TOYOTA MARKETING STRATEGY

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 Table of Contents

Introduction ............................................................................................................................................ 3
1. Industry Analysis of Toyota ................................................................................................................. 4
1.1 Internal Factors ............................................................................................................................. 4
1.2 Macro Analysis .............................................................................................................................. 4
1.3 Micro Analysis ............................................................................................................................... 6
1.4 SWOT Analysis............................................................................................................................... 6
2. Developing a Segmentation and Targeting Strategy .......................................................................... 8
2.1 New Product of Toyota ................................................................................................................. 8
2.2 Identification of Relevant Segmentation Criteria ......................................................................... 8
2.3 Rational and Justification of Segmentation Strategy .................................................................... 9
2.4 Targeting Strategy ....................................................................................................................... 10
3. Positioning Strategy for ‘Toyota Prius’.............................................................................................. 10
3.1 Key Positioning Objectives .......................................................................................................... 10
3.2 Positioning Strategy and Communication Plan........................................................................... 11
4. Marketing Strategy for Product Life Cycle Stages ............................................................................. 12
4.1 Product Life Cycle (PLC) .............................................................................................................. 12
4.2 Suggested Marketing Strategies at each PLC Stage .................................................................... 13
4.2.1 Introduction Stage Strategies .............................................................................................. 13
4.2.2 Growth Stage Strategies ...................................................................................................... 14
4.2.3 Maturity Stage Strategies .................................................................................................... 14
4.2.4 Decline Stage........................................................................................................................ 14
5. Long Run Competitive Strategy for ‘Toyota Prius’ ............................................................................ 14
5.1 The Strategy for Competitive Advantage.................................................................................... 14
5.2 Appropriate Strategy for New Hybrid ‘Toyota Prius’ .................................................................. 15
5.3 Perceived Value Analysis............................................................................................................. 15
Conclusion ............................................................................................................................................. 16
References ............................................................................................................................................ 17
Introduction

UK automotive industry can be considered as a backbone of the UK economy and generally

produces around £50 billion annual turnover, generating nearly £10 billion in net value-
added to the economy. The UK automotive industry employs nearly 730,000 employees in
retail, manufacturing and aftermarket sectors with nearly 145,000 employees directly
employed in manufacturing in 2010, this report suggests that the market is quite saturated
and competition is very high (SMMT, 2012). Figure 1.1 shows the auto manufacturer market
share in the UK 2010 end year.

Figure 1.1 – Auto manufacturer market share in the UK

Source: www. goodcarbadcar.net

Apart from making cars, Toyota UK produces many other types of automobiles such as
coasters and SUVs. In this report, appropriate marketing strategies for a new/innovative
Toyota product will be explored and discussed in a precisely manner
1. Industry Analysis of Toyota

1.1 Internal Factors

The internal factors of Toyota such as its vision, operating results, marketing mix, system
and procedures, and customer service are its growth drivers. The vision of Toyota is to “lead
the way to the future of mobility, enriching lives around the world with the safest and most
responsible ways of moving people” (Toyota Vision, 2012). The financial statements of Y/E
2011 shows that company‟s operating income increased by 20% from the previous year due
to multiple factors such as increased marketing activities, recovery from the economic
downturn, and introducing new hybrid vehicles.

The marketing mix of Toyota varies from country-to-country. For example, the types of
vehicles demanded in Europe and America are different from Asian market demand.
Similarly, the prices also differ region-to-region due to economic conditions. Toyota sets
prices closer to customer expectations. As a placement strategy, Toyota sells its products
through its own automotive deals network in each country and company‟s head office in
each country is in charge of distribution. Similarly, the head offices also decide promotional
strategies by considering legal and economic aspects (Bhandari, 2007).

Toyota adopts two main techniques for its production and quality procedures. They are Just-
in-time and Jidoka, means automation with a human touch or visualisation of problems
during production (Toyota Global, 2012a). In addition, the company‟s quality system is based
on seven primary features: reduce setup times, empowering employees, minimising
downtime, repair as problem occur, continuous communication, minimising inventory, and
maintain equipment as means of preserving quality. Toyota UK customer service is excellent
which aims to satisfy the needs of the customers. The company has many services to care
customers. These primary customer services include: telephonic support, email support,
customer care charter, and internet customer support system (Toyota Customer Care, 2006;
Toyota Help, 2012).

