Toyota Motor Manufacturing
Toyota Motor Manufacturing (UK) Ltd. – “Derbyshire were offering a site of almost 600 acres at Burnaston – about 7miles from Derby city centre – on a relatively flat and easy to develop piece of land. The site chosen for engine production was the right size and shape on a well prepared industrial park 7 miles from Chester. Both locations offered good transportation links to all parts of the UK and Europe.
We were made aware of the availability of a large skilled and flexible workforce close with strong roots in engineering and manufacturing and a first class environment in which to live and work. The local authorities also showed great enthusiasm and willingness to assist. The sites not only provided and effective infrastructure to enable us to operate i. e. electricity, gas, water, telephones but also business and personnel support services to help the Company and its people to integrate into the local communities. ”
When choosing a location the firm ultimately looks at cost, (least-cost site). This concept is the idea of choosing a location that allows a firm to minimise its costs and hence its selling price. All the factors they will examine directly or indirectly will be linked to this factor. Wages within Derby are falling in comparison with the average in England this will be a plus point for Toyota because it is better to have falling wages than increasing ones. They could locate to a city with very low wage costs but if they were rising then this could increase costs in the future.
The fact they are falling is a good sign also because it shows there is an increasing availability for labour because if demand drops so will cost of labour because there are more people looking for fewer jobs. This however seems to be due to fewer jobs rather than more people hence the population of Derby has decreased by 0. 53% from 1991 – 2001. This is a good sign because the labour market in Derby will be less competitive and Toyota coming to the region would then be welcomed by the community and the local government meaning benefits when starting up.
However it is not just the overall labour cost that is important Toyota will have to look at the labour cost per unit – hence comparing the productivity of this labour force as well as the overall cost. The productivity is how units each employee produces in a given time. A major cost for Toyota, because of there need for skilled labour would be training, because of this they will look for locations with an already relatively skilled workforce.
22. 39% of people in Derby in employment are employed in the manufacturing sector and 10.61% are process, plant and machine operatives and 11. 83% are in skilled trade occupations. This suggests that Derby has roots in manufacturing and also that because manufacturing is the biggest employer in the area there will be a good number of employees already trained in production of some sort. Land cost is important for location, for this reason a firm needing vast amounts of land for example manufacturing units or wholesalers will locate out of big cities. Also the further away from London the cheaper the land cost.
As you can see where the Toyota plant is located far enough away to benefit from reduced wages, land costs, transport etc. but to still have adequate links with transport hubs, airports stations, and ports. In their Derbyshire location Toyota invested i?? 1. 15 billion and acquired a 580 acre plot, adequate to reach production levels of 282,215 vehicles. The concept here is economies of scale, Derby offered this amount of land and Toyota have been able to reach production levels high enough to create a low unit cost.