One of the greatest examples of global competition is in the car industry. As the Japanese gained market share in America, U. S. carmakers required the Japanese to self-impose quotas on cars exported to the states. This encouraged Japanese firms not only to establish their plants in the United States but also to build bigger and more luxurious cars to compete against the higher-priced U. S. cars and the expensive European cars such as the Mercedes and the BMW.

One such Japanese car is the Lexus, by Toyota. This car is aimed at those who would like to buy a Mercedes or BMW but cannot afford either. With a sticker price of $35,000, the Lexus was substantially less expensive than the comparable European Imports.

In 1983, Toyota set out to develop the best car in the world – measured against the Mercedes and the BMW. The aim was to produce a quiet, comfortable, and safe car that could travel at 150 mph and still avoid the gas-guzzler tax imposed on cars getting less than 22.5 miles per gallon. This seemed to be an idea of conflicting goals; that is, cars being fast seemed irreconcilable with cars being, at the same time, fuel-efficient. To meet these conflicting goals, each subsystem of the car had to be careful scrutinized, improved whenever possible, and integrated with the total design. The first version of the 32-valve  V-8 engine did not meet the first economy requirement. The engineers applied a problem-solving technique called “thoroughgoing counter measures at the source.” This means an attempt to improve every component until the design objectives are achieved. Not only the engine but also the transmission and other parts underwent close scrutiny to make the car meet U. S. fuel requirements.

The approach to achieve quality is different from that of German car manufacturers. The letter use relatively labour-intensive production processes. In contrast, Toyota’s advanced manufacturing technology aims at high quality through automation requiring only a fraction of the work force used by German carmakers. Indeed, this strategy, if successful, may be the secret weapon to gain market share in the luxury car market.

In the development of the Lexus, each aspect of the car was carefully studied with the customer in mind. The car body and the rear heck, for example, were meticulously designed and tested for air drag. The cars of competitors serving as benchmarks were thoroughly studied. Similarities of the Lexus with the Mercedes and BMW are unmistakable. The name Lexus, by the way, was carefully chosen. Several potential names consisting of nonsense words were selected by the computer. Lexus, it was thought, conveyed a sense of luxury.

To market the car, Toyota established a separate dealer network, an approach taken previously by Nissan to sell its Acura cars. Again, painstaking effort was applied in designing the showrooms and training mechanics. For the introduction of the car, reporters were flown to Germany, where they had the opportunity to compare the Lexus with Jaguars, BMW’s and Mercedes cars on the autobahn, which has no speed limit. After six years in the marketing, the $500 million car was finally born. What will the future hold for the Lexus?

European carmakers are naturally concerned about the coming invasion of Japanese luxury cars. Mercedes and BMW not only have to compete in the U. S. market but also may face threats of a Japanese invasion in the European Union.    

Questions

1.         Could U. S. manufacturers apply the same approach as Toyota to build such a car? Why, or why not? What might be some obstacles? Discuss in detail.  (10 Marks)

2.         Do you think that the Lexus can obtain an image similar to that of the BMW and Mercedes cars? Discuss.        (5 Marks)

3.         Prepare a profile of the potential buyer of the Lexus?  (5 Marks)

4.         What should Mercedes and BMW do to counteract the Japanese threat in the United States and in Europe?   (10 Marks)