1.2 Macro Analysis

The PESTEL analysis framework is used to analyse external macro-environment that affect
the firm (Johnson et al., 2008). The PESTEL framework of Toyota is as follows:

Political: Government‟s safety and environmental laws and regulations have greatly
influenced the automotive industry in the past two decades. Toyota is also affected by these
laws. Different government traffic and motor vehicle laws in the UK forced Toyota and other
automotive companies to provide several facilities to passengers for their safety (Department
for Business Innovation and Skills, 2006). For example, driver‟s visibility, air bag, braking of
the car etc. In addition, environmental laws related to vehicle air pollution and oil
consumption and other relevant acts greatly affect the thinking of the consumers and
consequently Toyota‟s sales are also affected (Toyota UK, 2012).

Economic: Toyota is known as a flag of economic progress which employs tens of

thousands of people directly, and thousands of people indirectly. Toyota‟s contribution to
steel business, glass sector, aluminium, copper, iron, plastic, lead, rubber, and vinyl cannot
be ignored in stimulating the UK economy (Toyota, 2001). In fact, the company has
dominated the twentieth century on the basis of its unique economic phenomenon. However,
the recent economic downturn and a series of structural schisms in the UK have a major
impact on the performance of the automotive industry include the Toyota. Some major
impacts of economic downturn include: slowdown in the car market, suspension of
production, delay in new models, and decline in sales due to financial problems of the
people and businessmen (Reiter, 2008)

Sociocultural: Today, people like to travel long distances using a nice and new car which
makes them feel comfortable. The Toyota products have transformed the society and
changed the thinking and lifestyles of the people by bringing undreamed-of levels of mobility.
For example, the new Toyota hybrid has become a status symbol for the UK and USA
(Anderson, 2005). Other two significant sociocultural aspects of hybrid vehicles are
environmental concerns and fuel efficiency. There are even many laws exist in the UK that
require a vehicle environment friendly and average a certain miles per gallon.

Technological: The internet technology has a great influence on the sale of Toyota
products. A study showed that more than 60% users buy cars without taking a test drive
(Which, 2009). They actually use websites to compare the products of different companies
and make a purchase decision. In addition, the company recently introduced hybrid
technology to take competitive advantage within the industry as well as to provide powerful
technology-based features to users.

Environmental: Toyota Company has established many R&D centres to develop fuel
efficient vehicles to satisfy the environmental standards and safety regulations and also to
fulfil the growing demands of the consumers (Toyota, 2011).
Legal: The Toyota Company follows several legislation and technical directives with legal
nature. These legislations include fuel emissions, taxation, intellectual property law,
competition law, and consumer safety laws (Toyota Global, 2012b).

1.3 Micro Analysis

The Porter‟s five forces framework refers to the micro environment of the industry where
Toyota operates (Johnson et al., 2008). The Porter‟s five forces framework is as follows:

The threat of new entrants is low for Toyota because new companies usually require high
investments, advanced technology, strong distribution network, strong brand image,
customer loyalty, and high sunk costs. Therefore, it is not easy for a new entrant to compete
Toyota on these grounds. Threat of substitute is high because Toyota is competing with
other giant companies in the world on the basis of price and technology; and consequently
the demand of Toyota products is comparatively high in the local markets as compared to its
competitors. The impact of bargaining power of suppliers is very low as the suppliers are
reliant on high volumes and Toyota can threaten them to cut volumes that will affect the
supplier‟s profits (Hoskisson et al, 2008, p. 83).

Before three decades ago, the bargaining power of customers was low because there was a
large number of customers and few competitors in the industry. But now customers are more
important to Toyota because of high competition and this is why the bargaining power of
customers has high impact. The impact of competitive rivalry between competitors is
moderate in the automotive industry. (Hoskisson et al, 2008, p. 84) But on the other hand,
government policies and regulations limit this competition.

