Toyota Motor Corporation 

                                                               Toyota Logo
Toyota Company is has been very famous nowadays not only our country but also in other countries. It has been establish since 1937, August 28 by Kiichiro Toyoda. The year of Toyota come into Malaysia was in 1968. In Japan, The headquarters of Toyota Motor Corporation Company is located at 1 Toyota-Cho, Toyota City Aichi (Ask.com ,2013). Whereas in Malaysia it is located at UMW Toyota Motor Sdn. Bhd, No. 2 Persiaran Raja Muda, Seksyen 15, 40200 Shah Alam, Selangor Darul Ehsan. (UMW, 2013)

The history of the Toyota Company started as a subsidiary of his father’s company Toyoda Industries.( Alcock.T,2010) The first Toyota car, is the Toyota AA, it was manufacture in 1936 whereas the company was still with the name of “Toyoda”.(Alcock.T,2010) In the year of 1937, the brand was established as an independent company and they change their name to “Toyota”. There are several market structure such as Monopoly, oligopoly, Monopolistic competition and Perfect competition. Toyota Company is under Oligopoly. Whereby a situation in which particular market is controlled by a small group of Firms.(investopedia,2013) 

 The Behaviour in solving economic problems within its economic structure.

                           Production Possibility Curve for Toyota

Toyota Company main purpose is to reduce their wastage, increase efficiency and also maintain consistency. Thus, Toyota is producing on the PPC (Production Possibility Curve.) If they select Point A on the Diagram above, the majority of the resources from labour would be channel into machinery but if Toyota Company selects Point B, there would be a huge amount of machinery has to be forgone in order to achieve the desired amount of the labour. Hence, the most appropriate point is the Point E whereby all the resources are equally dividing among the two, rising towards the capital it is because a manufacturing company would pay more attention on machinery and also plants. At Point C, it state that which resources are not being used efficiently in the production of both goods. At Point D, explain that an output that is not attainable with inputs.

Resources
A resource is a commodity or service that used to meet human needs and desires. ( Ask.com,2013)  In order to create a car, resources are very important. Resources that which use in order to manufacture a car are glass, rubber, aluminium, steel and more. Resources are limited in the supply and also demand. For example the diagram below state that, the price drop of steel from OP1 to OP2, it will not cause Toyota to heavily stock up on steel as there is a lesser than proportionate increase of quantity demanded of only from OQ1 to OQ2.

Inelastic demand of steel

   Steel is commonly used in the construction of the chassis and body panels of trucks and automobiles .(ehow,1999-2013) Toyota Company also need steel in order to manufacture a Car. So, if demand of the Toyota cars increases, then demand of steel will also increase. The two diagrams below explain whereby if the demand curves for Toyota cars rise, the same will cause the demand curve for steel to shift right from DD to DD2.

 

                                                          Demand curve for Cars and Steel

In Short Run

A short run production is a time period whereby at least the one factor of production is fixed. In the short run production, the output can also increase by using lots of variable factors. In the short run production, Toyota can be clarified by using the theory of Law of Diminishing Marginal Returns. The law of diminishing marginal return state that one unit of production is the return of an extra unit that add into the total production. By explained the graph below, law of diminishing marginal returns also explained that there will be an improvement of the quantity of cars produced by Toyota at Stage 1. In stage 2, marginal return of the new units of production can be improved in a slower fashion for each extra unit. Therefore in stage 3, each additional line will give more low returns than the previous one because the resources have been fully employed.      

                                             TPP, APP and MPP Curve

  In Long Run

A long run is a period of time in which all factors of production and costs are variable. (investopedia,2013). There are three categories cover in long run production such as the diseconomies of scale, economies of scale and also the constant economies of scale. Diagram below shows 3 type of scales can be defined by using the long run production curve. 

 Long run average cost curve

 By referring the diagram below from 2001to 2008, The Toyota Company has used economies of scale. The increase in the input would also cause the increase in the number of production. After that form 2008 to 2009, the Toyota Company falls into diseconomies of scale. This is because of their manufactured start affecting lots of the car around the world. An increasing in input had a lesser than increasing in output.

Car sales in the world

Demand

Demand is the desire to own anything, the ability to pay for it, and the willingness to pay during a specific period. (Sloman.J, Wride.A, Garratt.D, 2012).  In this new era, a lot consumers have demand more and more cars that are affordable and also fuel-efficient. This increase in demand is due to the change in factors in the taste of the consumers, increase in population, income, prices of substitutes, and also the drop in the prices of complement products. The rise in population and income help a lot of the car manufacturers bring in higher profits. The next factor that will affect the rise in demand would be the drop in the price of a complement. If everyone knows that price of gas will going to decrease in next year, everyone would have buy more cars this year Another factors is insurance prices were to go down, it would be another incentive for consumers to buy cars. Therefore it creates a rise in demand. In 2009, the government started decide to exempt import duties for Toyota Prius which will definitely caused an increase in the demand of cars in Malaysia which is a movement along the demand curve stated diagram below. Therefore, the firm start to reduced price of cars so that attract consumers to aid uncertainties as illustrated at the movement along the demand curve in Diagram below from point A to B.

