Introduction
Green cars are automobiles with reduced harmful effects on the environment. They are more efficient compared to engines that run on gasoline, diesel, and other alternative types of fuels (Kieser 42). The reason is that they are powered by highly advanced technologies. Examples of such cars include the hybrid electric automobile.
Others include those operating on fuel-cell, compressed-air, natural gas, and clean diesel. The engines have significant economic impacts on countries as they reduce oil imports. In addition, green cars reduce air pollution through emission of low levels of greenhouse gases.
Currently, Toyota Motor Corporation is the leading manufacturer of green cars in the world (Marksberry 58; Wild and Wild 229). The company does its best to ensure it develops high-quality products that enhance economic and other forms of development in contemporary society. Generally, the company’s automobiles are invented to create harmony between man, environment, and the machine. The corporation operates on a set of its own management values and policies, which are passed from one generation to the next.
In this paper, the author will analyze a case study of Toyota Motor Corporation’s venture into the Australian green car market. To this end, the author will review some of the major factors behind the company’s decision to engage in foreign direct investment (FDI) in Australia as opposed to the manufacture of its hybrids in Japan.
In addition, the author will highlight some of the reasons why the corporation decided to adapt to the existing plan in Melbourne. The pros and cons of Toyota’s management of the FDI will also be looked into. Finally, a critical analysis of some of the impacts of the FDI on Toyota’s reputation will be provided.
A Review of Toyota’s Decision to Adopt the Existing Plant in Melbourne
Up until 2006, Toyota Motor Corporation had factories situated in both Port Melbourne and Altona, Victoria. However, all manufacturing processes today take place in Altona (Wild and Wild 229). The company decided to take over the operating plant in Melbourne rather than build a new one. The reason for this is because the factory was operating as expected. It was meeting the company’s production and quality expectations. For example, in this branch alone, Toyota produced over 100,000 vehicles annually (Chambers 45).
In 2008, the automobile company exported approximately 101,668 cars. The value of this batch stood at $1,900 million (Wimmer and Muni 60). The management realized that building a new plant would not have added changed the financial standing of the company significantly. In addition, Toyota had already fully established itself in the country. It had become one of the largest automotive manufacturers in Australia (Wild and Wild, 229).
It attained the top spot position in spite of stiff competition from other companies, such as Ford and Holden. According to Wimmer and Muni, Toyota succeeded so much to the extent that the Australian market turned out to be too small for all its products (69). As a result, it shifted its attention to the Middle Eastern markets. All of these developments took place while the company operated the Melbourne plant. As such, there was no economic sense in opening another factory.
Another reason that prompted Toyota Corporation to adapt to the existing plant was the need to avoid incurring huge losses in case the company suffered major setbacks in the market. A collapse in one plant would automatically lead to the fall of others. It is important to note that in spite of its dominance in the Australian market, the automobile company suffered from various challenges. For example, 2011 marked a tough market for its products. The reason is that the market had become extremely competitive.
The number of its exports during this period dropped to 59,949 from 101 668 units. In addition, the value of the company’s operations reduced to $1,004 million (Marksberry 53). In addition, the Australian dollar was strong at the time. The issue led to a significant rise in the cost of manufacturing, resulting in low economies of scale. The current and future free trade agreements also posed great risks for the business. As such, it would have been unviable to operate more than one factory in Australia.
Due to the numerous challenges, Toyota Company declared its plan to bring to an end all its manufacturing operations in Australia by the end of 2017. The announcement was made on 10 February 2014 (Wild and Wild 229). If it is implemented, the movie will be similar to that employed by Ford and Holden car manufacturers, who entered and left the market. However, the company promised that it would continue exporting its vehicles to Australia.
Impacts of Toyota’s Decision to Produce in Australia
The decision to manufacture green cars in Australia, rather than in the Japanese factories, will not impact negatively on the reputation of the company. It is important to note that Toyota has been producing in this country for some time. The well-established corporation opened a plant in Atlanta, Australia, in 1959 (Chambers 55). It has succeeded in the market, and it is still the leading automobile manufacturer.