1.4 SWOT Analysis

On the basis of above micro and macro environmental analysis, the SWOT analysis of
Toyota is conducted and presented in table 1.1.
 Table 1.1 – SWOT analysis of Toyota UK

STRENGTHS WEAKNESSES
LOCATION
FAVOURABLE UNFAVOURABLE
o Well-known brand and strong reputation o Weak organisational structure
o Reliable, efficient, affordable, and faster o Weak profitability
vehicles o Inability to keep balance between
o Variety of models satisfy customer lifestyle changes in demand and price
o Research and development activities o Inability to manage international
INTERNAL o Hybrid technology network of franchises and subsidiaries
o Cost leadership pricing strategy o Large amount of debt
o Ability to deal with crisis o Decline in overall sale
o Fuel efficient vehicles
o Implementation of lean manufacturing
approaches
OPPORTUNITIES THREATS

o Enhancing product’s image by introducing o Continued economic downturn

environmental friendly vehicles o Rapidly increasing material prices
o Opportunity to introduce solar power o Increasing competition
vehicles
o Changing interest and exchange rates
EXTERNAL o Introducing and promoting ecology-friendly
o Rising oil prices
cards
o Change in demographics
o Opportunity to penetrate larger market
scope o Tightening emission regulations and
standards
o Continued expansion to new segments and
new markets o Appreciating Japanese Yen against
Stirling Pound

The above analyses helped the author to identify key threats to Toyota which result in weak
profitability of the company as shown in table 1.2.

Table 1.2 – Results of key issues to Toyota

2. Developing a Segmentation and Targeting Strategy

2.1 New Product of Toyota

The new product of Toyota is selected on the basis of the following criteria:
 Customer‟s desire to go green (conspicuous environmentalism)
 Customer‟s core requirement i.e. new technology, reliable, efficient, affordable, &
faster
 Government‟s requirement of environment friendly vehicle
 Government‟s key safety regulations and standards
Therefore, as a senior marketing executive of Toyota UK, the author has decided to select a
vehicle with hybrid features which can satisfy above requirements. This product is named
„Toyota Prius‟ (Toyota Hybrid, 2012).

2.2 Identification of Relevant Segmentation Criteria

Reynolds and Lancaste (2012) precisely defined segmentation as “the process of breaking
down the total market for a product or service into distinct sub-groups” (p. 68). A number of
researchers (e.g. Sandhusen, 2008; Lamb et al, 2011) describe common criteria of
identifying relevant segments. According to them, the segment for the new/innovative
product can be selected on the grounds of geographic (region or country), demographic
(age, income, gender, race, religion, family, etc), psychographic (lifestyle, social class,
personality basis), and behavioural (usage, loyalty etc) variables. In this study, the segments
for hybrid owners are defined using market segmentation matrix (Botha, 2004). Table 1.3
illustrates market segmentation matrix containing different segment groups.

Table 1.3 – Marketing segmentation matrix

In the above table, geographical, demographic, and psychographic segments are clear but
there is a need to provide justification of behavioural segments. Therefore, the next section
illustrates the rationale and justification of behavioural segmentation strategy.
2.3 Rational and Justification of Segmentation Strategy

Hybrid owners can be divided into three significant behavioural categories such as pioneers,
opportunists, environment lover (Berthiaume et al, 2007). Pioneers are the technology lovers
who likes to show-off innovative products whereas opportunists love the benefits comes with
products such as fuel efficiency, tax benefits, better parking etc. However, „Green‟ lovers
passionately give priority to the environment.

Figure 1.2 – Consumer segments for hybrid owners

Source: Berthiaume et al (2007, p. 68)

The above diagram shows the priority of hybrid owners on the basis of technology, income,
and environment. According to Cohen (2004), the market segmentation matrix can also be
used to prioritize selected segments within the matrix for new products. Table 1.4
demonstrates how above consumer benefits can be loaded in the matrix using 1-4 (low to
high) scale
Table 1.4 – Prioritising market segments
 Source: Cohen (2004)

It is evident from the highest total of pioneers followed by „Green‟ lovers that they are most
suitable segments for Toyota for its new hybrid vehicle i.e. „Toyota Prius‟. Therefore, the next
section will demonstrate the strategy of targeting these two behavioural segments.

