Case Study - BE ( Toyota Australia in Peril)
Q 1 )What type of market structure is Toyota Australia operating? What are the features of this market?
What challenges
does this market structure pose for the company?
Answer -The car market in Australian market is very thin. With a population of 23.1 million
that represent 0.33% of total world population in 2013, represented a small market for lowtariff
barriers and highly open trading environment since mid of ‘80s provided consumers
with easy access to imported cars.
65 approx. brands and approx. 365 models sport, comprising passenger, and light
commercial vehicles competed for Australia’s total market of approximately 1.1 million new
car sales per year. The Australian automotive market is both, highly competitive and the
most chunked in the world.
The Automobile Industry of Australia face several problems that prevent the growth of the
industry. Australia is a developed country, but some problems are exist in this industry. Once
the major problems are identified then its restructure can be easily determined.
The last 3 decades have been expansion for the Japanese business in China and the Pacific
reason including Australia. There are several factors that contributed in this expansion. Fast
economic development, High domestic labour cost, Japanese Yen on high value on Australian
dollar, Industrial policies, fastness of the Japanese economy, globalization are the main
factors that have affected to this expansion.
If we read the table mentioned here, we got to know that, Toyota has the largest market
share compared to all others. Largest market share means, an inelastic demand from
consumers (Costello, 2016). On the other hand, Nissan has the smallest market share so that
Nissan faces elastic demand curve from their consumers. The main intuition of these
elasticity factors can be listed as mentioned below:
When demand is elastic then cutting the price of a business firm will improve its total
When demand is inelastic then cutting prices will create fall in revenue with little or no
significant impact on market shares (Edwards, Davey, & Armstrong, 2016).
Market trends recent developments in the Australian automotive industry operating
environment includes:
The Australian dollar depreciation against the Japanese Yen. This has also seen
European currencies improve their relative position against the Australian dollar.
Currency movements is another inadmissible risk factor for automotive companies
from Japan.
One major problem faced by the automobile industry is lack of the opportunity to scale and
on top of that the Australian dollar abatement is supporting a major push to increase local
content levels in Australian produced vehicles. It is an important aspect of any international
trade. Strong domestic component and material supply base is crucial to the success of the
automobile manufacturers.
However, this abatement is providing an opportunity to locate the new investment in
Australia but this will not provide a sustainable advantage to the manufacturers. If any
manufacturer is looking for a sustainable market, they need to have a high/super operating
Case Study - BE ( Toyota Australia in Peril)
level with enough infrastructure. A strong domestic market base is essential to the industry
ability to exploit scale and scope economies.
In 1996, only 39,000 completely built up vehicles were exported from Australia, representing
only 12% of vehicle production of 3,25,000 units. In 2001, exports reached 109,000 units,
representing 30% of vehicle production for the year. Growing export sales have allowed
domestic production to remain above 3,50,000 vehicles in 2001. Seems, the growing export
orientation of the vehicle manufacturers in recent years has been followed by the
component sector.
Now, in the Asia Pacific Region, looks like Toyota is realizing that if they don’t increase their
Asia Pacific network (including Australia), they can’t sustain in the market and may left
behind compared to others. And if we check the today’s situation, all major Japanese
companies have a significant share in the Australia market.
Toyota Australia considers exporting 50% of production to be maximum sustainable level,
and they would be looking for some manufacturing investment at which the maximum level
can be locate. Without a large and stable domestic base, Australian operations cannot
absorb inconstancy in export sales.
The Toyota has been mainly focused on improvement in environmental performance
continues, that includes the activities that minimize resource consumption. Toyota was also
aiming to contribute to the society through its corporate activities. Toyota Australia is also
trying to create an energetic and a safe work environment, based on the fundamental policy
that taping safety first is everyone’s responsibility, at every level.
After 1980 Japanese direct investment in Australia developed, centring on consumer Electric
appliances and automobiles. On a bigger scale, GDP growth of Australia in 80’s were
dependent on the manufacturing & value added industries growth. At this stage in Australia,
with a clear intention, Toyota promoted their direct investment to form strong hand-holds
for the production and supply which would meet the fast expansion of the domestic market,
and make them the bases for export to the assembly manufacturing industries in Asia. This
also meant that they would serve as the key holds for the final product export to other
foreign markets.
If we check the govt policies in the last 5 years, govt has made several changes and that was
significantly impacted the Australian automotive environment. A quick highlight of these
significant changes:
Decrease in tariff from 25% to 15% in 1996 to 2000 on passenger motor vehicles,
Removal of motor vehicle wholesale sales tax which was 22%,
Introducing of the GST 10%,
Schedule fall in tariff to 10% on Jan 2005.
