Driving the Green Car Market in Australia

The Chief Factors Involved in Toyota’s Decision to Undertake FDI in Australia

Toyota’s decision to undertake FDI in Australia emerged from the fact that due to fear of losing jobs in automobile industry, this country proposed 3.4 billion dollars between 2011 and 2020 to transform the Australian car industry into the green car market. Thus, Toyota decided to take this chance to broad its investments into the green car market, which is beneficial not only in Australia but also worldwide. Generally, the Toyota’s decision to undertake FDI in Australia can be divided into three categories of factors, which are micro, macro, and global level. Thus, crucial factors for every level will be briefly presented in the article in the frame of understanding the Toyota’s decision.

The micro level includes the developing of Toyota’s plant in western Melbourne. The taxpayers in Australia invested $63 million to making the cars of Toyota greener. Combining with investments from headquarters of Toyota, it will create new technologies, jobs and reduce greenhouse effect within one particular plant. The Australia also won the prize by preserving local jobs. This decision can be beneficial to the company mainly because it expects investments and support from Australian government as well as from Australians. The upgrading of an old plant will provide the ability to recruit new employees for the job.

The macro level includes the firming of the ground of Toyota’s cars in the local market. Due to the downfall of local car sales, many manufacturers closed their production in the country. According to the article, there are three major international manufacturers continued their production in Australia. Toyota’s support brought to life ambitious green cars idea in Australia.  Thus, the investments of Toyota will be beneficial to the company as they contribute not only to business but also into nature, preserving which can work as a selling factor for locals.

The global level includes technologies, which Toyota can harvest from investments. Moreover, it was beneficial to Australian government as it created a possibility to further investments from Toyota as well as other car manufacture companies. Due to the Green Car Innovation Fund, Toyota’s Altona targeted on producing more “green” engines starting from the second half of 2012. These engines can be part of implementation into Toyota’s cars not only in Australia but worldwide. Thus, Toyota receives investments from Australian government to produce their engines.

The decision made by Toyota is mutually beneficial to both sides. Australian government created a financial basis to attract Toyota’s investments. Thus, Toyota was able to see three categories of factors that helped them to grab this beneficial opportunity. The categories are micro, macro, and global factors. Also, the Australian government won from this kind of profitable collaboration. This agreement between the government and the company will save jobs, expand local car market, attract new technologies and investments.

Why Toyota Decided to Adapt the Existing Plant in Melbourne rather than Build One from the Ground?

The company made the decision under the circumstances that Australian government also would pull its weight by providing it with resources. Australian Green Car Innovation Fund also assisted in developing of Melbourne plant as the government intended to not only play its part in researching of green cars but also save jobs for the citizens and provide the local market with new hybrid vehicles. For Toyota, creating a new plant from scratch would cost additional resources which headquarters of the company did not wish to spend as it had been already established a well-functioned plant in Melbourne which just needed upgrading and transforming into a green production facility. The final decision was made mainly of the financial practicability of the venture.

If they would have created a new plant from scratch in Australia, it had caused rather additional losses to the company than profits. First, Toyota would need to decide what it should be done with the Melbourne Plant. It would still produce regular cars on gasoline with not the best sales at that time. Secondly, the company would need to support both plants at the same time and at the same level, which was undoubtedly challenging due to reducing car sales worldwide in general and Australia in particular.

Another great factor, which would pull them back from creation of one more plant in Australia, could be the Australian government itself. The main reason to create the Green Car Innovation Fund was finding the ways of manufacturing cars in more environment-friendly manner, but another reason was saving and creating jobs for Australians. If one of the plants would need to be closed due to severe losses, it could create a tension between Toyota and Australia, which benefited neither sides.

The last factor for not establishing the second plant was a small demand in producing gasoline cars and higher demands for innovation. This requirement in innovating decisions was dictated not only by the market but also by Toyota itself. The supporting of old and new specialized plants would demand to separate financial resources. This separation would only create drawbacks not only in building a new factory but also in preserving the old one.

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Toyota decided to adapt the existing plant in Melbourne mainly because of provided help from local government.  The market also set its rules for competing. Australian government would support an establishment of a new facility, but if Toyota had faced with an urgent need for abandoning one of the plants, it would create tension between the government and the corporation. The separation of resources could lead to the stall of the development of a new potential plan and the old one. These reasons were in favor when Japanese decided to upgrade the old plant.

