Plug-in Hybrid and Toyota

Marketing Management – MRK-1101 Case Study Marketing Environment Prius: Leading a wave of Hybrid About Toyota Founded by Kiichiro Toyoda, Toyota Motor Corporation is a Japanese multinational corporation that is principally engaged in the production of cars, vans, trucks, buses and robots. Alongside its extensive vertical and horizontal integration, Toyota participates in the construction of houses, production of textile machinery, real estate market, financial activities, and biotechnology research.

Currently, its president and representative director is Akio Toyoda, and is headquartered in Aichi, Japan. Over time, Toyota Motor Corporation has been awarded the title of largest automobile producer in the world, along with the privilege of being the twelfth largest company in the world. Toyota has 50 manufacturing plants, 170 distributors, 326,000 employees and 660,000 shareholders around the globe. In the fiscal year ended 2012 March 31, it sold more than 7,351,000 vehicles.

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The largest portion of its production takes place in Japan along with most of its sales, closely followed by those made in North America. According to the R & I (Rating and Investment Information Inc. ), Toyota is in the AAA category, this being the highest. Among its greatest creations, characterized by creativity and strength, are the methods of production and procurement “Just In Time” and “Jidoka”, the first mass-produced hybrid car and widespread distribution (Prius), the first automatic parking system in a vehicle and the most sold car in world history (Corolla – more than 37. million units). Through four global strategic business units (Cars & Minivans, Trucks, Crossovers & SUVs and Hybrids & EVs) and many international branches, Toyota attends to completely different markets, meaning it commercializes a complete line of products for each type of customer and every region of the world, by developing both global and regional models. Brazil is different from China, which is different from India, and so on. As an example: in Brazil, the Corolla model sells well. On he opposite, the Lexus is the Russian bestseller. By selling quality and reliable products, Toyota harvests an intense loyalty that grows with transferable warranties, product availability in any country, nurtured personal experiences and testimonies of financial services offered, making its users consider only the option of replacing their Toyota with another Toyota. Toyota’s earnings are derived from two main sources. On one hand, it is able to reduce costs to a minimum because of its highly effective organization of production systems.

On the other hand, it is a leveraged company, and as indicated by the fundamentals of corporate finance, as the ratio of debt to equity grows, increases the return on investment for shareholders. Following we expose Toyota’s mission, vision and values: Mission “Offering our customers the prestigious car brand Toyota. Based on quality delivery, after-sales tracking and quality service at reasonable prices, to meet customer needs with technological support and quality, while achieving a return for our shareholders. ” Vision “We have leaders in each of our workstations for the full satisfaction of our customers.

We are a service-oriented company, so we constantly innovate to exceed established standards. Our vision is long term, since the relationship with our customers does not end with the sale of a car, just then is when it starts. ” Values • Honesty: “We act with honesty and integrity, maintaining fair treatment to all people. ” • Loyalty: “We are part of the Toyota Family, leading us according to the values ?? and business goals of the organization. ” • Respect: “We keep at all times due regard for human dignity and their environment. • Accountability: “We fulfilled our duty, making the company’s policies and provisions our own. ” • Confidence: “We perform with accuracy, timeliness and fidelity to strengthen our environment. ” Toyota has developed a Code of Conduct which organizes the basic attitudes necessary for employees to keep, so as to act in line with the guiding principles and fulfill social responsibilities. It is a tool to help employees maintain adequate knowledge of how to behave as members of the company and the Toyota Family, conducting their daily operations based on the common awareness of these principles.

To ensure compliance, special training takes place from senior managers down to the last employee, disseminating information on its website and run e-learning programs. Hybrids “A hybrid vehicle is a vehicle that uses an on-board rechargeable energy storage system (RESS) and a fuel based power source for vehicle propulsion. ”Nowadays, hybrid technology is used not only for vehicle but also in rail transport, public buses, military off-road vehicles, ships, aircrafts, etc. In 1899, Henry Pieper developed the first petro-electric vehicle.

The most common technology used for cars is the Power-Split (or serie-parallel hybrid) which takes its power from two motors at the same time: an electric motor and an internal combustion engine. Hybrids are known to consume less fuel than regular cars but the main issue is regarding the damage of the car battery made of nickel metal or lithium ion. The sales of the Toyota Prius reached 235,000 in 2012, a number that is considerably higher than the previous year of 135,000 and 160,000 for the year 2008. Prius The Toyota Prius was introduced in 1997 in Japan but it was launched worldwide in 2000.