2.4 Targeting Strategy

After selecting an appropriate segmentation strategy, the company has to develop targeting
strategy. According to Kotler (2000), “targeting is the process of evaluating each market
segment’s attractiveness and selecting one or more segment to enter” (p.215). Three
different targeting strategies include: undifferentiating, differentiated, and concentrated
(Stone and Desmond, 2007). Undifferentiating strategy cannot be adopted as Toyota is not
willing to convey same message to everyone. The company can use either differentiated or
concentration targeting strategy. In following the differentiating strategy, the company can
target each segment with its own marketing mix to meet the desires of the customers. On
the other hand, concentration (or niche) targeting strategy is even more suitable for Toyota
where the company can target well-defined group of customers.

3. Positioning Strategy for ‘Toyota Prius’

Petzer et al. (2006) define market positioning as “the process by which an organisation’s
marketing managers try to position their organisation” (p. 138). The positioning strategy of
„Toyota Prius‟ is described in the following subsections.

3.1 Key Positioning Objectives

The key strategic and operational positioning objectives for pioneers and „Green‟ lovers are
developed on the basis of the criteria identified for the new product. The objectives are
presented in table 1.5.
 Table 1.5 – Positioning objectives

Source: Berthiaume et al (2007)

3.2 Positioning Strategy and Communication Plan

The positioning strategy of Toyota must be different from its competitors (Petzer et al. 2006).
In the market of high-technology and innovative products, the positioning strategy is primarily
based on the three positioning elements i.e. customer targets, competitor targets, and value
proposition (Jakki, 2011). Table 1.6 illustrates the positioning strategy of Toyota for pioneers
and „Green‟ lovers.
Table 1.6 – Positioning strategy

Source: Jakki (2011)

The positioning strategy is incomplete without an efficient communication plan based on
considerable tools and techniques as a means to inform, persuade, and remind consumers
directly or indirectly about the products and brands (Kotler and Armstrong, 2010). Table 1.7
presents the communication strategy and budget plan to address particular segments.

Table 1.7 – Communication strategy

Source: Berthiaume et al (2007)

4. Marketing Strategy for Product Life Cycle Stages

4.1 Product Life Cycle (PLC)

PLC represents age of any particular industry, product or service in which it goes through
different stages. It mainly has four stages: introduction, growth, maturity, and decline. Kotler
(2003) and Ferrell and Hartline (2010) have explained the features and key characteristics at
each stage of a PLC. These characteristics are presented in table 1.8.
 Table 1.8 – Key characteristics of PLC

PLC STAGES
Characteristics
Introduction Growth Maturity Decline

Sales Low Swiftly increasing High Falling

High cost Average cost Low cost Low cost

Costs
(per unit) (per unit) (per unit) (per unit)

Cash flow Negative Positively rising High Falling

More
Distribution Selective Concentrated Selective
concentrated
Pioneers/’Green’
Customers Opportunists Pioneers Laggards
Lovers

Competitors Some Emerging Start declining Decreasing

Sources: Kotler (2003) and Ferrell and Hartline (2010)

4.2 Suggested Marketing Strategies at each PLC Stage

The PLC offers a useful framework for developing strategy for a product in a timely manner.
It is vital for product managers to evaluate the stages of product‟s life cycle in relation to
planning in the present period as well as for the future. Using the PLC as a tool has a clear
advantage of pushing managers to evaluate the future of their industry and their products
(Ferrell and Hartline, 2010). After analysing the stages of PLC it can be suggested that, the
automotive industry falls in the maturity stage and Toyota‟s new products fall in the category
of introduction stage with some flavour of maturity stage. The strategies that can be adopted
at each stage of the PLC are as follows.

