Toyota Prius Case

The Toyota Prius is a full hybrid electric mid-size hatchback, formerly a compact sedan developed and manufactured by the Toyota Motor Corporation. The EPA and California Air Resources Board (CARB) rate the Prius as among the cleanest vehicles sold in the United States based on smog-forming emissions. The Prius first went on sale in Japan in 1997, and was available at all four Toyota Japan dealerships, making it the first mass-produced hybrid vehicle. It was subsequently introduced worldwide in 2000. The Prius is sold in almost 80 countries and regions, with its largest markets being those of Japan and the United States. In May 2008, global cumulative Prius sales reached the milestone 1 million vehicle mark, the 2 million milestone was reached in September 2010, and as of October 2012, a total of 2.8 million Prii have been sold worldwide. Cumulative sales of 1 million Prii were achieved in the U.S. by early April 2011, and Japan reached the 1 million mark in August 2011. Since its launch in 2009, the third-generation Prius sold more than 1 million units worldwide by September 2011. In 2011, Toyota expanded the Prius family to include the Prius V, an extended hatchback wagon, and the Prius C, A subcompact hatchback. The production version of the Prius plug-in hybrid was released in 2012. The Prius family reached global cumulative sales of 3.3 million units through October 2012, representing 71.5% of Toyota Motor Company hybrid sales of 4.6 million Lexus and Toyota units sold worldwide since 1997.

  1. What micro environmental factors affect the introduction and sales of the Toyota Prius? How well has Toyota dealt with these factors? The micro environmental factors that affect the introduction and sales of the Toyota Prius are the company itself, the suppliers, the customers, the competitors and the public. The micro environmental factors are the factors close to the company that affect its ability to serve its customers. The company: The slogan and concept of Toyota express explicitly that Toyota is always pursuing the product which is environment-friendly and fuel efficient. As the previous version, the new version is also continued to use this concept and the improved Prius is in accordance with the company’s image perfectly. The Prius is an important component of Toyota’s strategy; the car sets the table for a new line of hybrid cars. The suppliers: There has to be better collaboration between Toyota and their suppliers. Toyota needs to motivate their suppliers R&D to produce better products. They can all benefit from this because better products make a better car. This will result in higher customer satisfaction, and more value can be added. The marketing intermediaries: Toyota has to prepare promotion material for the launch of the Prius. They hired an advertising agency to come up with promotion ideas. The dealers also have to be prepared for the sale of the Prius. They have to train their salesmen in order to inform the customer about the car. The promotion of the car went very well, as Toyota made the customer well aware of their new car. The training of the salespeople did not go as planned, because many salesmen had trouble with the new technology. The customers: The company carefully studied their consumer market. They are focusing their product on innovators and early adapters. These people are very interested in new technology. Toyota put a lot of effort in educating this target group by advertising and sending emails to potential customers. This worked very well for Toyota. Their target group was very interested in the car. The number of sales proves this. The competitors: Toyota had a head start with the launch of the Prius. They were the first with a hybrid car on the market. Toyota should monitor its competitors closely and try to predict their marketing strategy and establish the reaction plan. Publics: The government encouraged the consumers to buy environment-friendly cars with tax incentives. Toyota spends only about €15m for promotion of the Prius from a €400m budget. The media spread the idea of environment-friendly cars and after a while it became a trendy to drive in environment-friendly cars. Toyota tried to build up a linked image between being environmentally friendly while driving the car.

2. Outline the major macro environmental factors – demographic, economic, natural, technological, political and cultural- that have affected the introduction and sales of the Toyota Prius. How well has Toyota dealt with each of these factors? The macro environment is the larger societal forces that affect the whole micro environment. Taking into account the demographic, economic, natural, technological, political and cultural forces. Demographic forces: Toyota is dealing with a certain group of consumers who are used to work with advanced technology. These consumers are always looking for the next best thing. Products that are very innovative appeal to these highly developed people. Toyota used this to their advantage by focusing their marketing on this target group. Economic forces: There was a fast decline in the economic growth, but the purchasing power increased so the consumers were able to buy luxury products for example, the Toyota Prius. The petrol prices were and still are rising very fast so hybrid cars are becoming more popular. Natural forces: There is a growing shortage on fossil fuels. Petrol is highly demanded, so alternatives for this are much needed, as there are also no direct substitutes available. The hybrid car is a good example for innovation in new technologies in transportation. There is also the danger of global warming which is caused amongst others by carbon emissions and regular combustion engines. The hybrid car has lower carbon emissions which is a good role model for other car manufacturers. Technological forces: Toyota has already been the top producer of the hybrid cars and although the other producers are providing the similar products, their technological ability is still far behind Toyota. However, Toyota needs to further enhance their leading position and keep up to date about any technology changes.