In Latin, Prius means ‘before’ because the company says that the idea was launched before the environmental awareness issue. In 1995, Toyota first presents its hybrid concept at the Tokyo Motor show. Then, sales started in 1997 and the car becomes the first mass-produced hybrid. Toyota are the first to introduce a Japanese hybrid vehicle to North America. The company decided to market their first generation of hybrids between the Corolla and the Camry. In addition of the owner fuel economy, they were eligible to a 3,400$US federal tax credit.

Between 2003 and 2009, Toyota completely redesigned the vehicle. They added more interior space and used more eco-friendly products. During those years, sales stayed as low as 2,152 cars for 2006 and only 414 in 2007. The significantly low sales were partly attributed on the high price of the car. From the year 2009 to present, Toyota presented a third generation of Prius in which they added more power to the car, a larger possibility of fuel economy, and some plant-derived ecological bio plastics. Moreover, they installed a 6. touch screen, where you can see the fuel level, the battery level and the outside temperature. They added a USB port for IPod, a Bluetooth hands free phone system and a solar panel which gives energy to the car fan. The Prius Family consists of 4 different hybrids. The first one is the regular and most popular Prius. The second one is called Prius V which has an extended hatchback wagon and it has 50% more interior space than the original one. The third one is the Prius C which has a high demand because it is listed at a lower price than all of the others. However, it is smaller than the Prius hatchback.

The fourth and last one is the Prius plug-in hybrid which you can easily plug to an external source of power. Even if the sales were very low during the precedent years, the Prius found its way to the top. In 2009, the car became the bestseller in Japan. Then, in 2012, Prius had 51,5% of the US Hybrids market share. Today, three models from the Prius Family are among the top 10 most fuel efficient cars sold in the United States. To analyze the proper Market Environment of the brand, it is essential for the company to know and understand the environmental factors that surround it, in order to adapt the right strategy.

Analyzing these environments permit to better understand the marketplace and its consumers. How Toyota can react to changes in the marketing environments? We will focus on micro and macro environmental factors to explain the marketing strategy of the Toyota Prius. MICROENVIRONMENT When considering Toyota’s microenvironment related to the Prius, we cannot leave any of the studied segments out of our analysis. Toyota has managed to build valuable relationships with both their customers and suppliers, not to mention its own employees, shareholders and associates their leading role in the value delivery system.

As for the company itself, Toyota is a clear model of an organization that managed to grow without letting its size comes in the way of its flexibility and values. Always innovating and keeping state of the art equipment to work with, Toyota’s employees have been able to follow the lines of the Jikoutei Kanketsu, Jidoka and Kanban concepts, enabling the company to cut down on stocks, defective production and wasted time, while maintaining a close and crucial relationship with its customers.

Every team in the factory is able to solve most situations that might appear at their station – this is a big difference between Toyota and its competitors. The development and production of the Prius was handled as only Toyota could ever have done. Taking advantage of the relationships Toyota had built with its suppliers thru years and new strategic agreements (like the one with Tesla Motors), the G21 project was launched with the objective of developing an efficient eco-friendly vehicle. Three years later, the Prius was already in production and the first generation of mass-produced hybrids got to sales floors.

At that time, the eco-friendly trend among customers was only starting to show. The main advantage the Prius could offer to its buyers was the millage in a time where oil prices were high and rising. Toyota Prius’ early adopters were mostly people interested in trying new technologies with environmental care related ideas. But it was soon to be change. As the hybrid showed the world how efficient it is to be respectful of the environment, more people got interested, and even celebrities started to see in it a good business partner –it is a clear statement of the kind of values they hold as people.

The Prius started to be popular among celebrities like Larry David (TV producer), Demi Moore, Cameron Diaz, Owen Wilson, Jessica Parker, Adrian Greiner, Kate Bosworth, Gwyneth Paltrow, Leonardo Di Caprio, Miley Cirus, and the list goes on. The timing for the launch of the Prius could not have been better. Yet again showing how rewarding courage and patience can be, this Japanese company developed a new market for its new product – a market that still grows steadily today, and does so with high expectations. As care for the environment grows, so grows the demand for efficient hybrid vehicles which are the nexus to alternative fuels.

