Automobile Industry of Australia
. The marketing structure of this industry is oligopolistic, which is a combination of both competitive and monopoly market structure. Oligopoly refers to an industry that includes a few competing firms. Each firm has enough market power to prevent it from being a ‘price taker'
Performance and problems of the market structure of Automobile Industry in Australia
There exist two standard models in oligopoly such as Cournot’s model (simultaneous game) and Stackleberg’s model (sequential game)
If we read the above table, then we see that Toyota has occupied the largest market share compared to all others. Largest market share means, Toyota Company faces an inelastic demand from consumers
i) When demand is elastic then cutting the price of a business firm will improve its total revenue and market share and
ii) When demand is inelastic then cutting prices will create fall in revenue with little or no significant impact on market shares
The Automobile Industry of Australia use the face several problems that hinders the growth of the industry. Australia is a developed country but there exist some problems in this heavy industry. Once the major problems are identified then its reforms will be easily prescribed.
The lack of scale opportunity is one of the major problems faced by the automobile industry. According to Rowell, Nghiem, & Connelly, (2016) the long run average cost curve is ‘U’ shaped. It has a special implication. Production of more and more output leads to decrease per unit production cost. On another hand,the Australian automobile industry can’t be able to capture the good effect of scale economies because more and more output production demands more inputs
Another important issue that hampers the growth of Australian automobile industry is the condition of Australian Dollar. It is an important aspect of international trade. Due to the strong Australian dollar, it is difficult for Australian manufacturers to remain competitive in the global market
The weak manufacturing base is also a vital reason behind the stagnant condition of the automobile industry of Australia.Strong manufacturing base is the prime factor for a country to be developed. A substantial amount of investment in capital is required to make a strong manufacturing base for a heavy industry
Therefore, revolutionary reforms are badly required for the improvement of automobile industry of Australia.
The stronger and stable step towards the huge investment can boost up the automobile industry.A Huge amount of both public and private investment is needed to capture scale effect and to improve manufactured base for Australian Automobile Industry. It is well known that ‘Investment' in any industry works as a fuel of engine
The government of Australia has to take robust steps in the trade perspective in Australia to motivate the automobile industry of Australia in a larger market of the global automobile industry. The free trade agreement is maintained by Australia Government. But still, there is a problem in international trade due to the rigidity of Australian Dollar (AUD) movements in foreign exchange market
This is a little approach to capturing the scenario of Australian automobile industry, its drawback, and reforms needed to overcome these problems. This essay is explained with economic intuitions. Problems of Automobile industry are identified then its reform measure will be discussed. The automobile is a heavy industry, and to be developed the country improvement in the heavy industry, manufactured base are very important.
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