Value is based on the perception of usefulness in the eye of the user in regards to the product or service. Toyota Prius customer base consists of private and corporate buyers who in the long run, attach value in the ideal combination of fuel efficiency and low maintenance at a reasonably affordable price that is environmentally friendly (Andidas,2003).
Toyota use print and electronic media, advertising, experts, celebrities, opinion leaders and opinion formers, to lay product benefit claims in an attempt to manipulate perception and communicate the valuable aspects of the Prius as well as differentiate it from competitors. This differentiation is achieved by uniquely positioning their products. Two examples are shown below:
-
“The Toyota Prius, the world's first mass-produced hybrid car, equals conventional vehicles in range and performance, with far fewer emissions and much better fuel economy” (Adams Business Media, 2002).
- Figure 4 shows a Toyota Prius print media advertisement implying the fuel efficiency of Toyota Prius has stopped consumers from regularly gassing up at fuel stations.
3.1.1 POSITIONING OF THE PRIUS
The positioning of Toyota Prius as shown in the perceptual map in Figure 5 reveals that it is perceived to be less fashionable, basic, unique and a personal car.
IMAGE
Toyota’s image can be its logos, the brand , graphic designs, communications and collaterals. It is important to distinguish between corporate identity, brand identity, and brand image.
The AC2ID Test TM and REDS2 TM are two tools which would be used to analyze the image of the Toyota Prius. (Appendix 1 explains these two tools in a little detail).
4.2.1 AC2ID TESTTM
The AC2ID Test TM breaks the Toyota Prius identity into five types and then examines how strong the similarities are between each of the identities whose differences can indicate a potential corporate problem. The survey is shown below
AC2ID TESTTM SURVEY
ACTUAL IDENTITY – The current attributes of Toyota Prius are looked at.
-
Toyota Prius continues into 2009 as the best-selling gas-electric hybrid vehicle in the United States and the world (Toyota, 2008)
- Toyota is the leading global automaker (The Global Automobiles 2008).
- Focus is on R&D and ‘Just In Time’ Production
COMMUNICATED IDENTITY – This is revealed through “controlled” corporate communications.
Primary
- Low cost manufacturing leading to price competitiveness
- Fuel efficiency and environmental friendliness
- Focus on quality improvement and reliability
-
New Toyota Hybrid X concept car is the future generation of hybrid cars (Business week, 2007).
- City traffic fuel efficient car.
Tertiary – Negative
-
“Toyota Prius proves a gas guzzler in a long distance race with the BMW 520d.” (The Sunday Times, car review, DATE)
Tertiary – Positive
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“Our test drive showed that Toyota’s hybrid car can deliver substantial fuel savings - providing drivers make the right kind of journeys” (Bingley 2008).
CONCEIVED IDENTITY - This refers to corporate image, corporate reputation and corporate branding.
-
Toyota – World Class market leader in the Automobile Industry ( and , 2008)
-
Very high customer loyalty rates with nearly one in three Prius owners buying another Prius compared with other popular hybrid models with an average of 1 in 5. We see from figure 7 below that Prius has the highest percentage of 29% (Hybrid cars, 2008).
IDEAL IDENTITY – The positioning of Toyota in its market.
Toyota Prius Core Values:
- Optimum use of good quality steel in body
- Strong customer focus and supplier relationships
- Prime focus on quality Improvement
- Innovation at the core of their operations due to high investment in R&D
- Toyota has 25 manufacturing units across continents to meet customer’s requirements in quick time
- Economical, cleaner and more comfortable motoring
DESIRED IDENTITY – Toyota’s vision
- To become the most successful and respected car company in each market around the world by offering customers the best purchasing and ownership experience (Yoshio Ishizaka, 2001).
REDS2 TM
Complementing the AC2ID Test TM is the REDS2 TM which is designed to analyze and reveal misalignments in the AC2ID Test TM.
All the 5 identity interfaces are well aligned. However, the communicated primary and the positive tertiary aspects may appear to be misaligned with the negative tertiary aspect. The negative tertiary aspect brought out Toyota Prius as a less fuel efficient car in long distances. The Prius is positioned and communicated as a city traffic fuel efficient car.
