Toyota Case Analysis

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Analysis

- In case of Toyota, it initially started with economies of scale in terms of sale being high but as the market was t thin it started towards diseconomies. In order to stop it to go towards diseconomies it started exporting thus maintaining the economies of scale. The company came in peril as micro economies scenario changed. The company eventually fell towards diseconomies of scale.

- Micro economies scenario changed in terms of $ appreciation. It actually brought forward the notion that Australian dollar became strong in comparison to US dollar which resulted in cost overshooting revenue as 70% of the total revenue is from export.

EXCHANGE RATE MOVEMENT DURING TOYOTA AUSTRALIA’S EXPORT PROGRAM

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- HIGH COST – The cost was faced with high cost dilemma as the market of Australia was thin and it could not manage to recover cost from scale in Australia alone.

- Because of decrease in tariffs sale of Toyota was dependent mostly on exports (70%) Australia were importing cars at cheaper rates. Thus the thin market of Australia became even thinner because of the government implications. The other one is the free trade agreements that Australia signed which made the economy as free entry.

REASONS FOR SHUTDOWN

- A strong Australian dollar leading to cheaper imported cars and high production cost

- Low import tariff

- High wages

- The appetite for Australian made cars has also waned.

- Availability of known cars of different brands.

- Culture of the workplace

Managerial Value Lessons

- Toyota was a mass producing car they had to make at least 2 lakhs so that it produce cheap. As a manger I would request the government to reduce the import taxes on the materials which need to be imported.

- COST- it is cheaper to just make them in their country and shift them to Australia. With massive competition in the car industry, car makers are under pressure to make cars cheaper to buy without compromising quality and one way they can do this is to make the car in their own country and export them to Australia.

- Toyota can look for more open and trade friendly economies and focus on their exports to increase their scale of production. It should look target developing economies as its new exports market.