Demand curve

Supply

A Supply is a schedule that shows how many products or services would the producers willing to produce for a sale at each of a series of possible prices during a specific time. (Sloman.J, Wride.A, Garratt.D, 2012)  One of the factors that will be affect supply of cars to Malaysia was when the earthquake and the tsunami which happen in Japan on March 2011. This caused a stall in production and delivery of Toyota cars where the supply fell from SS to SS2 in Diagram below.

           

                               Supply curve

Price determination

       The price of mechanism is the main determinant of prices of cars. Toyota Company tries to reach equilibrium between the demand and supply of cars. According to the Toyota sales and production picture below, supply for cars hardly meets the demand. Looking at graph below, at price OP2, the quantity of Toyota cars demanded by consumers is at 0Q3 while the willingness of Toyota for supply is at 0Q1, thus, there is an additional demand. 
            When the buyers start to compare the car with one another, the excess of demand will definitely drive the prices up, signalling to the suppliers that more of the good should be produced. The high prices will decrease the demand which will lead to the equilibrium point at Point E.

Price mechanism excess demand of Toyota Cars

Toyota sales and production in Malaysia

Government Intervention

     Government intervention is a regular action taken by a government in order to affect or interfere with decisions made by individual, groups, or organization regarding social and economic matters. (Webfinance, 2013)  Why the price of Toyota cars in our county is so expensive? It is because of the import duties and taxes. The government stated high tax on imported cars such as Toyota, Honda, Ford and more. So that, the government able to save the local industry such as Perodua and also Proton. The reason Malaysian buys more Proton and Perodua cars are because they are cheaper than other imported cars and also both Proton and Perodua are local industry. Thus, the Government would encourage Malaysian to buy more local cars

Price Elasticity of Demand

Cars are always considered as consumer durables. In the long run, the demand for cars is inelastic it is because that the consumers are very less likely to purchase another car unless the current car needs substitutes.  Whereas in short run, the consumers will be more responsive towards the changes in price which will make the demand for cars more elastic. 

Price Elasticity of Supply 

In year of 2005, the price of Toyota Prius has been doubled up from 0P0 to 0P1, it cause a less increase in supply from 0Q0 to 0Q1. This show that cars are relatively supply inelastic that the price of the cars continued to increase more than the increase in quantity supplied refer to diagram below.

                                                  Supply inelastic curve of Toyota Prius

Reference list

1.      UWM (2008) Toyota Motor Contact information [online] http://www.umw.com.my/ourbusinesses/automotive/toyota/contactinfo/Pages/default.aspx [access at 10 Oct 2013]

2.      James.T (2013) why is steel used in car bodies [online] http://www.ehow.com/facts_7592134_steel-used-car-bodies.html [access at 10 Oct 2013]

3.      Business ask (2013) Where are the Toyota headquarters located [online] http://www.ask.com/question/where-are-the-toyota-headquarters-located [access at 11 Oct 2013]

4.       Alcock.T (2012) A history of Toyota Motor Corporation [online] http://www.centralcontracts.com/news/a-history-of-the-toyota-motor-corporation-3355 [access at 12 Oct 2013)

5.      Webfinance (2013) government intervention [online]http://www.businessdictionary.com/definition/government-intervention.html [access at 13 Oct 2013]

6.      Sloman, J., Wride, A. and Garratt, D. 2012. Economics. Harlow, England: Pearson.

7.      Investopedia (2013) Defination of long run [online]http://www.investopedia.com/terms/l/longrun.asp [access at 14 Oct 2013]

8.      Business Ask (2013) Definition of economic recourse [online] http://www.ask.com/question/definition-of-economic-resources [access at 15 Oct 2013]

9.         Toyota-global.com. 2013. Figures | TOYOTA MOTOR CORPORATION GLOBAL WEBSITE. [online] Available at: http://www.toyota-global.com/company/profile/figures/ [Accessed: 16 Oct 2013].

10.  Toyota Malaysia. 2013. Toyota Malaysia - Vios. [online] Available at: http://toyota.com.my/vios/ [Accessed: 17 Oct 2013].

11.   Trimnell, E. 2008. Toyota Production System (TPS). [video online] Available at: http://www.youtube.com/watch?v=5MjEYrfclt4 [Accessed: 17 Oct 2013].

12.     The 14 Principles of the Toyota Way. 2003. [e-book] New York: Jeffrey Liker. pp. 35-41. http://icos.groups.si.umich.edu/Liker04.pdf [Accessed: 18 Oct 2013].        
13. Investopedia (2013) Defination of Oligopoly [online]http://www.investopedia.com/terms/o/oligopoly.asp [access at 19 Oct 2013]