Toyota Australia

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The Benefit of this strategy is generating more profits and obtaining more market shares. In contrast, the risks are potential low quality and setting up a price war.

In order to fulfil the strategy, Toyota Australia should:

- Perform value chain activities more cost-efficiency than rivals and revamp the firm’s overall value chain to eliminate or bypass cost-producing activities.

Toyota Australia Future Business Transformation: They should focus on improving efficiency. In order to that, they need to capture all available economies of scale. For instance, to build the facilities near the supplies such as steels would be a great choice, by which they can save the transportation cost.

- Operate facilities at full capacity.

According to the case, Toyota Australia only used up to 66.7% of their total capacity. In that situation, more unfavorable fixed cost would be absorbed by lower quantity of product, in which unit costs are higher than expected. In result, to have a lower overall cost, and use up the full capacity is critical to Toyota Australia. There are two methods to deal with the unfavorable situation. First, they could produce more, but they need to ensure that they are able sell it after all (it will be discussed then). Otherwise, they can sell part of their production facilities, to avoid the waste of the idle capacity.

- Use firm’s bargaining power vis-a-vis suppliers.

The cost of supply is also the key to operate efficiently for the company such as Toyota. As we know that Australia is famous for its mine and steel industry, and vehicle industries are heavily relied on steels. If they can fully utilize the advantage of country of origin, there is a huge competitive value globally. In order to accomplish the goal, they could build a strategic alliance with the local supplier (to be discussed later), and utilize the idle supplies and facilities as Holden’s exist.

- Employ advanced production technologies.

As a common knowledge, technology are playing a more and more critical role for production industries nowadays. To keep its competitiveness, Toyota should employ advanced techniques. For instance, the Australian subsidiary have the chance to consult their parent company in Japan, and build a system to admit information and technologies sharing.

- Improve employees’ efficiency.

Labours are also a key function of Toyota Australia. From the data provided, there are 4200 employees in total, however, only 2500 of them are involved in the manufacturing. For a exporting oriented company (explanations will follow), it is important to keep the non-manufacturing employee’s number at a minimal, in order to reduce the unnecessary cost. Moreover, they should hire experienced and skilled workers and limit the number of junior staffs, in order to improve the efficiency of the production. In addition, having a better commission plan to motivate and improve the productivity would be a good option.

At the same time, we should not ignore the risk of the Low Cost Provider.

- Quality Control: In the situation of lower cost, quality is easily becoming a problem. And customers are with a high sensitive of it. They should employ Total Quality Management (TQM) or Balanced Scorecard (BSC) to keep a track and detect the production quality. Also, to improve the internal control quality is a great option.

- Labour Disruption: According to the case, Toyota Australia did cut hundreds of employees, and further reduced the payrolls. It is a risky activities against the labour union, although direct labour cost can be decreased. They should be extremely careful when they firing employees and they should consult local labour laws to avoid any contingency lawsuits.

- Price War: While they are trying to reduce the cost, it is important for them to stay away of any functions of price wars with local competitors such as Ford, to avoid loss-loss.

Export Strategy

Toyota Australia should continue their strategy of exporting, due to the low local demand and also because they are near the supplies of steels. For export-oriented strategy, they have the advantages of low capital requirements, economies of scale, no distribution risk and no direct investment risk. In contrast, they should be prepared of some other risks. For example, they should benchmark the cost to home-based productions, and stay alert with transportation cost, exchange rate floating, tariffs and loss of channel control.

Strategic Alliance/ Joint Venture & Vertical Integration Strategy

Toyota Australia should consider to build a strategic alliance and vertical integration strategy, as the current outside environment is not favourable for them to grow and expand. To form an agreement with both suppliers and retailers and to work cooperatively with them are key strategy to survive in Australia. Since it helps to sustain the core competence of low price and it can increase the bargaining power of alliances over suppliers and buyers. In addition, it can also help to open new market opportunities, which share the same core value with export-oriented strategy.

- Build strategic alliance with suppliers - Backward Integration

Steels are a critical raw material for vehicle production industries. As a result, to build a strategic alliance with steel and mine company could be a good choice for Toyota. By signing the agreement, they would argue for a better raw material price and have a sustainable supply. Hence they would have a better bargaining power toward buyers and they can enjoy a lower production cost.

- Form strategic alliance/joint venture with retailers (oversea) - Forward Integration

Since Toyota Australia’s strategy is export-oriented, they should consider to cooperate with firms and retailers oversea, especially for the countries in the south-east Asia. From the case, I found out that some countries do have an unreasonable tariff for them to export. Hence, to have a local partner will reduce the risk and the partner may have an idea to provide an efficient way to deal with the tax. By forming an alliance and joint venture, Toyota Australia would have a better bargaining power toward suppliers and buyers by lowering the production and overhead cost.

For both two part of the strategic alliance listed above, they should create a system for managing the alliances,