TOYOTA MOTOR CORPORATION

Toyota Motor Corporation is Japan's leading carmaker. The company has international existence in more than 170 countries across the globe. It manufactures a variety of automobiles, including cars, pickups, minivans and SUVs, including models such as Camry, Corolla, 4Runner, Land Cruiser, Sienna, the luxury Lexus line, and full-sized pickup trucks. It has enormous financial potency, a sales turnover of 131,511 million for 1997 and sales growth of 29.3%. It is the second-largest carmaker in the world, following General Motors. We are already aware that the automobile industry is enormous and is popularly split into two categories, namely, commercial vehicles and cars. Even as General Motors' is the world's largest automobile producer, the car market situation is somewhat different due to sudden changes stimulated by Japanese counterpart Toyota racing ahead. Recently, Toyota has gained the world's leading car manufacturer label having about 17% market share, followed by GM and Ford who have approximately 15 and 12 per cent market share, respectively. (Toyota Culture, by Liker )

Some of the critical points of its success include:

Successful Brand: Toyota has gradually developed into a trusted brand based on quality, first-class performance and being eco-friendly (Lysons & Farrington 2005)

Innovation: Toyota is at the front position of car manufacturing innovation. It was the earliest car maker to embrace lean manufacturing (Toyota Production System), a quicker, more competent process that leads to less waste than the conventional batch and queue manufacturing technique. It, in addition, applied JIT (Just in Time manufacturing) and intelligent automation.

Product Development: The car market's achievement is the latest model that encourages demand and loyalty to the Toyota brand. Toyota has a status for producing greener cars, more fuel proficient, and first-class performance. Toyota has sought to meet government necessities like reducing the impact on the atmosphere, economic changes including prices of fuel - oil persisting in increasing by developing hybrid energy. Toyota was the earliest car maker to promote hybrid (gas and electric) fuel, with the commencement of the Prius model earlier than its rivals.

It effectively entered markets and penetrated them with both manufacturing and sales subsidiaries. Toyota quickly gained first-mover advantages in internationally strategic markets (Asia, Europe, US) first. In contrast, its closest opponent (Ford, GM) gained a grip in only 2 of (the US and Europe). Toyota is well-positioned to take the lead in developing South-East Asian markets of China and India. Toyota has stimulated a worldwide manufacturing model. Car manufacturing sites are costly, requiring high fixed cost investment. Toyota has moved its manufacturing site to where factor costs are lesser (with no comprising on quality) and currently manufactures diverse parts of the car and carries out assembly in various locations around the globe. It has been mainly flourishing at gaining cost efficiencies compared to manufacturing and assembling vehicles in a single location (Management of Technology and innovation in Japan). When Toyota introduced the world's first hybrid electric-gasoline car in 2000, the Prius, it heralded its leadership in the auto industry. In 2002, when the second-generation Prius hit the showroom, dealers received 10,000 orders before the car was even available. Toyota's strategy for the Prius was to build an environmentally-friendly vehicle that reduces energy consumption, greenhouse gas emission, and smog emission. Toyota president, Fujio Cho, sees environmental performance as essential to future cars

Introducing such leading-edge products presents marketing challenges. For example, the marketing messages educate consumers that the Prius doesn't need to be plugged in, as an electric car does. They must also communicate the value of fuel efficiency, not just for fuel savings for customers but also for the environment. "Every gallon of gas burned releases 20 pounds of carbon dioxide into the atmosphere. The general public still lags in appreciating the global warming significance of that," said Dave Hermance, executive engineer for environmental engineering at Toyota's Technical Center in Los Angeles.

Now, Toyota is moving into Phase Two of its strategy regarding hybrid cars. It is moving hybrid technology into the core of its lineup. By 2006, Toyota will launch hybrid versions of its Highlander and the Lexus line of RX SUVs. It is also considering a hybrid version of the Camry. Toyota tries to ensure consumers that its car offers better fuel economy without skimping on power and comfort with each model. Its goal is to popularise the technology enough to reap the economies of scale needed to bring the cost of building hybrids and their prices more in line with conventional models. It predicts that by 2010, 25 per cent of its sales will come from hybrid cars. Toyota offers a full line of cars for the US market, from family sedans to sport utility vehicles to trucks to minivans. Toyota also has products for different price points. From lower-costs Scions to mid-priced Camry to the luxury Lexus. Designing these other products means listening to different customers, building the cars they want, and then crafting the marketing to reinforce each make's image. For example, Toyota's marketing strategy for Lexus focuses on perfection. "Dealership offer white-glove treatment. Toyota markets Lexus globally and understands that each country defines perfections differently. In the US, perfection and luxury mean comfort, size and dependability, and in Europe, luxury implies attention to detail and brand heritage. Thus although the core of Lexus marketing is similar (a consistent Lexus visual vocabulary, logo, font and overall communication), the advertising varies by country. Toyota spent four years carefully listening to teens before launching the Scion for first-time car buyers. It learned, for instance, that Scion's target age group of 16- to 21-year-olds wanted personalisation. To meet that preference, Toyota will build the car mono-spec at the factory and let customers at dealerships choose from over 40 customisation elements, from stereo components to wheels and even floor mats. Toyota markets the Scion at music events and will have showrooms where "young people feel comfortable hanging out and not a place where they go stare At a car, "said Scion Vice President Jim Letz