3.3 PROCESS
3.3.1 MANUFACTURING METHODOLOGY
Toyota is the leading practitioner and main originator of the lean manufacturing approach or Just in Time (JIT) which is a system where all processes are synchronized simultaneously to give high quality, fast throughput and exceptional productivity. Toyota calls this system the Toyota Production System (TPS), (Won et al 2001). Figure 8 below shows the TPS structure.
3.3.2 R&D EXPENDITURE
According to Standard and Poors, in 2007 Toyota Corporation was not just the leader amongst automobile companies as regards R&D expenditure but is also ranked number one amongst global companies on R&D expenditure. See Appendix -------
3.3.3 TOYOTA’S PRODUCT DEVELOPMENT SYSTEM
- Toyota personnel, processes, and technology are fully integrated, aligned and designed to be mutually supportive, with emphasis on processes that are designed to minimize waste and maximize the capability of the people who use them.
- A system of early engineering rigor, problem solving with designed-in countermeasures, with built-in learning and continuous improvement.
-
Go to the source engineering – ("Gentchi Genbutsu") where senior personnel spend a significant amount of time working on competitor tear downs (Reverse Engineering). (Morgan 2002)
3.3.4 TEAM STRUCTURE AND EMPLOYEE MOTIVATION
In 2001, Toyota came up with the Toyota Way which is supported by two main pillars which are “Continuous Improvement i.e. Kaizen” and “Respect for People”.
Toyota’s structure is one that has:
- Stable employment.
- Good discussion between labour and management.
-
Good communication with employee families. (Toyota Sustainability Report, 2008)
Plant managers prepare plans based on suggestions from employees. According to Tanaka (1994), out of two million suggestions from employees, 97% were adopted.
Figure 9 shows the balanced team structure of Toyota based on their procress systems.
4.0 IMPLEMENTATION ANALYSIS
The 1st generation Prius was launched in late 1997 as a hybrid car and positioned as an effective intra-city car. In 2004, the 2nd generation Prius was launched with incremental improvement in designs especially its legroom and carriage capacity, fuel efficiency as well as improved external stylishness. The size increase moved the Prius from the small car to the middle sized car segment (Wikipedia 2009)
Toyota’s supply chain capabilities (Agile, Adaptable & Aligned), quality approach and strong cultural relationship with suppliers have led to high quality products and highly efficient production system, leading to considerable cost reductions over time.
Table 2 shows Toyota as the leader in labour hours. The TPS is a major factor in the ability of Toyota to assemble cars at the fastest rate.
The high quality, high consumer satisfaction, fuel efficiency and environmental friendliness of the Prius have been confirmed with numerous awards;
-
Most fuel efficient car in America for 2008 (The Car Connection 2008).
- Highly rated for emission reductions (Received the Green Engine of the Year 2008).
- Quality rating of 7 out of 10 and a reliability rating of 10 out of 10 from the consumer and expert reviews sampled. (The Car Connection 2009).
-
Best car in the upper medium car segment for 2008 with a score of 901 out of 1000 (the highest rating achieved by any of the cars in all segments) by What Car Customer Satisfaction Index (CSI) (JD Power & Associates 2008)
Toyota maintains effective communication about the Prius range. Its website gives access to specifications, complete brochures as well as a digital tour of the exterior and interior. Toyota uses regular press releases and auto show displays to feature imminent developments on the product which helps in sustaining interest. The 2010 Prius was displayed in the Detroit Auto Show earlier in January 2009 (Physorg.com 2009).
5.0 PRODUCT INNOVATION STRATEGY ANALYSIS
‘Car makers always develop products after regulation have been enacted. We should reverse the relationship, anticipate what will come in the future, and develop products in order to create new markets.’ (Statement by Toyota vice- president on the development of the Prius) Forest et al 2006.
Product Innovation strategies can be broadly categorized under ‘Reactive’ and ‘Proactive’ innovation strategies.
Over the years, Toyota has employed both of these, but their primary strategy is the proactive strategy and this is evidenced by the ‘Kaizen’ principle employed within the company from the receptionist to the President. Their penchant for continuous improvement has enabled Toyota practice the proactive strategy in their product innovation and given them competitive advantage in expertise, experience and fore-knowledge for the future trend in the car industry leading to considerable cost savings in the manufacturing process.
