Toyota Company

Background Of Toyota Company

Toyota is a company that selling automotive. The father of  Toyota is Kiichiro Toyoda and his father, Sakichi Toyoda was an inventor of textile machinery, including an automatic loom, and founded Toyoda Loom Works. He was working in his father's company. In year 1937, Toyota Motor Co., Ltd. was established in Japan (toyota-global.com, 2013). After Toyota developed, it sales began in 1958 and totaled a modest 288 vehicles (pressroom.toyota.com, 2013). It has developed the business into international, we can find Toyota in other countries such as United State, United Kingdom, China, French (toyota-global.com, 2013).

Demand and Supply

There are few economic concept that I would like to analyze within Toyota company. First of all, demand and supply concept are developed. Demand is something that a person want it, can effort it, and have a plan to buy it. Want is a expectation of a goods and services that can satisfy people. Quantity demand is the amount of goods and services that consumer buy. Besides that, law of demand is the other things remain the same, the higher the prices of a goods and service, the lower the quantity demanded.  

According to MacKenzie and Evans (2010), they stated that a Toyota recall crisis. In year 2009 Toyota Lexus has faced a problem which is while the speeds estimated is exceed 100mph, the break of the car will not function. Due to this problem, it might affect the demand of Toyota Lexus. In case, the buyer will have low confident with the Toyota car's brand and will feel that the Toyota's car was unsafe therefore the demand for Toyota car will decrease.

The graph above illustrate that decrease in quantity demanded, and the demand curve shift to the left.

Furthermore, when people are low confident with the product or service, they will search for the substitute goods with a nearly price. For example, they will shift to Nissan company due to Nissan Almera's price at RM64,887 (livelifedrive.com, 2013) compared to Toyota Vios which is RM 73,200 (toyota.com.my, 2013) and this will also decrease the demand of Toyota cars.

The figure 2 is the substitute good of Toyota. The price of both cars are nearly, but people have low confident with Toyota, and thus people will seek for the substitution good which is Nissan Almera. As a result, the quantity demanded of Toyota Vios decrease, and the demand curve shift to the left as shown in figure 1. Besides, the quantity demanded of Nissan Almera increase, and the demand curve shift to the right as shown in figure 2.

Besides that, consumer income will also affect the demand of Toyota. When consumer income increase, they will start to seek for the luxury good, and give up the normal good. For example, the price of Myvi is RM41,924.30 (perodua.com.my, 2013) and Toyota Vios is RM73,200 (toyota.com.my, 2013). Consumer would like to change their car from Myvi to Toyota Vios after their income increase. This will affect the quantity demanded of Toyota.

The graph above illustrate that the quantity demanded of Toyota Vios increase as consumer income increase and the demand curve shift to the right.

Besides that, according to Mybestcardealer.com (2013), it stated that Toyota Vios offer a discount with RM8000. The original price was RM73,200 (toyota.com.my, 2013) and decrease to RM65,200 result in an increases in quantity demanded and movement along the demand curve to the right.

The graph illustrate that the Toyota Vios discount with RM8000. A falling price of a good will result increase in quantity demanded and movement along the demand curve.

Supply is a goods or service that produce by a firm. There are some factor will affect the quantity supplies such as price of factors of production, number of supplies, state of nature. According to forbes.com(2011), following the massive earthquake and ensuing tsunami , Toyota subsidiary plants that produce parts and vehicles had to stop production. In case, Toyota subsidiary plants cannot function anymore, this will result in decrease in quantity supply and the supply curve shift to the left.

The graph illustrate that the quantity supplied decrease due to the natural disaster, and the supply curve shift to the left.

In year 2011, 11 March marks the second anniversary of the massive earthquake and tsunami that pummeled Japan, killing more than 20,000 people (latimes.com, 2013). Due to the sacrifice within the natural disaster cause decrease in population, it will affect the demand of Toyota fall which decrease in the quantity demanded and the demand curve will shift to the left.

 The graph above illustrate that the quantity demanded decrease due to the natural disaster affect the population, and the demand curve shift to the left.

The natural disaster affect the supply which decrease in the quantity supplied and also affect the demand which decrease in quantity demanded. In this case, it affect the market equilibrium which decrease the quantity equilibrium.

The graph above illustrate that the supply and demand decrease due to the natural disaster. As a decrease in both supply and demand will result in decrease in equilibrium quantity.