Its inventions, which include the Camry Hybrid and the Aurion, will help sustain the company’s reputation in Japan and other global markets. Since the plant’s opening, the company has continued to be viewed positively in Japan.
The reason is that carrying out its green car manufacturing operations in Australia is considered as a form of the firm’s expansion (Wild and Wild 229). It is not regarded as a way of neglecting the home factories and their services in Japan. Furthermore, some of the components used in the Australian plant are sourced from Japan.
One of the reasons why the company can be regarded negatively is when the automobiles produced have mechanical faults. Low-quality cars result in recalls, leading to a decline in the volume of sales. Over the years, Toyota has made a number of recalls for particular models of its products. For example, in 2010, the corporation was forced to call back a total of 750,000 cars in North America. In addition, the move affected 600,000 units in Japan, 50,000 in Europe, and 30,000 in Australia (Wimmer and Muni 71).
International customers pay a lot of attention to the countries within which their automobiles are assembled. Every manufacturing plant has its own reputation based on the quality of its products (Meyer 80). As a result, no consumer would willingly agree to purchase a car assembled in a plant known to produce faulty machines. In addition, customers make rational decisions when it comes to their safety.
Pros and Cons of Toyota’s Approach to the Management of the FDI
According to Meyer, FDI is the process where a company establishes a plant in another country (80). It can also involve entering into a joint venture with a corporation in its local market. The total value of foreign investment flows in the 21st century has surpassed the $1 trillion mark (Kieser 53). Toyota’s FDI in Australia, in relation to the manufacture of the green car, has its strengths and weaknesses.
Pros
Australia stands to benefit a lot from the move by Toyota to engage in FDI. For example, it will acquire new technologies, management skills, capital, and business opportunities.
The Melbourne plant will require key supplies from local businesses. The supplies include equipment and accessories. In addition, employment opportunities will be created. Currently, Toyota has over 3,900 employees in Australia (Marksberry, 65). Finally, as a result of the FDI, the prominence of the brand will increase, leading to financial benefits for the firm.
Cons
In spite of the various benefits associated with FDI, it is important to note that it has its share of disadvantages. For example, it increases competition in relation to the local industries. As a result, native businesses are forced to re-adjust their prices to remain in the market. The locals may also lose their customers to the foreigners. In addition, the existing relationships with domestic companies may be impacted negatively as they start engaging with foreign investors (Wild and Wild 229).
Toyota can be negatively affected by the move to engage in FDI if the local market suffers from disasters, such as wars and natural calamities. The company may collapse as its shares drop drastically in such times. In addition, there can be intense competition leading to the closure of the plant (Meyer 33).
Conclusion
Green cars are important machines in the contemporary world. They are environmentally friendly and energy-efficient. Toyota has played a key role in this end by manufacturing various models of these engines. Its team strives to build affordable and high-quality automobiles that meet the customers’ needs. In addition, the Japanese corporation has taken advantage of its effective marketing strategies to promote its brand in the global market.
Works Cited
Chambers, Dennis. Toyota, Westport, Conn: Greenwood, 2008. Print.
Kieser, Ulrich. Green Designed Future Cars, New York: Free Press, 2008. Print.
Marksberry, Phillip. The Modern Theory of the Toyota Production System: A Systems’ Inquiry of the World’s Most Emulated and Profitable Management System, Boca Raton, FL: Taylor & Francis, 2013. Print.
Meyer, Gereon. Advanced Microsystems for Automotive Applications: 2010 Smart Systems for Green Cars and Safe Mobility, Berlin: Springer, 2010. Print.
Wild, John, and Kenneth Wild. International Business: The Challenges of Globalisation. 6th ed. 2006. Hoboken, N.J: Pearson. Print.
Wimmer, Engelbert, and Arun Muni. Motoring the Future: VW and Toyota Vying for Pole Position, Houndmills, Basingstoke, Hampshire: Palgrave Macmillan, 2012. Print.