Development of the Toyota Prius begun in the 1980’s when Eiji Toyoda, then chairman, questioned, “Should we continue building cars as we have been doing? Can we really survive in the 21st century with the type of R&D we are doing now?” (Itazaki 1999). The Prius was developed by a project committee in September 1993 to conceive the car for the 21st century. After lots of brainstorming, the team concluded that “resources” and “environment” should be the key concepts of the car for the next century (Yoshiro 1999).
They experienced difficulty in estimating demand, consumer perceived value due to its novelty, how much consumers will be willing to pay, would consumers value it’s contribution to reducing pollution? And overall, the risk of failure was relatively higher and could damage the image of Toyota.
Although the proactive approach to the introduction of Prius involved a lot of risks and costs, it delivered long-term strategic benefits as Toyota was able to make a clear statement on its commitment to environmental protection and generate excitement about the company’s products and innovative capabilities that had been missing for many years. These benefits were maximized as Toyota was first to the market with a hybrid vehicle.
An strategy analysis using the Mintzberg et al framework showed Toyota to be:
- Consistent with goals and policies
- In consonance with the environment.
- Offering considerable advantage.
- Unrealistic with sales strategy to sell 1 million Prius per year from the 2010s.
Figure 8 below is a diagrammatic representation of the Toyota Prius strategy
5.0 PRODUCT LIFECYCLE STAGE INTERPRETATION
Lifecycle stages:
- Introduction (low sales, losses incurred)
- Growth (faster sales & profit growth),
- Maturity (sales peak & flatten)
- Decline (sales & profit fall).
323 cars were sold in 1997, and by April 2008, sales totalled almost 1,028,000 cars. It took over eight years for sales to reach half a million units - and only two more years to double that to one million (Deacon 2008). Toyota sells the Prius in more than 40 countries with sales increasing dramatically in recent years and even more so recently with the massive hike in the price of oil and the resulting pain at the pump in many countries (Kenilworth 2008).
These sales results show that the Prius is in the growth stage of its life cycle and taking it’s sales in Australia as a case study: Australians have bought more than 9,300 since the Prius was launched in October 2001, with sales rising every year, including an increase of more than 60 per cent in 2007 to a record of 3,176 cars. 2008 Sales in Australia and globally are running ahead of the same period in 2007, largely due to improved availability (Klose 2008).
According to Toyota’s spin doctors in Japan, Prius vehicles around the world have reduced carbon-dioxide emissions by about 4.5 million tonnes, compared with petrol-only vehicles in the same class and of similar size and driving performance (Bleeker 2008).
It is this performance in quality and sales, coupled with consumer environmental awareness and increasing oil prices that makes Toyota’s goal of one-million hybrid sales per year during the 2010s appear feasible (Toyota pressroom 2009).
While in our group we are skeptical about such goals especially in the wake of the current economic financial crisis, we postulate that the sales of the Prius and other hybrid vehicles will continue to grow for some more years before its peaks and stabilizes.
6.0 PRODUCT / COMPETITOR ANALYSIS
The Honda Insight is the main competitor to the Prius. Honda sold the first Insight in Japan, Europe and the United States in November of 1999, Civic Hybrid in December of 2001 and Accord Hybrid in December of 2004 which was especially for North America. (Tsai 2009)
Due to the economic recession in 2008, both the sales of Toyota and Honda slumped to a record low (Takahashi 2008). In terms of the changing consumer behavior in recent years, Honda decided to provide new generation Insight at the end of 2008 (Tsai 2009). Table 3 shows a comparison between both cars. Though the Prius is better off as regards CO2 mass emission, and fuel economy combined, the Insight is sold at a lower price. This is an advantage in recession times as consumers are willing to pay a lower price and buy a fuel-efficient car. In February 2009, the sales of Honda new generation Insight in Japan were over 10 thousand units within the first five day (Tsai 2009).
7.0 SWOT ANALYSIS
Table 4 shows a SWOT analysis carried out to look at the business environment in which the Toyota Prius is operating and also to see what Toyota can do to further reposition and strengthen the position of the Prius in the market.
