Introduction and Summary of case study
With General Motors Holden’s announcement that they are planning to exit the car manufacturing markets in Australia, Toyota faces a situation which is the dilemma between capital losses and high operation cost conditions. Toyota has operated in Australia since 1958. 70 percent of its production are exports. As vehicle industries was considered as the core aspect of Australian’s economy development. However, Toyota has operated in a growingly adverse environment for decades. Australian government had been following liberal trade policies since the mid-1980s, it seriously affects the local manufacturer because of low import costs for foreign vehicle industries. The opposite of it is high tariff rates of…show more content… This criterion is relevant to evaluate the case because cost is one of the most significant factors when justifying a business. Long run costs have no fixed factors of production, while short run costs have fixed factors of production, as well as variable costs. If a company can manage its short run costs efficient all the time, it would be able to succeed in the long term competitive with a lower long run costs. For the short run costs, variable costs include employee wages, which is a huge part of operating cost. As for the long run cost, an efficient long run cost is a sustainable sector to implement excess profits (Panico, 2008). Porter’s generic strategies demonstrate three strategies, which are cost leadership, differentiation, or focus (Porter, 1980). Differentiation and focus strategies are not relevant to this case because there are no major competitors in the Australia market, and the key issue is how to handle with the cost problem for Toyota.
2. This criterion is relevant to evaluate the case because government’s behavior includes government policies, tariffs, and economic factors. We can analyze these factors with part of PESTLE model’s political and economic parts, five forces model’s bargaining power of buyers (Porter,