Toyota Australia

Q) As a company (for instance Toyota), would you prefer a protective government policy or would you favor a free market economy from the standpoint of long-term business sustainability? Provide ONLY 5 strong points of justification.

A) Considering as Toyota- Australia ,we would prefer to have a protective government policy from the standpoint of long-term business sustainability because of the following reasons:

1.       High import restrictions will increase the demand of local manufactures vehicles.

The free trade agreements as proposed by the Australian government to promote sounded good on paper and worked well for food products and metal, but had a negative impact on the Automobile industry.

2.       Protectionist policy will promote the research and development of the firm within the country providing the spill over effect on other industries.

3.       Protectionist policy will bring the foreign manufacturing automobiles company to setup their assembly units to overcome the higher import taxes .

4.       Provide subsidies to local manufactures for export.

5.       Less foreign competition will promote the local manufactures to cater to the demand.

Q) Besides government policies, which are the other macroeconomic factors that affected the Australian Automobile industry?

A) The following macroeconomic factors led to the downfall of the Australian Automobile Industry

• Unfavourable demand structure: Australia is a relatively small market for cars. Sales of new cars contribute to just 1.3% of the global market. At the same time, exports from Australia were affected because of slow economic recovery, and the demand shifted to emerging markets.
• Strengthening of the Australian Dollar: Over the past few years, the AUD had strengthened significantly, which affected the exports of the car manufacturers in Australia. At the same time, it made imports cheaper, which further affected the profitability of the local manufacturers.
•  Shifts in the global automobile market: Since the maximum growth in vehicle sales post 2000 was in Asia, automobile manufacturers around the world started pulling out of smaller markets like Australia and moving to bigger and faster growing markets like China and India.
• High costs: High wages in Australia increased the production costs in Australia, ultimately increasing the price of cars. This lowered demand both locally and for exports from Australia.
• High inflation: The inflation rate in Australia was high, reducing the disposable income of the consumers and affecting the demand for cars.

Q) If you were on the board of Toyota would you have prevented the exit of Toyota? What strategy would you suggest for survival?