MD TARIQ.

SBPPSE (MBA 1st year)

CASE STUDY: TOYOTA AUSTRALIA IN PERIL

MD TARIQ.
MBA 1ST YEAR (SBPPSE)
CASE FACTS:

Toyota Motor Company was founded in 1937 by the Toyoda family.

Toyota Australia, a subsidiary of Toyota Motor Corporation Japan was founded in 1958.
When General Motors Holden announces its plan to exit from car manufacturing in
Australia, Toyota faces a decision dilemma amid losses and adverse business and
economic conditions.
On December 11, 2013, General Motors Holden announced its plan to exit car
manufacturing in Australia by the end of 2017.
Started assembling 3 more modelsthe Corona, the Crown and the Corolla
between1964 and 1968.
Started producing engines in 1978 in Altona plant in Melbourne and car body panels in
1981.
Exported for the first time in 1986.
Manufacture of Camry replaced Corona at the Melbourne plant in 1987.
In 1994/95, shifted all its operations and manufacturing from Port Melbourne to Altona
plant.
The entire production process was regulated by the laws of demand and supply.
Followed Kaizan, the practice represented by employees making day-to-day
improvements in their working practices and equipment.
Jidoka strengthened Toyotas image by contributing to Australian society in terms of
value addition and employment, and good quality products.
As a market for cars was very thing, it started exporting domestically manufactured
vehicles to neighbouring New Zealand in 1986.
Further expanded its export reach to Middle East countries and later in the South Pacific
islands, Malaysia and Thailand.
New vehicles sales accounted for just 1.3% of the total global market in Australia.
Started producing Avalon model in 2000 and released Camry hybrid, the first hybrid car
manufactured in Australia in 2010.
Remained the overall market leader for the subsequent 11 years after registering record
sales of more than 186,000 cars in 2003.
Exported almost two-thirds of its production (60,000 units worth $1.004 billion) to
Altona plant to 13 countries worldwide.
Followed the just in time approach to production, resulting in the right parts and
materials manufactured and provided in the exact amount and place where they were
needed.
Toyota produced 150,000 units of annual capacity, just more than 100,000 vehicles in
2012 and in same year, Holden produced just more than 80,000 vehicle units and ford
fewer than 40,000.
Tariffs were bought down to 5% by 2010 after the Australian government followed
liberal trade policies since the mid1980s and quantitative restrictions were completely
eliminated by 1988.

Question & Answers:

MD TARIQ. SBPPSE (MBA 1st year)

Ques: 1. Country Differences?
Ans: Western careers vs. Japanese community
Focus on long-term growth as opposed to short-term profits
More interpersonal relationships with employees, suppliers, and customers
Ques: 2. Which of these factors can be controlled by Toyota? What are the factors that impact the
profitability of Toyota Australia?
Ans: Various cost and demand side factors affect the profitability of Toyota Australia:
Australias low tariff barriers and highly open trading environment made the automotive market both
highly competitive and fragmented.
The global financial crises had reduced the demand for cars in developed economies owing to their slow
recovery.
Small scale production and increasing average cost of production.
According to the study, Toyota can look for more open and trade friendly economies and focus on their
exports to increase their scale of production. It should look to target developing economies as its new
exports market.
Ques: 3. How would you characterize the market structure faced by Toyota Australia? What
challenges does this market structure pose for the firm?
Ans: The market structure faced by Toyota is an oligopoly when it comes to manufacturing domestically
due to presence of only 3 manufacturers, namely Ford, Toyota and GM. The challenges posed in such a
market environment are that the decision of one firm affects the operations of other firms in the case here
as GMs decision to exit posed some challenges for Toyota.
Ques: 4. What is the minimum efficient scale of operation for car manufacturers globally? What
are the implications of this for the automotive industry in Australia?
Ans: Have an adverse impact on scale at which component manufacturers operated in Australia.
Efficient cost of the components. The global optimal scale of operation for car manufactures is estimated
to be around 200,000-300,000 vehicles per year. However Australia and Toyotas scale of production is
quite low as compared to the global set of standard. Such small scale of production will shoot up the
average cost of vehicle production in Australia.
Ques: 5. What impact did Toyotas closure had in Australia?
Ans: Its closure would result in job losses not only for its employees in the manufacturing unit but also
for the subsidiaries supported by Toyota manufacturing vehicle through supply chain linkages.
Manufacturers that depend on Toyota as their major buyer would be further constrained by low demand
and may even required shutting down their manufacturing units. The resulting unemployment would
greatly affect the Victoria region and the workers would be helpless in the Altona plant.