Australia is one of the open market access system and more open to sustain compared to the
other countries in the Asia pacific regions. This decreasing of tariff rates seen competition
enlarging further.
The implementation of ACIS had some positive points upon the automotive industry. These
Case Study - BE ( Toyota Australia in Peril)
includes:
o For a company like Toyota which makes global products and require a good volume to
manage investment to compete in the open market, underpinning volume that will
create more jobs, and exports in the overseas market.
o To increase their innovation capabilities, supporting efforts by component producers.
When we see the overall responses of the replacement of the EFS by ACIS, the industry has
responded well. Removing of 22% sales tax and applying GST @10% helped to boost vehicle
affordability in the market.
Reformation is highly needed to overcome of all these problems. Automobile is a heavy
industry and the country improvement in this heavy industry will be based on the
manufacturing base. Once we identify the problems of an automobile industry, we can
discuss about its reformation measures.
o When demand is elastic then cutting the price of a business firm will improve its total
revenue and market share, and
o When demand is inelastic then cutting prices will create fall in revenue with little or no
significant impact on market shares (Edwards, Davey, & Armstrong, 2016).
Market trends recent developments in the Australian automotive industry operating
environment includes:
The Australian dollar depreciation against the Japanese Yen. This has also seen
European currencies improve their relative position against the Australian dollar.
Currency movements is another inadmissible risk factor for automotive companies
from Japan.
One major problem faced by the automobile industry is lack of the opportunity to scale and
on top of that the Australian dollar abatement is supporting a major push to increase local
content levels in Australian produced vehicles. It is an important aspect of any international
trade. Strong domestic component and material supply base is crucial to the success of the
automobile manufacturers.
However, this abatement is providing an opportunity to locate the new investment in
Australia but this will not provide a sustainable advantage to the manufacturers. If any
manufacturer is looking for a sustainable market, they need to have a high/super operating
level with enough infrastructure. A strong domestic market base is essential to the industry
ability to exploit scale and scope economies.
In 1996, only 39,000 completely built up vehicles were exported from Australia, representing
only 12% of vehicle production of 3,25,000 units. In 2001, exports reached 109,000 units,
representing 30% of vehicle production for the year. Growing export sales have allowed
domestic production to remain above 3,50,000 vehicles in 2001. Seems, the growing export
orientation of the vehicle manufacturers in recent years has been followed by the
component sector.
Toyota Australia considers exporting 50% of production to be maximum sustainable level,
and they would be looking for some manufacturing investment at which the maximum level
can be locate. Without a large and stable domestic base, Australian operations cannot
absorb inconstancy in export sales.
Case Study - BE ( Toyota Australia in Peril)
T
he Toyota has been mainly focused on improvement in environmental performance
continues, that includes the activities that minimize resource consumption. Toyota was also
aiming to contribute to the society through its corporate activities. Toyota Australia is also
trying to create an energetic and a safe work environment, based on the fundamental policy
that taping safety first is everyone’s responsibility, at every level.
After 1980 Japanese direct investment in Australia developed, centring on consumer Electric
appliances and automobiles. On a bigger scale, GDP growth of Australia in 80’s were
dependent on the manufacturing & value added industries growth. At this stage in Australia,
with a clear intention, Toyota promoted their direct investment to form strong hand-holds
for the production and supply which would meet the fast expansion of the domestic market,
and make them the bases for export to the assembly manufacturing industries in Asia. This
also meant that they would serve as the key holds for the final product export to other
foreign markets.
Challenges:
If we check the govt policies in the last 5 years, govt has made several changes and that was
significantly impacted the Australian automotive environment. A quick highlight of these
significant changes:
Removal of motor vehicle wholesale sales tax which was 22%,
Decrease in tariff from 25% to 15% in 1996 to 2000 on passenger motor vehicles,
Introducing of the GST 10%,
Schedule fall in tariff to 10% on Jan 2005.
Australia is one of the open market access system and more open to sustain compared to the
other countries in the Asia pacific regions. This decreasing of tariff rates seen competition
enlarging further.
The implementation of ACIS had some positive points upon the automotive industry. These
includes:
o For a company like Toyota which makes global products and require a good volume to
manage investment to compete in the open market, underpinning volume that will
create more jobs, and exports in the overseas market.
o To increase their innovation capabilities, supporting efforts by component producers.
Reformation is highly needed to overcome of all these problems. Automobile is a heavy
industry and the country improvement in this heavy industry will be based on the
manufacturing base. Once we identify the problems of an automobile industry, we can
discuss about its reformation measures.