8.0 FUTURE STRATEGY ANALYSIS / RECOMMENDATIONS
The major challenge faced by Toyota is how to sustain increase in Prius sales and outperform competition. Improved Prius sales will increase profits from the Prius range but more importantly increase the capacity to sell other conventional cars because the emission to sales limit imposed by export markets would improve.
The future strategy and recommendations made here are based on the analysis of the VIPI framework, current innovation strategy, competitor analysis, and SWOT analysis carried out.
-
Look beyond technology and more towards design approach in product innovation. Through design, the Prius can be repositioned in the perceptual map as a unique, personal, stylish and fashionable car (Segment 1- See Appendix ---)
-
Continue R&D investments to further improve fuel efficiency, CO2 emission and performance through new discoveries and adoption of discovered technologies, which include the use of lighter metals, Lithium batteries, Solar power, Algae as alternative bio-fuel or a combination of these.
-
Toyota’s brand, image and R&D expertise can be realized as a valuable resource. They could capitalize on this by forming alliances with other environmental friendly transport companies, governments e.t.c which could benefit from the Toyota image and expertise and also help Toyota to diversify within the transportation business. Ultimately we could have Toyota trains, Toyota air lifts e.t.c. (See Appendix )
- Look towards selling their expertise and technology about hybrid vehicles to other car companies looking to enter into the market (this would be when the hybrid car segment ceases to be exclusive).
- Further build on existing supplier relationships through equity investments (another alliance), which will build the capacity of the suppliers and eventually make them ‘one-stop-shops’ for parts for hybrid vehicles.
- Plan an entry strategy into the ‘new rich’ middle class being created in the emerging economies thereby increasing the market for the Prius and ultimately yielding more revenue.
- Work at standardizing the parts of the Prius to reduce changes thereby encouraging suppliers to produce them and improve their availability. This will ultimately lead to lower cost of maintenance for Prius owners.
- Extend the hybrid technology across a range of other Toyota products such as Camry, Corolla e.t.c to offer consumer variety in their choice of hybrid vehicles.
REFERENCES
TSAZHI
Andidas.com (2003). Toyota Prius Marketing Communications Plan.
Adams Business Media (2002). “Toyota: A worldwide leader in product innovation, Investor Fact Sheet”
Available at:
Source:
[Accessed 28/2/2009]
Business week (March 8, 2007). Toyota goes beyond the Prius.
and (2008)
Available at:
Source: www.
[Accessed 2/3/2009]
Hybrid cars (2008)
Available at:
Source: ).
[Accessed 3/3/2009]
Lem Bingley, , 14 Apr 2008.
Niedermeyer (2008). “2010 Toyota Prius vs. 2010 Honda Hybrid”
Available at:
Source: http://www.thetruthaboutcars.com/toyota-prius-vs-honda-fit-hybrid/).
[Accessed 27/2/2009]
Toyota (2008).
Available at:
Source: ).
[Accessed 1/3/2009]
The Manufacturer US. “The Toyota vision”
Available at:
Source: ).
[Accessed 2/3/2009]
United Nations Environment Program (2009). “The Environment in the News”
Yoshio Ishizaka (2001). “The Toyota Way in Sales and Marketing, The Toyota vision”
Available at:
Source: ).
[Accessed 3/3/2009]
TAYO
Wikipedia (2009).Toyota Prius. Available at [Accessed 26/02/09]
J.D. Power and Associates (2008). Toyota Prius Ranks Highest in Satisfying Customers in the UK for a Second Consecutive Year. Available online at
[Accessed 26/02/09]
The CarConnectgion.Com(2008).2008 Toyota Prius Review. Available online at [Accessed 26/02/09]
U.S.News & World Report Rankings and Reviews (2009). Toyota Prius - What the Auto Press Says Available online at 26/02/09]
Physorg.com (2009). Subdued Detroit Auto Show Focuses on Going Green. Available at [Accessed 3/03/09]
Directgov Online (2009).New Car Co2 Emissions : Top 10 Search Available at [Accessed 26/02/09]
E-MAY
Deschamps, J.P. and Nayak, P.R. (1995) Product Juggernauts: How Companies Mobilize To Generate A Stream of Winners, Harvard Business School Press, Boston, MA.