4.2.1 Introduction Stage Strategies

Porter (1980) has suggested the generic strategies almost at all business levels, cost
leadership, product differentiation and market segmentation with each of narrow and broader
scope. Companies within the automotive industry can choose and implement generic
strategies in order to grow and maintain competitive advantage (Campbell et al. 2002).
Toyota can adopt three suitable strategies such as product differentiation strategy, price
penetration, and heavy advertising strategy for creating awareness at this stage.
 4.2.2 Growth Stage Strategies

At this stage where growth is inevitable, Toyota needs to focus on expanding the business
and rapidly increasing the market share using porter‟s cost leadership strategy which will
eventually increase the market penetration, market share and brand awareness for Hybrid
products (Ferrell and Hartline, 2010)

4.2.3 Maturity Stage Strategies

The need of product differentiation becomes vital when it comes to maturity stage of PLC.As
mentioned earlier Toyota has less market share in the UK as compared to other automotive
manufacturers, the reason behind this is a lack of product differentiation strategy. On the
other hand, other companies are focusing on either product differentiation or niche market.
As Toyota is a global company it is focusing on cost leadership and market segmentation
strategy which makes it one of the biggest automotive company in the world. As far as the
UK is concerned at this stage of a product Toyota needs to employ a product differentiation
strategy for its new hybrid product in order to increase its market share (Ferrell and Hartline,
2010; Pride and Ferrell, 2011)

4.2.4 Decline Stage

At this level of a product Toyota can consider; entering into the new and emerging markets,
cost cutting strategy, value adding or value chain strategy, and segmentation strategy (Pride
and Ferrell, 2011).

5. Long Run Competitive Strategy for ‘Toyota Prius’

5.1 The Strategy for Competitive Advantage

Porter‟s generic strategies framework is important to evaluate company‟s competitive

strategies in terms of cost leadership, differentiation, and focus (Johnson et al, 2008). In
following cost leadership strategy, a company can lower the overall cost of its products to get
a competitive advantage. The differentiation strategy on the other hand focused on
producing unique innovative products that cannot be copied easily. Finally, the focus
strategy is based on targeting one segment of the market (ibid).
5.2 Appropriate Strategy for New Hybrid ‘Toyota Prius’

In order to compete in the market in the long-run, the differentiation strategy can be adopted
for „Toyota Prius‟ by adding a range of products in its portfolio that can meet the standards of
customer requirements as well as government laws and regulations on environment and
safety. In this way, the new product with Hybrid style engine can gain long term competitive
advantage on the basis of innovative and economical technology and environment friendly
products. Currently, there are very few automotive companies that are implementing hybrid
technology but it is suggested to Toyota to identify the competitors by knowing their
strengths and weaknesses. Similarly, the company can conduct many R&D activities to
known customer‟s needs and intimacy (Ferrell and Hartline, 2010).

5.3 Perceived Value Analysis

Perceived value analysis is important to know how the strategy will be maintained in the long
run (Capon and Hulbert, 2007). The perceived value analysis of Toyota UK is presented in
table 1.9.

Table 1.9 – Perceived Value Analysis

Source: Capon and Hulbert (2007, p. 513)

The customer value map in figure 1.10 shows that „Toyota Prius‟ is capable of providing
better customer value due to its leadership position in „Green‟ autos.
 Figure 1.10 – Customer value map

Source: Capon and Hulbert (2007, p. 514)

Conclusion

It is concluded from the above discussion that Toyota is currently the market leader in
producing Hybrid products but the organisation faced weak profitability in the past due to
several factors summarised in table 1.2. For its new product namely „Toyota Prius‟, the
company needs to target and position „pioneers‟ and „green lovers‟ in the early phases of
PLC using various communication channels such as print media, electronic media, and
internet. In addition, several marketing strategies for each phase of PLC are also suggested
in this report where Porter‟s generic strategies, price penetration strategy, and heavy
advertisement are prominent. Finally, it is also concluded that differentiation strategy is
appropriate for Toyota‟s new hybrid product in order to compete in the marketplace in the
long-run.
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