Discussion of the Main Issue Presented in the Media Report - Case Study Example

Economics Case Study Your name Course Tutor Institution Department Discussion of The main Issue Presented in the Media Report Toyota is facing a serious challenge of completely closing down in Australia in 2017 (Fickling 2014). Toyota has been manufacturing vehicles in Australia since 1963 and thus, this is seen by many as a hard blow to the persons working in the car manufacturing industry. Producing goods locally has been endangered as the commodities boom assisted move the worth of the Australian $ to $US 1.11 within the month of July 2011. That has been the utmost level within thirty years from the time that exchange controls dropped. Whilst the monetary has since decreased in value to roughly 89¢ to the US$, it is still high in comparison to any point for the last eighteen years up to the year 2007. That has left Toyota’s home lines that manufactured 101,425 vehicles in the year 2012, striving to clutch their own within a worldwide company which manufactures ten million vehicles annually (Fickling 2014). The firm had been striving to reduce $3800 from the price of making a car within Australia for the purposes of making contest with plants that are found in Japan and Kentucky. It is estimated that it costs approximately $US3750 more to manufacture a vehicle within Australia than anywhere else. Reports reveal that last May, the costs of producing car in Australia were more by two times those within Europe and 4 times more those in Asian divisions. The exit of Toyota would ultimately remove the parts makers’ customer ground. With the exit of Toyota in Australia, roughly 35,000 jobs would be lost (Fickling 2014). The impact of Toyota’s exit to the workers would be that some of them would not be capable of finding alternative jobs while some, who would find, would not be paid similar to what they used to. On the other side, some employees who would be lucky enough would find even better jobs than they could imagine. Additionally, some other employees would enter into private practice where they would set up their individual businesses. The government on the other hand, would also lose tax gained from Toyota manufacturing company. The Toyota’s exit would also affect employment indirectly (Fickling 2014). In this case, some of the suppliers who sell products to the company would be adversely affected. The insurance companies that have insured the company and employees would also be affected. Secondly, the employees in companies or individuals that are hired to offer supportive services like, carrying products to various destinations would also lose those jobs. Third, the banks where the company keeps its money would also be negatively affected. In this regard, some employees in such banks might also be laid off. Key Stakeholders to Be Impacted by Toyota’s Exit A number of stakeholders would be impacted by the exit of Toyota in Australia. The first stakeholders to be impacted the most would be the old (Fickling 2014). In this case, old people would find it difficult to find jobs elsewhere as they are not as active as many corporations would desire. Additionally, as they would be looking ahead to retirement, not many companies would be willing to employ them for a short while and offer them retirement benefits. The other stakeholders to be impacted by the Toyota’s closure would be the young generation. In this case, young people would find it hard to lose jobs and begin searching for other jobs. Despite being active, aggressive and young, they would not find it easy to get jobs in other industries. The other stakeholder to be impacted by the company’s exit would be the insurance companies who would lose the sums of money paid to them for insuring both the company and employees. The other stakeholder to be impacted by the Toyota’s pulling out of business would the government. As such, the government would have another big burden of catering the needs of the laid off employees of the company either directly or indirectly. As an example, some employees would be incapable of paying medical bills for themselves as well as for their families compelling the burdened government to reluctantly pay for such services. The other stakeholder to feel the pinch of Toyota’s closure would be banks. In this regard, the banks that were offering loans and safekeeping of the company’s money would longer enjoy that deal. The banks would be compelled to give all the money that would have been deposited in them thus reducing its deposits. Therefore, the banks would have less money to lend out to the customers and making other investments thus, decreasing their overall profits. That, in the long run would cause another reduction of employees in the banks. The other stakeholders to be affected by the company’s exit would be other companies and individuals offering supportive services to the company. The companies include transporting, advisory and advertising corporations. In this case, the profits of such companies would decline which eventually would cause a reduction of their operations and employees. The other stakeholder to be impacted by Toyota’s closure would be the neighbouring community. As the company supports and promotes community development, the closure would have a negative effect to the lives of the communities concerned. For instance, some projects that are being funded by the company would be halted due to decline of funds. Similarly, students who would have been sponsored by the company would also be compelled to leave school as they would not be able to pay the school fees. The main impacts of the company’s closure would be many. First, there would be loss of pay by the employees. In this scenario, some employees would not receive their full payments which would ultimately lower their standards of living. Additionally, some employees would finish off losing their homes due to being incapable of paying their bills. The other major impact would be mental. Actually, the awaiting income loss would be an incessant worry. Fretting over the way of paying bills and keeping the normal lifestyle would virtually be a reflex. The unemployed persons would end up with stress-associated psychiatric problems that would sink to depression and finally death. That would be an extra cost to the government in offering medical care to the affected persons, and more care to the left families of the deceased. The other major impact of job loss by Toyota employees would physical effects. In this scenario, particularly the older employees would suffer from stress-connected arthritis or diabetes which would eventually lead to death. The other major impact of Toyota’s closure would be insurance loss. In this case, employees having children would be adversely affected by losing fitness insurance that would lead to increased stress levels. As medical costs are high, employees and their families would not be visiting doctors for defensive care, and at initial symptoms of problems. By the moment they would be seeking assistance, the issue would have increased rapidly into circumstances that would be requiring expensive surgery or medication. Those costs would be passed on to government to pay them in such cases. Economic Theories That Can Be Drawn From This Media Report The first and foremost economic theory that can be drawn from the report is that a country’s currency has got its effects on the country’s products. As asserted by the article, while the Australian currency has depreciated to roughly 89 to the US$, it is at its utmost than at whichever position for the previous 18 years all the way up to the year 2007 (Fickling 2014). As a matter of fact, a nation’s currency is regarded as a gauge of its living standard and economy. A weak dollar possesses immediate impacts on businesses. As such, since Toyota is operating its business with a weak currency, it has to incur extra costs in making payments for similar products. Those extra costs are transferred to the company’s consumers. That explains to the additional $US3750 cost of producing a car that is being experienced by the Australian Toyota than anywhere else. The other economic theory that can be drawn from this media report is that free trade has impacts on the country’s performance of the economy. As pointed out in the article, the Australian Toyota president said that it would be impracticable to go on manufacturing in Australia, citing free trade agreements which had opened the market of Australia to less expensive imported vehicles (Fickling 2014). In this scenario, free trade agreements would also contribute to the Toyota’s departure as Australian consumers have shifted from buying vehicles form it to external sellers, like Japan that are far less expensive. That would make Toyota to close down as it would not be capable of competing with its cheap selling competitors. Issues That I Believe Are Relevant I believe it is relevant to say that the services sector has several jobs that are unnoticed by many people (Flicking 2014). For example, the Australia’s repairing, servicing, fuelling and selling of cars have normally entailed far more employment than the car parts and manufacturing has offered. Additionally, the Australia’s service sector accounted for half the country’s jobs in the 19th century. Today, services sector comprise of roughly 85% where jobs are available in education, health and multiple business services. If I had the ability to affect the situation, I would retrain and reposition the affected employees to other sectors of the economy. Additionally, I would offer specialist advice to the workers who would desire venturing in private practice. Reference Fickling, D. 2014. Australia has been Making Cars for Years, But that Means Nothing When it Comes to the Bottom Line. http://www.smh.com.au/business/headwinds-finally-drive-away-toyota-20140211-32g0j.html Read More