ASSESSMENT 3: Evaluation of business case

The case study presents a successful vehicle manufacturing company, Toyota Australia (Toyota), as it evaluates radical strategic options in light of contracting sales and no sign of improvement in future. Established in 1958 in Port Melbourne, Australia (Toyota Australia n.d.), Toyota became very successful locally and started to look for opportunities overseas. It made its first shipment abroad in 1986. By 2011, Toyota became the largest exporter of manufactured automobiles in Australia, exporting 73% of vehicles overseas. However, in 2013, as GM-Holden, a competing Australian vehicle manufacturer, announced complete shutdown of its operations by 2017, Toyota was facing existential threats both at home and abroad.
In 2013, there were only three vehicle manufacturers in Australia. However, Toyota’s main competitors were not the Australian, but overseas car producers. Starting in 2005, Australia embarked on signing the Free Trade Agreements (FTA) with Thailand, the ASEAN counties, and New Zealand (Australian Trade Commission n.d.), as a result exposing local manufacturers to significant competition.
Increased competition from the overseas car manufacturers eroded the revenues of all local producers. Toyota also had to reduce its production volume and operate at an unprofitably low capacity utilisation rate.
In an effort to improve its competitiveness in 2012, Toyota launched a Toyota Australia Future Business Transformation, a cost-cutting programme (Toyota Australia 2012). According the case study, this programme targeted the key perceived issue – high labour cost, through reduction of the headcount, overtime reduction and ‘dirty money’ allowances.
With most of its sales generated overseas Toyota was highly dependent on the exchange rate of Australian dollar (AUD). From this perspective, significant appreciation of