Toyota to Move from Torrance to Texas - Essay Example

            Los Angels were used by the company as a transshipment point and not a manufacturing point due to its proximity to the port. This is because the Toyota Company imported cars by sea. There is also easy access to Tokyo by the company. By this, the Toyota Company was able to maximize profits by minimizing its cost of transporting cars far from the port. The company’s profit is equal to total revenue less cost of inputs and transportation costs. The costs that vary across space are procurement costs and the costs of distributing the output. Thus, the Toyota Company had to choose a location that would minimize its total transport cost (Hirsch and Undercoffer, 1).

            However, the company now does not import its vehicles and 75 percent of its branded cars sold in the United States are manufactured there. Most of them are manufactured in Toyota plants in Texas, Kentucky, and Mississippi. There is a reason that could have led the Toyota Company not to use Los Angeles as a manufacturing point. These are the distance from the market; and the distance from the inputs. Locating a manufacturing firm near its market helps in lowering the transportation cost of the output. With such companies, the monetary weight of output is more than the weight of the input thus the firm locates manufacturing points near its market (Hirsch and Undercoffer, 1).

            As is suggested by the observer, the move that shows that Toyota is trying to avoid high taxes in California is true. This is evident from the article. It is stated that Perry visited California so as to recruit companies. He contends that 50 California companies have planned to grow and move to Texas as it offers a business climate that is better than California. The author of the article also states that “Toyota could also save money in an environment of lower business taxes, real estate prices and the cost of living” (Hirsch and Undercoffer, 2).

            With the communication technology today, the Toyota Company should not feel compelled to relocate its headquarters closer to its manufacturing facilities. This is because technology enables companies to operate even when there is a distance between their headquarters and the manufacturing point. The managers of the Toyota Company are able to run it even from another location. There are also other factors that may hinder Toyota Company from relocating its headquarters such as the cost of moving, the quality of life in the new location, the cost of living, and the cost of operation in the new area (Busch, 1).