Honda Motor Europe Ltd. (UK) [online] [Accessed 15/02/2009].
Toyota (GB) PLC [online] [Accessed 08/02/2009].
Trott, P. (2008). Innovation Management and New Product Development, 4th edition. Prentice Hall.
Tsai, C. (2009). The Sales of Honda Hybrid Are Over 300 Thousand All Around The World. AutoNet. 19 Feb. 2009. Available at AutoNet Online [Accessed 21/02/2009].
SOLA
BOYE
Forest L . Reinhardt, Dennis A . Yao and Masako Egawa 1996. Toyota motor Corporation: Launching Prius. Harvard Business School. (9-706-458)
Itazaki, Hideshi, 1999. The Prius That Shook the World: How Toyota Developed the World’s First Mass-Production
Hybrid Vehicle (translated by Albert Yamada and Masako Ishikawa), p. 10.
Yoshiro Ikari, The Age of Hybrid Cars: How Toyota Developed the World’s First Mass Production Car ‘Prius,’
Kobunsha, 1999, p. 35.
Bleeker B. James. 2008. AutoOnInfo.net . , 2009
Toyota pressroom 2009. , 2009
Klose steane. 2008. Toyota sells one-millionth Prius. . March 11, 2009.
Kenilworth McCarthy 2008. Global sales of Toyota Prius hybrid pass 1 million. , 2009.
Deacon Clinton 2008. One millionth Prius sold. , 2009.
APPENDIX
1.0 PERCEPTUAL MAPS
This is a technique used to understand the position of brands as consumers perceive them.
Uses of perceptual maps:
- New product testing - testing whether the new product concept achieved the intended positioning.
- New product development: directions for R& D efforts using information to plot the “ideal point”, that is the feasible point on the map that represents ideal combination of attributes for different customer groups.
2.0 AC2ID TestTM
The AC2ID TestTM developed by John Balmer in 2001 used to determine the organisational brand image. It breaks the identity of an organisation into five types and then examines how strong the similarities are between each of the identities are. Differences between identity types indicate a potential hazard to a cohesive corporate identity and can help identify potential remedial action(s).
Actual Identity is shaped by corporate ownership, leadership style, organisational structure, business activities, markets covered, quality of products or services, values held by management and employees.
Communicated Identity is; “controlled” corporate communications, performance effects of products, spin and commentary made.
Conceived Identity is the corporate image, corporate reputation and corporate branding.
Ideal Identity – The positioning of an organisation in its competitive market.
Desired identity – is the vision of the organisation.
3.0 REDS2 TM
Partnering the AC2ID TestTM mnemonic, Balmer came up with REDS2 TM. REDS2 TM is another mnemonic designed to describe the process to be used to conduct the AC2ID TestTM test:
-
R = Reveal the 5 identifies
-
E = Examine the 10 interfaces between the identities
-
D = Diagnose the deficiencies identified between identity interfaces
-
S = Select a suitable
-
S = Strategy
Identity deficiencies / Misalignments
Identity deficiencies and misalignments occur between:
- Actual vs Communicated
- Actual vs Conceived
- Actual vs Ideal
- Actual vs Desired
- Communicated vs Conceived
- Communicated vs Ideal
- Communicated vs Desired
- Conceived vs Ideal
- Conceived vs Desired
- Desired vs Ideal
4.0 SUPPLY CHAIN CAPABILITIES
According to Lee (2004), Toyota has a supply chain that is:
- Agile - Responds to short term changes in demand or supply quickly
- Adaptable – Adjusts supply chain design to accommodate market changes
- Aligned – Establishes incentives for supply chain partners to improve performance of the entire chain
RELATIONSHIP WITH SUPPLIERS
According to Harbour reports (2007), Toyota continues its commitment of close collaboration with suppliers, including increasing its equity position in suppliers such as Denso.
6.0 QUALITY APPROACH
Quality is built in during the manufacturing process. If a defective part or equipment malfunction is discovered, the machine concerned automatically stops, and operators stop work and correct the problem.
(source: )
7.0 COMPETITOR ANALYSIS
* Source: Honda Motor Europe Ltd. (UK) and Toyota (GB) PLC.
8.0 FUTURE STRATEGY
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