At first, Toyota was not fully concerned with competition, given the that first generation of the Prius was in fact the first generation of hybrids launched in high numbers. It was the first ‘mass-produced hybrid’, so the market for this product was brand-new and there were no direct competitors, only a few imperfect substitutes (like small non-hybrid cars, public transport, car-pooling, motorcycles or bicycles). Nevertheless, when other companies witnessed the Prius’ success, they did not hesitate to start developing hybrid systems of their own. Today, the biggest competitor Toyota faced at this stage is Honda, with the Insight model.

However, the Insight does not offer the same convenience and overall value as the Prius – explaining why the Prius represented more than half the sales of its own segment. GM and Ford also offered competition, but only as slow followers. For the second and third generation of the Prius, there have been changes among the competitors. Today, there is more offer than ever for hybrid vehicles. Toyota monitors its rivals closely, trying to predict their marketing strategy, taking advantage of being the first developer and trying to always stay a few steps ahead.

As exposed before, Toyota has been working on its relationship with suppliers for long years. As Japanese culture states, these companies try to understand each other and build relationships that will last for decades. It is not unusual for them to help one another financially or economically. They grew together, grow together and take care of each other. These relationships are one of the main reasons behind Toyota’s success. Had it been not for these kinds of agreements and understandings, Toyota wouldn’t have been able to develop the Just-In-Time supplying system.

Toyota and its suppliers understand perfectly how much value these production links add to the final product, and nothing matters more to them, as they all believe their first objective is to deliver their customers the most possible value. Regarding its employees, Toyota has always had a particular way of seeing things. As an example, Toyota has always announced its need for workers within itself before announcing it to the public, therefore giving the opportunity for its own employees to go for the new vacant if they prefer it to their current job, or to present family members for it.

Indeed, Toyota believes in family values and takes care of its own. In 2002 Toyota launched a project to promote gender diversity within the workplace. Since then, lots of efforts have been made to help balance work of women caring for their children by supporting their professional development, while promoting the building of a culture that encourages them to make the most of their abilities. Toyota handles its public image through many programs and projects that help lots of communities and thousands of people.

In 2011 in Argentina, for example, 360 Toyota’s employees conditioned and painted 30 schools completing the “Pintando 1000 paredes” project. Also, as part of the celebration of the production of half a million units, the company made the donation of a Hilux pickup to the General Hospital of Zarate, which will be equipped as the first unit of pediatric transports and will be used to assist the Newborn Center. With this donation, Toyota seeks to promote the integration and dialogue with communities near the industrial plant. In Canada, through the Toyota Canada Foundation, Toyota proves that it is committed to give back to local communities.

This foundation focuses in environmental, educational and social safety actions. Another example is the Toyota Earth Day Scholarship awarded every year by the Toyota Foundation. This scholarships pay for all the expenses of the students who win it. In Toyota Canada Foundation’s words: “Every day, in communities across Canada, young people are actively demonstrating their passion for the environment through the important work they accomplish”. These dedicated young Canadians are emerging as tomorrow’s environmental leaders and advocates.

Toyota Canada and the Toyota Canada Foundation in partnership with Earth Day Canada established the Toyota Earth Day Scholarship Program to help cultivate and nurture this environmental leadership. The Toyota Earth Day Scholarship Program encourages and rewards graduating Canadian high school students who have distinguished themselves through environmental community service, extracurricular and volunteer activities, and academic excellence. To date, Toyota Canada, the Toyota Canada Foundation and Earth Day Canada (EDC) have awarded 160 students with $800,000 in scholarships.

The Toyota Earth Day Scholarship is Canada’s best recognized environmental entrance scholarship. ” The company was also confronted to macro-environmental factors that have affected Prius sales. Macro-environmental factors are the major external and uncontrollable factors that influence an organization’s decision making, and affect its performance and strategies. These factors include the economic factors, demographics, legal, political, and social conditions, technological changes and natural forces. MACROENVIRONMENT Demographic Demographics are also an important factor influencing Prius sales.