Penetrating the young buyer market is essential for Toyota, given that the average Toyota owner 46. Moreover, most of Toyota's big sellers aren't exactly head turners. When CEO Fujio Cho travelled through Germany in 1994, he recalls being asked why were Toyota cars so poorly styled. According to Cho, part of the problem is that too many Toyota's were designed with Japanese consumers in mind and then exported. Some worked, others failed. These days, design teams on the West coast of the US, in southern France, and Japan compete for projects. That has paid off with models such as the Yaris, Toyota's best-seller in Europe. A Greek designed the Yaris, then imported it successfully to Japan because of its "European" look.

Another big reason behind Toyota's success is its manufacturing. Toyota's combination of manufacturing speed and flexibility is world-class. Its plants can simultaneously make as many as eight different models, bringing Toyota considerable productivity and market responsiveness. Toyota is now integrating its assembly plants worldwide into a single giant network. The plants will customise cars for local markets and quickly shift production to satisfy any demand surges from markets worldwide. With a manufacturing network, Toyota can build a wide variety of models much more inexpensively. That means Toyota will fill market niches as they emerge without building new assembly operations. 'If there's market or market segment where they aren't present, they go there, "said Tatsuo Yoshida, auto analyst at Deutsche Securities. With consumers increasingly fickle about what they want in a car, such market agility gives Toyota a substantial competitive edge.

In 2005, Toyota ranked ninth among the world's most valuable brands, first among Asian brands. Its sales rose in every region in 2003, and the company earned $146 billion. It edged Ford to become the world's second-largest carmaker, and its market cap of $110 billion is more than that of GM, Ford, and DaimlerChrysler combined. Toyota is now eyeing the top spot, aiming to surpass GM as the world's largest carmaker by 2010. Such lofty ambitions require Toyota to target China as a critical market of the future. Toyota only makes about 130,000 vehicles in China, with a market share of 5 per cent. Preoccupied with its efforts in the US, Toyota is a late entrant to China. In September 2004, however, Toyota announced plans to spend $460 million on a plant to produce Camry with Guangzhou Automobile and cooperate with First Autoworks in producing Prius. Bringing hybrids to China is a bold step and supports the Chinese government's efforts in promoting clean, fuel-efficient vehicles. However, many Japanese manufacturers are hesitant to take leading technologies to China because their intellectual property will be stolen. And Chinese consumers aren't exactly clamouring for higher-priced environmentally-friendly cars.

Major challenges and future outlook for the company:

Car manufacturers constantly face increasing political and consumer groups' demands to manufacture more fuel-efficient cars and decrease emissions.

Saturation oversupply in the developed world has led producers to look to China, India and up-and-coming markets where population, income and demand are mounting. However, these countries have national brands which are increasing in reputation.

Oil prices - upsetting the price of fuel.

Consumers handling of cars is declining. Faced with increased operation costs, consumers use their vehicles less to bank on household costs. Governments across Europe are encouraging car-share and substitute forms of transportation, and these factors are disturbing the demand for the latest cars.

Varying demographics: The size of families has been declining, condensing the demand for bigger cars and an upswing in demand for fuel proficient smaller cars.

Answer ALL Questions

QUESTION 1

What have been the key success factors for Toyota? (20 marks)

QUESTION 2

By applying the "Segmentation, Targeting and Positioning (STP) Model" relate to the marketing strategies of Toyota (30 marks)

QUESTION 3

Using Porter's Five Forces Model, explain how Toyota can sustain its business against its competitors. (30 marks)

QUESTION 4

What recommendations would you make to the Chief Marketing Officer of Toyota to champion the automotive industry (20 marks)