TOYOTA MARKETING STRATEGY Explaining the factors that determine demand and supply of houses in the UK during the above period
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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 valueadded 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 Justin-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 LOCATION
INTERNAL
STRENGTHS
WEAKNESSES
FAVOURABLE
UNFAVOURABLE
o Well-known brand and strong reputation o Reliable, efficient, affordable, and faster vehicles o Variety of models satisfy customer lifestyle o Research and development activities o Hybrid technology o Cost leadership pricing strategy o Ability to deal with crisis o Fuel efficient vehicles o Implementation of lean manufacturing approaches
o Weak organisational structure o Weak profitability o Inability to keep balance between changes in demand and price o Inability to manage international network of franchises and subsidiaries o Large amount of debt o Decline in overall sale
OPPORTUNITIES
EXTERNAL
o Enhancing product’s image by introducing environmental friendly vehicles o Opportunity to introduce solar power vehicles o Introducing and promoting ecology-friendly cards o Opportunity to penetrate larger market scope o Continued expansion to new segments and new markets
THREATS
o o o o o o o
Continued economic downturn Rapidly increasing material prices Increasing competition Changing interest and exchange rates Rising oil prices Change in demographics Tightening emission regulations and standards 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
Characteristics
PLC STAGES Introduction
Growth
Maturity
Decline
Sales
Low
Swiftly increasing
High
Falling
Costs
High cost (per unit)
Average cost (per unit)
Low cost (per unit)
Low cost (per unit)
Cash flow
Negative
Positively rising
High
Falling
Distribution
Selective
Concentrated
More concentrated
Selective
Customers
Opportunists
Pioneers
Pioneers/’Green’ 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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