Political forces: The government is doing a lot for the environment-friendly consumer. With tax incentives they are pushing the consumer to buy hybrid cars. But they are not only encouraging the consumer, the company is also receiving support from the government n the form of tax deductions if they produce environment-friendly. Cultural forces: Nowadays people are more aware of the consequences of their actions to the environment. People are trying more and more to be environmentally responsible. This also includes buying hybrid vehicles. Toyota also approaches suburban and green lifestyle followers. This is especially appealing to supporters of suburban or green life styles, like Lohas (Lifestyle of health and sustainability.

3. Evaluate Toyota’s marketing strategy so far. What has Toyota done well? How might it improve its strategy? Product: The product that was re-launched had far better and attractive features as compared to its previous version, which included its outer appearance as well as the inner characteristics. Price: Secondly, the price maintained was also competitive and helped the company to maintain an edge over the rivals as well as retain its customers profitably. Furthermore, as already mentioned, several saving programs are offered by various governments, to make the care even more attractive. Place: The product was well received by the market in the sense that it was available easily in the showrooms as well as on the internet. The customers were able to make well- informed decisions because of the detailed website and the personal assistance provided by the trained agents. They were also able to share their experience through forums such as Prius envy. Promotion: Extensive marketing campaigns and heavy promotional activities through TV (Discovery channel, MSNBC, History and Learning Channel etc), billboards, auto magazines (Newsweek, Vanity fair), newspapers, leaflets along with emotional taglines and environmental appeals helped Toyota set itself as the market leader. Toyota spent about €15m, nearly 4 per cent of their total promotion expenditure for the Prius. From the four “Cs” the consumers are receiving a solution for the sky high fuel prices, with a low emission car. The communication allowed a good position within the market, addressing the target group, in line with the strategy. Finally, the betterments may include higher quality for the inner features so as to improve the actual driving experience of the customer i.e. it is not a muscle car and doesn’t even provide very high speed. This factor should be considered since their main focus is on youngsters. Then it should use below the line advertising strategies and maintain direct and personal contact with the existing as well as the new focused customers.

4. In your opinion, what are the advantages of Toyota’s early entry into the hybrid market? What are the disadvantages? Has Toyota jumped too early into an expensive technology that has had its day? Advantages: Toyota has a head start on their competitors. With the early launch of the Prius they created a environment-friendly image for themselves. Toyota created an image in the mind of the customer, while thinking about hybrid cars, that the Prius is the first brand that comes up. Being the first company making a hybrid car there are no competitors in the beginning in that particular market segment. Disadvantages: Toyota leaves a lot of room for improvement for their competitors. The competitors have more time and money to improve the concept. Being a pioneer implies heavy investments into R&D because there is nothing comparable from any competitors. Furthermore, being the first company, introducing such a hybrid car to the market, large amount of money have to be spent on promotion to make the consumer aware of the product and educate them about the new technology. With a new product there are always unforeseen problems which the introducer will have to solve. Also a new product focuses only on innovators and early adaptors, not on the whole market.

Strengths *

Environment conscious and provides reduced CO2 emissions *

Elegant design *

Exceptional fuel efficiency *

Five models are available *

Last two models are complete plug-in versions *

Nearly 3m cars sold in over 80 countries *

Good branding and advertising| Weaknesses *

Slightly higher price compared to petrol variants (4.000€) *

High maintenance cost being a hybrid model *

Required more resources and energy to build, than comparable non-hybrid cars *

Other care in the same price category offer significantly higher performances| Opportunities *

Can gain from first movers advantage in hybrid segment *

Acquiring collaboration with automobiles suppliers *

Augment distribution and servicing network *

Likely that fuel cost keep on increasing in the future *

Awareness of environmental concern is growing *

Sales are likely to spread over developing markets | Threats *

High maintenance costs *

Competition offering innovative features at lower prices *

New entrants in the same segment can make use of existing R&D expenditures and reduce their developing costs *

Battery driven cares are even “greener”, getting cheaper and more efficient *

Negative press due to recent production recalls|

Toyota hasn’t jumped too early into an expensive technology that has had its day because they can keep improving the technology and add more models to their product line to stay appealing for consumers. However, there is a big importance, to stay on track with innovation, that Toyota is not outrun by the completion in the same segment and in the battery driven cars.

Rating: 5.0. From 1 vote.
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