What Will the Decision to Manufacture in Australia Do to the Reputation of the Company at Home? How Much Attention Do International Customers Pay to the Location?

The whole world is globalized right now, and no action will be in vain. The venture of Toyota will be not only unnoticed, but it will also create a precedent for other Japanese companies in order to brainstorm similar strategies for their business development. The decision will also make Japanese government set up similar programs for developing green cars within the borders of the country. Due to the lack of resources, it would be a promising project. Australians would also play a role in the reputation of Toyota as cars assembled in their country would provide jobs to them. The globalization provides the circumstances that no deeds would be unnoticed.

Japan is a home for innovation because of its futuristic technologies. Its culture and religion support the idea of nature preserving and peace spreading. Toyota killed two birds with one stone by investing in upgrades of their plant in Melbourne. The first one lies in Australia itself, and the second is within its natural domain. Naturally, this venture would increase the company’s popularity amongst Japanese and Australians. Moreover, the reputation of Toyota would be recognized globally, and many companies would try to follow its model of creating innovation by installing close relationship with governmental programs that support creativeness in different spheres. Toyota might not be a pioneer in this type of business dealing, but its steps will draw attention from its rivals in the market.

Returning to the question, international customers pay to the location of their cars assembling. It is still needed to remember that it is a two-edged sword. Naturally, patriotic feeling and financial reasons would lead customers to buy cars manufactured within the borders of their country, but people also appreciate the quality and professionalism of the assembling. For example, German engineers and mechanics are well-known throughout the world, but cars assembled in Germany are not cheap because of a high cost of local specialists. On the contrary, German cars produced in China are more modest in pricing due to the low cost of local employees. Nevertheless, the standards for producing cars in any company are the same for every country. Thus, it is not the question of quality, but it is the question of location where manufacturers manufacture their products.

Undoubtedly, the decision of Toyota will create its reputation at home. The preservation of nature and reducing greenhouse effect will certainly be a perfect example to be followed by other companies. Moreover, it will create precedents for companies to cooperate with local authorities by supporting each other. The decision will also increase their reputation worldwide by creating a positive attitude to their nature-friendly intentions. Considering the idea of how consumers react to the location where their automobiles are produced, it is needed to remember that it is a two-edged sword as each aspect has its advantages and disadvantages. 

Toyota’s Approach to Managing FDI

Toyota’s decision is certainly beneficial to the company and business, but it also has hidden pitfalls. The benefits will still prevail in this type of venture as it obviously influences the production not only in Australia but also the global one. There is no absolute beneficial decision that the company could make during a downfall of car sales. It was inevitably that hard decisions should be made, but they were worth it. In the end, however, it would bring new life to the old markets. Naturally, the hidden pitfalls will be something to deal with, but profitable parts will also play in action.

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First, the advantages of this venture are financial. The decision will provide more benefits for Toyota not only by car sales within Australia but also by provided investments into the Green Car Innovation Fund and local government. It would also attract more employees to the plant and will force the development of environment-friendly cars. Moreover, this policy will help Toyota to build and support its environmental friendly reputation, which may lead to additional investments from other sources. Continued collaboration with local government will also provide necessary investments and long-lasting partnership.

The disadvantages, if compared to advantages, are in a weak position. The creating of this type of risk venture is a key disadvantage in the whole project. Toyota invested $300 million into the market which is not stable, and the situation can be changed crucially later. For example, it is obvious to mention present situation in oil markets where the fall of oil prices from $100 to $35 and even less for a barrel had happened. Such issues directly affect the market of gasoline as well as the car market in whole, which may delay shifting from gasoline cars to alternatively fueled vehicles. The situation is changing rapidly as new players appear in the markets after the years of economic sanctions and political tensions between old players. These problems created the modern gasoline war, which last time the world vividly witnessed between USSR and US during the Soviet Union military operation in Afghanistan in the 1980s.

Conclusion

It is worth to mention that the decision of Toyota will certainly benefit the image of the company as an environment-friendly innovator in the world of business. The advantage of this is an increasing image and popularity of Toyota in Australia and in the whole world. Still, it is not a profit-making decision, and the Japanese company knew it when signing on this project with Australian government. The disadvantage lies within instability of car and oil markets themselves as it may be a huge drawback to the development of environment-friendly technologies in the automobile industry. Tough decision making is inevitable in modern world of business. It is also important to know that what one gains, the other loses.

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