Toyota Australia in Peril

Questions
1. What factors are impacting the profitability of Toyota Australia? Separate out the relevant
factors from the demand side and the supply side of the market. Which of these factors can
Toyota control, and to what extent? What strategies, if any, can you suggest to improve
profitability?

2. How would you characterize the market structure faced by Toyota Australia? What
challenges does this market structure pose for the firm?

3. Is Toyota Australia operating at the optimal scale of operation? Should it expand or contract
its production? Support your answer with a diagram.

4. What is the minimum efficient scale of operation for car manufacturers globally? What are
the implications of this for the automotive industry in Australia and for Toyota?

5. What should Toyota do? Should it wait for demand and cost conditions to improve, or
should it abandon production in Australia?