Sample Essay on Toyota and Mercedes Benz are automobile firms


Toyota and Mercedes Benz are automobile firms that are widely known for their competitive and consistent production of automotives. These two firms show similarities in their production as their products are in the same line of production. Toyota’s headquarters are located in Japan while Mercedes Benz headquarters are located in Germany. Both firms are renowned in their production, and they are among the top ranked automobile producers throughout the world. The two firms, being in the same line of production, face similar problems. However, these companies face different political, social, ethical, and legal environments. This is as a result of their differences in location, since different countries offer different business environments for firms. The differences in the environment that the firms operate in trigger different responses from their respective management teams. This paper discusses the differences in political, social, ethical, and legal environments faced by these firms. The paper also discusses the impact of these differences on management decision making.


Business Law

Problems facing the firms

Toyota and Mercedes Benz companies face problems, such as price wars in the market. These price wars are caused by stiff competition in production of automobiles. The market is a free market where producers may enter or leave the market at will. This fact has led to entry into the market by many firms, hence intensifying competition. The firms also face problems due to demographic changes and shifts in economic power throughout the world. These changes have created enormous upheavals in demand and hence leading to development of the problems. The firms are also faced with the challenge of radical changes in consumer expectations. The firms have to redesign their products in order to match the consumer’s needs and this has been a big challenge. Increasing complexity is another major problem facing the automotive industries. This is as a result of the increased numbers of options and products, the increased pressure to innovate, shorter cycles of technology, and global networks for supply.

Political environment

Japan as a democratic state has strong legal institutions but it also shows some level of bureaucracy when matters of national policies are considered. Decisions on these matters are influenced by industrial and business groups, and this makes Japan to lack realistic approach to change. This contributes to Japan’s extended economic dissatisfaction (Borowski, 2010). Municipalities and prefectures create local laws. These laws may differ from the national laws. These laws plus decisions made by bureaucrats affects firms in different ways and hence posing a challenge to the management. There is a major difference between Japan and Germany’s political environment when the law of contracts is considered. The law is not binding in Japan but it is binding in Germany. Germany is known for its political support to businesses and firms and this offer a good working environment for firms. Germany works under federal laws while Japan woks under state laws. The differences in the political environments between Japan and Germany have a big impact on management. For example, Toyota’s management cannot make quick decisions due to the fear of the unknown as laws may be changed at any given time. Mercedes’ management can make fast decisions since the federal laws protect the firm and in case of emergencies the government is ready to support the firm (Voortman, 2004).

Social Environment

Japan upholds the importance of healthy social business environment. Japanese believe that a good social business environment can solve social problems such as environmental issues and poverty. Japan has a center that promotes social business ties, not only in Japan but also in all parts of the world. In Germany, German language is widely used and hence this may be a challenge to work in the country without the knowledge of the language. The issue of formality is very much upheld in Germany as opposed to Japan, where formality is not observed keenly. Mercedes’ management, therefore, faces challenge when recruiting new workers as it gets into a dilemma whether to disqualify an aspirant for lack of familiarity with German language (Voortman, 2004).


Legal environment

There exists a great difference between Germany and Japan. In Germany, laws are made with great considerations and they are universal and binding. This is different from laws made in Japan, where a group of minorities influence making of laws. The laws made are not binding as they are meant to favor the minority group of bureaucrats. The management of Toyota Company is at times met with difficulties when making decisions on some matters (Borowski, 2010). Some crucial decisions cannot be made as the bureaucrats may have imposed some laws against some issues. These laws act limit firms to perform different tasks or the firms may be required to pay in order to get permit to go about some businesses. On the other side, some laws that have been enacted in Germany may hinder the management of Mercedes Company from performing some tasks, which would have generated profit to the firm. The management is also faced with some challenge when deciding on the best move to take as the available laws impose different taxes on different transactions.

Ethical environment

Toyota has been facing many challenges over spreading rumors of the poor quality of their cars (Borowski, 2010). This has been a big blow to the firm and this has enticed the managers to seriously look into the matter. The poor quality was a feedback from some customers and this led to sending of a warning to the management from the government. Mercedes Benz on the other hand has had issues concerning embezzlement of the firm’s funds by the management. This led to the firing of the CEO of the company. The management experiences when investigating on embezzlement of funds, especially when it occurs at the higher ranks of leadership (Voortman, 2004). Toyotas management also faces challenges, as it has to reinstate the food reputation of the company.


Firms may be producing and operating in the same line, but the fact that they operate in different countries may depict a big difference on the firms. Similar firms may also seem different because of their management. Different management teams offer different leadership styles and they may differ in their objectives. Business environments affect similar firms differently, so long as they are not situated in the same country.


It is important to study the business environments of different countries before setting up a business activity. After carrying out the study, the next important thing to do is to vary the advantages and disadvantages using the information obtained. It is important to consider both the short-term and long-term goals before making a decision (In Kaarbøe, In Gooderham & In Nørreklit, 2013).


Borowski, A. (2010). Report on the Toyota Company. München: GRIN Verlag GmbH.

In Kaarbøe, K., In Gooderham, P. N., & In Nørreklit, H. (2013). Managing in dynamic business        environments: Between control and autonomy.

Voortman, C. (2004). Global logistics: Management. Lansdowne [South Africa: Juta.