IntroductionMarkets around the world face competition in different forms. They are perfectly competitive, monopolistic, oligopolistic and monopoly in nature. Different forms give rise to different models and present a different scenario for the real world. The report looks into the car industry in Australia and the type of competition prevalent in the economy. Toyota as the car brand has been taken and the report revolves around Toyota and its competitors. It also looks into the various short and long run curves and the effects it has on the market.
Purpose of the reportTo identify the characteristics of the car market and based on it judge the market structureTo present the manner in which the market structure affects the short and long run curvesTo present the benefits and controversies which surround the market structureTo throw light on the finding and recommendations which will help Toyota fight competition and sustain in the market structureToyota in AustraliaToyota is in the field of manufacturing cars and has been in operation since 1980. The car industry is heavily competitive and has resulted in stiffer competition from every area.
This has forced the look for newer technology and means that would reduce cost and help to improve the bottom line. This is also forcing Toyota to come up new variants of car. (Toyota, 2010) On a look the car industry looks perfectly competitive but when a deeper analysis is conducted it highlights monopolistic competition. This is due to the fact that there are several players like Ford, Mitsubishi, Hyundai and many others. A detail analysis of the reason is further provided in the report. Monopolistic CompetitionThe car industry in Australia shows monopolistic competition.
Toyota faces competition from several quarters and has limited control over the market and the products are also similar to its competitor like Ford, Hyundai etc. The following definition will further help to associate Toyota and the car industry to monopolistic competitionDefinition: Monopolistic competition is “a market structure which has many sellers having little control over the market and the products are very similar with very little differentiation among the products”. (Monopolistic Competition, 2010)Toyota in the car industry stands on this definition as there is competition form players like Ford, Mitsubishi, Hyundai and others.
Also the control due it is little and further the products offered are similar therefore meeting the criteria of a monopolistic competition and qualifying itself as one. AssumptionsToyota in the car industry qualifies as having a monopolistic market structure due to the following assumptionsLarge number of firms: This is quite evident as there are many producers like Ford, Mercedes, Hyundai and others making competition level to be highSimilar but Differentiated Product: The car industry witnesses this as cars of different manufacturers like Toyota and Ford are similar but have slight differentiation i their design, maintenance, mileage and other areasSubstitute Product: The car industry witnesses this as increase in price of Toyota forces consumers to purchase Ford but the price match is followed by others soon leaving very little possibility to jump from one product to other.
(Suranovic, 2007) Free entry and exit: This is also present due to government laws which allows many new producers come and leave the market though the cost of setting is highEconomies of scale: Producing more cars help Toyota to reduce their cost as the fixed cost gets spread over larger units thereby helping to achieve economies of scale and ensure lower cost.