Demand for vehicles has been rising since population is growing rapidly. The baby boomers, those who were born after the World War II till 1966, are starting to choose hybrid cars rather than regular cars, despite the higher prices of the first. This people account for a third of Canada’s population and control over 50 percent of the country’s wealth. Some of them are close to retirement and therefore enjoy high salaries due to having worked all their lives. Also, 57 percent of the baby boomers who have retired do not want to leave inheritance because they think that each generation should earn its own money.

Why should they choose a car to show to the society that they care instead of choosing comfort and luxury? Researches show that ‘’links between displays of caring, environmental behaviors, and competition for status’’. Before they make their choices, these people are more likely to compare the different products. At the beginning, Toyota only focused on the “techies”; nowadays, they also target eco-friendly customers, those who are interested by fuel-efficiency vehicles but also a larger audience, like families and “the baby boomers”. Economic forces

It is important to know how the economic forces have an influence on the marketing strategy of Toyota. Therefore, they include the current state of the economy, determine consumers’ activities and buying decisions and can be affected by factors like the cost of living, inflation and interest rates. These forces had an important impact on Toyota’s strategies. After the financial crisis, the worldwide automobile industry was in a bad situation, with sales decreasing. Due to this crisis, Toyota lost about $6 billion in 2009, and its sales went down of 15. 1% on the previous year.

However, sales of the Prius reached 2 million sales. In addition, the situation about oil price in recent year has influenced the success of the Prius. The rising cost of fuel price boosted the sales. A report by Consumer Reports revealed that the Prius is one of the few hybrid cars to recover the premium price and save their owners money after five years and 120. 000 kilometers. Disregard of the weak economic growth and high oil prices, the sales figures for automobile have been constant lately in Europe, North America and Asia and this had resulted to the emergence of new customer and growth.

Competition among the manufacturers had urged Toyota to conduct more research and development on Prius. Therefore, Toyota launched a second generation Prius where they continue making amendment according to the latest technology and preferences of their buyers. Political forces Political forces are measures, policies and standards implemented by the governments. These can influence the companies’ decisions. In this case, politics have had a good impact on the marketing strategy of the car and influenced the sales in a good way. Governments in America help to promote eco-friendly vehicles by supporting cars such as the Prius.

The biggest incentives were monetary. The federal government offered tax breaks (amounting thousands of dollars), free-parking places to whom will buy the Prius. Therefore, some states in the US permits for Hybrid to drive in HOV (High Occupancy Vehicle) even if there is only one occupant. Some eco-friendly companies like Google and Timberland joined the incentive by offering $5000 for the purchase of a hybrid car. Insurance companies lastly offer discount to these cars. Sociocultural forces These are forces that have an influence on the society’s concerns and culture and they may lead to a change in attitude, beliefs, and lifestyles.

Changes in lifestyles may result in different values and priorities and can shift the consumers’ needs and wants. First, concerns about the environment are constantly increasing and people become conscious that the world is facing a major problem of pollution and lack of resources. There’s an increasing urgency of the population to bring into operation new pro environmental behaviors. They try to reduce their impact on environment. In response to this problem, Toyota introduced the Prius and nowadays, this innovation is beneficial to the firm, because of the growing demand for eco-friendly vehicles.

Another trend in the society is that more households are getting two revenues. As more women are joining the workforce, the disposable income is increasing and more people can afford to buy a more expensive car or to have a second. The Prius would be also considered as a car, used frequently rather than a second car, used for commuting to work. As families want to save money, Toyota is targeting a broader audience. Toyota hopes that families will choose the Prius as an affordable family car with comfort, style and low cost servicing. Technological Forces

These one are the application of knowledge and creativity in solving problems and increasing efficiency. Industries can get a competitive advantage if they can come up with technology advances and new ideas. The Prius was the first hybrid car launched in the market. Because of rising concerns about environment, pressure appeared on vehicle companies, in order to develop green cars. Thus, Toyota saw this opportunity and responded to it by introducing the first hybrid car in the world, the Prius. This one uses a combination of petrol and electricity to power and motor and that leads to fuel economy. In addition, gas emissions are lowered.

The Prius also uses new technologies. The “Solar Ventilation system” are panels embedded in the roof that cool the cabin when it is parked during the day. The “Multi Information display” provides feedback on fuel efficiency and power flow and the “Head up display” shows speed and driving information on the car’s screen. There is also an intelligent parking assistance and an active cruise control. Natural forces First, we can outline natural factors like gasoline prices. Since summer 2004, oil prices have been increasing so far. Consumers began to shift to vehicles that are more fuel efficient and depend less of oil.