Furthermore, according to Shunk (2011), he mentioned that Japan earthquake causes the supply for new Toyota vehicles decrease and increasing in prices. This will result in the supply curve will shift to the left and increasing in prices therefore create a new equilibrium price and equilibrium quantity.

The graph above showed that a decrease in supply and increase in price after the natural disaster result in the supply curve will shift to the left therefore create a new equilibrium price and quantity.

Elastic Demand

On the other hand, the elasticity of Toyota company is elastic demand. Elastic demand is the audience will have a big respond when the price changed. Car is not a necessity due to without car, people can still take bus, motorcycle, car pool with friend or family, taxi and train be able to reach the destination. As the previous case showed above, according to Mybestcardealer.com (2013), it stated that Toyota Vios offer a discount with RM8000. The original price was RM73,200 (toyota.com.my, 2013)  and decrease to RM65,200 cause a big respond from people which the quantity demand will increase.

From the graph above we can see the elastic demand with a huge range that increase in quantity demand.

Government Intervention

Tax is a fees that charged by a government on a product, income or activity (investorwords.com, 2013). Based on my research that the local car's price are cheaper than import car's price which is Toyota Vios at a car price of RM 73,200 (toyota.com.my, 2013) compared to Perdua Myvi which the price only at RM41,924.30 (perodua.com.my, 2013). Due to the reason that government want people only consume national car in order to maintain the sale and demand in local car industry, therefore they develop a high tax to import car.

So obviously, the Toyota's car will be charges in high tax rate therefore will increase the price of Toyota car and decrease in supply as well as quantity demand since the buyer and seller are divide the burden of tax as shown in the graph above.

Oligopoly

There are four type of market structure which is perfect competition, monopolistic competition, oligopoly and monopoly. The market structure of Toyota is oligopoly, The characteristic of oligopoly are few firms, moderate barrier to entry, price maker and so on. There are only few competitor of Toyota such as Honda, Nissan, Hyundai, Kia and Volkswagen. In addition, Toyota also is a price maker which they can easily make a decision to set a price without following the market price due to they have the largest proportion market share. Entry barriers help existing firms to exercise market control due to the government restrictions, copyright and patent issues. Thus, it is hard to develop a new car firm into the market (Mehta, 2013).

References:

forbes.com, 2011. Japan Quake, Tsunami Take Heavy Toll On Toyota. [online] Available at: <http://www.forbes.com/sites/greatspeculations/2011/04/08/japan-quake-tsunami-take-heavy-toll-on-toyota/> [Accessed 24 October 2013].

investorwords.com, 2013. Tax. [online] Available at: <http://www.investorwords.com/4879/tax.html> [Accessed 24 October 2013].

latimes.com, 2013. Japan earthquake and tsunami: Before and after the cleanup. [online] Available at: <http://www.latimes.com/news/nationworld/world/la-fg-japan-tsunami-before-after-slider,0,5361679.htmlstory#axzz2id4AYpbF> [Accessed 24 October 2013].

livelifedrive.com, 2013. 2013 Nissan Almera. [online] Available at: <http://www.livelifedrive.com/malaysia/new-cars/overview/2138/2013-nissan-almera-sedan> [Accessed 24 October 2013].

Mehta, S., 2013. Oligopoly Characteristics. [online] Available at: <http://www.buzzle.com/articles/oligopoly-characteristics.html> [Accessed 24 October 2013].

Mybestcardealer.com, 2013. Toyota Vios | Discount RM 8,000 + Gifts. [online] Available at: <http://mybestcardealer.wordpress.com/2013/06/03/toyota-vios-june-promotion-2013/> [Accessed 24 October 2013].

toyota-global.com, 2013. History of Technological Development. [online] Available at: <http://www.toyota-global.com/company/history_of_toyota/> [Accessed 24 October 2013].

perodua.com.my, 2013. Myvi Price. [online] Available at: <http://www.perodua.com.my/ourcars/myvi/price> [Accessed 24 October 2013].

pressroom.toyota.com, 2013. Company History. [online] Available at: <http://pressroom.toyota.com/corporate/company+history/> [Accessed 24 October 2013].

toyota.com.my, 2013. Toyota Malaysia [online] Available at: <http://www.toyota.com.my/owners/> [Accessed 24 October 2013].