Toyota

Toyota
Toyota may have gotten its start in auto making by being a fast follower, but it is now the
innovator. In 1936, Toyota admitted following Chrysler’s landmark Airflow and patterning its
engine after a 1933 Chevrolet engine. But by 2000, when it introduced the first hybrid electric-
gasoline car, the Prius, Toyota was the leader. In 2002, when the second-generation Prius hit
showrooms, dealers received 10,000 orders before the car was even available; GM followed with
an announcement that it would enter the hybrid market with models of its own.
Toyota’s strategy for the Prius was to build an environmentally friendly car that reduced the
footprint on the environment by reducing energy consumption, greenhouse gas emission rates,
and smog emission rates. Toyota president Fujio Cho sees environmental performance as
essential to the future of cars.
Introducing such leading-edge products presents marketing challenges. For example, the
marketing messages must educate consumers that the Prius doesn’t need to be plugged in, as an
electric car does. The marketing messages must also communicate the value of fuel efficiency,
not just for fuel savings for customers, but for the environment as well. “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.
Toyota offers a full line of cars for the U.S. market, from family sedans to sport utility vehicles
to trucks to minivans. Toyota also has products for different price points, from lower-cost Scions
to mid-priced Camrys to the luxury Lexus. Designing these different 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 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 personalization. To meet that preference, Toyota will build
the car mono-spec at the factory and let customers at dealerships choose from over 40
customization 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 just go stare at a car,” said Scion vice president Jim Letz.
In contrast, Toyota’s marketing strategy for the Lexus line focuses on perfection. The tagline for
the global strategy is “Passionate Pursuit of Perfection.” Dealerships offer white-glove treatment.
Toyota markets Lexus globally and understands that each country defines perfection differently.
In the United States, for example, perfection and luxury mean comfort, size, and dependability.
In Europe, luxury means attention to detail and brand heritage. Therefore, although the core of
Lexus marketing is similar (a consistent Lexus visual vocabulary, logo, font, and overall
communication), the advertising varies by country.
A big reason behind Toyota’s success is its manufacturing. Toyota’s combination of

manufacturing speed and flexibility is world class. Its plants can make as many as eight different
models at the same time, which brings Toyota huge increases in productivity and market
responsiveness. Toyota is in the midst of integrating its assembly plants around the world into a
single giant network. The plants will customize cars for local markets and be able to shift
production quickly to satisfy any surges in demand from markets worldwide. With a
manufacturing network, Toyota can build a wide variety of models much more inexpensively.
That means Toyota will be able to fill market niches as they emerge without having to build
whole new assembly operations. “If there’s a market or market segment where they aren’t
present, they go there,” said Tatsuo Yoshida, auto analyst at Deutsche Securities Ltd. And with
consumers increasingly fickle about what they want in a car, such market agility gives Toyota a
huge competitive edge.
Toyota’s sales rose in every region of the world in 2003, and the company earned $146 billion. It
edged past Ford Motor Co., 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, with a goal of surpassing GM as the world’s largest carmaker by 2010.
Discussion Questions
1. What have been the key success factors for Toyota?

2. Where is Toyota vulnerable? What should it watch out for?
3. What recommendations would you make to senior marketing executives going forward?
What should they be sure to do with its marketing?

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A big reason behind Toyota’s success is its manufacturing. Toyota’s combination of

1. What have been the key success factors for Toyota?

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