Furthermore, fuel is a non-renewable resource. Thus, consumers are more and more focusing on the environmental problems, and they prefer to buy a car with low consumption and emission rather than any regular car. The Toyota’s compromise with the environmental sustainability is expressed in its vision as “Continued awareness for the Earth and environment” and “Lead the way to the future of mobility”. Toyota’s strategy in response to the Marketing Environment Based on the market environment, Toyota has adopted a strong and effective marketing strategy to launch the Prius.

The firm targeted first a specific consumer and then decided to broaden its horizon. The market for this car can be divided into two major categories: Customers (B2B) and consumers (private buyers). Customers buy cars either for hire/rental or for company fleets but these are few and already known to Toyota. The environmental features make the Prius particularly interesting for business buyers, because of its low operating cost. Private people are the most important market. Consumers are either male or female and between 30 and 50 years old. They are likely to be married and with family responsibilities.

Most part of them is well-informed and educated, and belongs to the upper-middle class. The target market identifies three profiles of potential buyers. First, the ‘techies’ are interested in the latest technology and must be the first to own the car. Then the environmentally friendly consumers are aware of the actual environmental issues. They would be keen on buying an eco-friendly car because they know the impact of motoring for the earth. Consumers also interested by values and looking for the ideal combination of high fuel economy and low cost of maintenance in the long run, as families, are targeted by Toyota.

All three groups are likely to be exposed to the same degree of outdoor and ambient advertising. Prius got a strong strategy by launching a “green car” in a period where issues about the environment and pollution seem to be a current question of debates. Toyota has used the penetration pricing strategy. Therefore, politics have helped the car to become successful thanks to the benefits granted to Prius’ owners. As the demand for hybrid cars is elastic, and with a strong balance sheet, the company is able to compete with other car makers in the United-States.

Currently, Toyota controls about 16% of the market share and has five major assembly plants in the U. S to support its distribution network. The company did not offer online purchase facilities to the customers, but hired marketing intermediaries to advertise the new hybrid. These intermediaries helped to provide professional training to offer the best satisfaction. They also used taglines with emotions that were very effective in this promotion. Therefore, The Prius is promoted in different ways. Advertising, sales promotions and personal selling are the most familiar ways of promotion.

In addition, the Prius has appeared in movies and TV shows. This car is driven by the main actor in CSI Miami, Weeds, Superbad. Then, the car is sold at a competitive price, with the base model starting at $19,080. The Prius is a car model that has a lot of benefits. We can outline its comfort, its good performance. It has also a high scoring on crash tests, and a minimal impact on environment. However, it remains reliant on fossil fuel which is non-renewable, and a special attention is needed for repairs and servicing. In addition it requires many unique components that may make long-term part availability difficult.

In the future, Toyota would have the opportunity to evolve into a “Plug-in Hybrid” with higher capacity batteries and to spread into other market sectors. The company would also be confronted to a high demand for hybrids since the awareness on environmental issues have been increasing. Unfortunately, various rumors attempting to undermine the Prius exist. These rumors serve to decrease credibility or consumer confidence. For example, we can outline “I heard that Prius is more damaging to the environment than a Hummer”, which is completely false. The firm might also improve its strategy by offering a wider range of products.

Currently, there are only 4 types of Toyota Prius on the Market. The first model was very basic, Toyota got a good idea to improve the second model, with specifically technological improvements. Therefore, we can focus on its internal marketing, how Toyota could reduce its costs without compromising the product’s quality and customers’ satisfaction. As the world is running short of resources, especially fuel, Americans have decided to solve the problem through introducing the Hybrid Technology. However nowadays, consumers still prefer to buy more performing cars and big engines like trucks and so on.

We can say that the current approach to hybrids is seemed to be not working right now. Due to the last financial crisis, people focus on cheapest prices and good value cars (compromise between quality and price) and do not especially think about environment. Putting hybrid motors in each car do not seem to be an efficient way nowadays. Although people are getting more concerned about environmental issues, the approach to hybrids could be at its best in a few years. This technology should be present in each car and presented like a “norm” for environment and against pollution. BIBLIOGRAPHY

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