Table of Contents
This report focuses on the value of marketing strategy in achieving the overall aims of a company. Specifically, it will explore the efforts put in place by Toyota in marketing one of its hybrid cars, the Prius. Marketing strategy is paramount to the success of the Prius in the competitive market arena. Toyota’s philosophy of the ‘right car at the right place’ (Cho, 2001) dictates the adoption of geographic and psychographic segmentation strategy for the Prius brand. Through a well-crafted segmentation strategy, Toyota has been successful in determining the target market for the eco-friendly vehicle. In addition, effective segmentation has helped Toyota create channels for reaching the target markets effectively.
The success of the Prius is pegged on a thorough understanding of the environment in which the company operates. This is achieved by conducting a scan of the environment to identify threats and opportunities in the hybrid car market. Environmental scan is a critical process in defining the strategy for Prius. Without a proper scan of the environment, the company would find it rather difficult to design an effective marketing mix for Prius that meets the expectations of the customers. The marketing mix is critical in meeting the needs of the customers. These are implemented with the focus on creating awareness of the products as well as enhancing delivery and communication with the client, and are based on a thorough understanding of the marketing environment. A proper application of the 4 Ps will help Toyota meet its objectives and satisfy the needs of the clients (Cho, 2001). The 4 Ps comprise of the product, the price, place, and promotion of the Prius. Indeed, the strategies and tactics embraced by Toyota in marketing the Prius are captured in the marketing mix. A clear and purposeful implementation of the 4 Ps will perfectly guide the company into meeting its obligations. In doing so, the company has continuously taken cognizance of the issues that can hinder its operations, especially in the foreign market. These can be overcome by choosing an entry strategy that can help reduce operational costs, which will in turn translate into low product costs. In addition, there is a need to expand the products base by reaching to as many people as possible. For instance, the use of celebrities can increase the product’s customer base significantly. Moreover, continuous research is critical to ensure customer needs are met at all times.
Toyota Prius has maintained an unparalleled success since its launch in the 1990s (Larsen, 2009). Although other companies have tried to design their own versions of green cars, they have not been able to match the Prius in terms of its efficiency in fuel consumption and overall performance. Because many companies started manufacturing environmentally friendly vehicles, it became imperative that Toyota had to invest is a marketing strategy to maintain its competitive position in the market arena. In addition, the company has continually invested in research and development efforts to keep abreast with the market trends. Moreover, the company should continue these efforts to ensure it develops competitive eco-friendly cars. Marketing strategy requires the analysis of several factors in the path towards achieving the objective of the company. To understand the path taken by the company, this paper will first evaluate the historical background of Toyota Motor Corporation. Secondly, an appraisal of the environment in which it operates will be discussed. Of critical importance are the internal and external forces that dictate the strategy that a company should adopt. The next focus would be the marketing strategy that Toyota adopts based on the environmental forces in the industry. This will lay down a basis for the set of recommendations that Toyota should adopt in the marketing of Prius.
Toyota was incorporated in Japan in the year 1937 (Pride & Ferrell, 2008). The company set out to be a global player by reaching out in the US with its Corona brand in 1965. Its success in the US market saw the company become a house name in the US during the 1970s (Henry, 2008, p. 91). In pursuit of its growth and cost cutting initiatives, the company instituted local manufacturing in the 1980s (Klein, 2012). By 2006, Toyota had become the second largest car seller in the US with about 16% of the market under its fold (Klein, 2012). In 2012, one of its brands, Toyota Corolla, was the best selling brands in the world. Across the board, the company’s brands are performing exceptionally well. For instance, the Toyota Prius, which came into production in the early 1990s, is one of the most sought- after brands in the market (Klein, 2012). The move towards hybrid vehicles, pushed by the need to minimize environmental degradation has seen Toyota face significant threat from other competitors for its Prius brand. However, the car has had a splendid performance in the last two decades. This superb performance is directly correlated to the company’s dexterous market strategy. Indeed, a look at the exemplary performance of the company, together with its premium brand, proves that strategy is a vital component in the success of any company.
Every company has an environment in which it carries out its operations (Pride & Ferrell, p. 51). The business environment falls under two categories: the internal and the external environment. Internal factors are within the control of Toyota (Klein, 2012). On the other hand, external factors are those that Toyota Motor Corporation cannot control. One key component factor of the internal environment is the human resource. Toyota has an array of well-qualified employees with high technological expertise. This gives the company an upper hand in the designing excellent vehicles such as the Prius. In addition, the company’s decision makers are successful in their decision-making process. Toyota has influence over these internal resources.
The external environment operates independent of the company and as such, Toyota cannot influence them. These include political environmental, social, and technological factors. A thorough understanding of these factors helps the company to better position its Prius brand in the market. The PEST analysis is an incredible tool in avoiding discontinuities in a company’s strategic focus (Klein, 2012, p. 16). In addressing each factor, the managers of Toyota are better placed to understand how future developments might influence company’s competitiveness. The external environment has played a major role in shaping the strategic orientation toward hybrid cars, and especially the Prius.
The political dimension addresses those legal and regulatory frameworks that might affect a firms operation. The US government has put in place several legal guidelines that support the production of hybrid cars (Pride & Ferrell, 2008). These are an extension to the Energy Policy Act of 2005. One legal framework is the Energy, Improvement, and Extension Act of 2008 (Anderson & Anderson, 2010, p.98). The laws help Toyota produce cars that measure up to the expectations of the government. If these are not adhered to, then operating in some markets can be greatly hampered. Indeed, the trend is towards more fuel efficient and eco-friendly vehicles. This was the basis of the Prius brand and the company has embraced any changes in the legal frameworks positively.
The production of Prius was mainly mooted by the economic factor. If a country imports more products, it might incur more trade debt. This usually affects the economy of people since the prices of oil keep going up in the global market. Reduced income means little amount is available for retail spending. This affects the GDP of a country. Because hybrid cars are efficient in fuel consumption, more money is set aside for other uses in the family. This is a plus in the economy (Lier & Muller, 2011, p. 38). Indeed, a better performing car will resonate well with clients in the future.
In the contemporary world, people can be more interested in hybrid cars because of the various social benefits (Klein, 2012). Here, social benefits include issues like the health of the citizens as well as the people’s customs. For instance, conventional cars produce a lot of smoke, which is a health hazard. Indeed, prolonged exposure to unwanted gases such as nitrous oxides could lead to respiratory track infections (Pride & Ferrell, 2008). Hybrid cars are beneficial in this aspect because they emit less carbon dioxide.
Technological revolution is critical in the modern car market. Conventional vehicles have had numerous inconveniences, necessitating the need to reengineer on this aspect. Improved technology provides more comfort and safety for car owners. For instance, hybrid cars save a lot of energy by using regenerative braking system. The heat generated by the frictional force in the traditional car-braking system is normally wasted. Improved technology can convert this energy for improved performance (Lier & Muller, 2011, p. 38).
The suppliers in the automobile industry do not have much power since the companies can produce the components they needs on their own. However, Toyota should cooperate with suppliers to ensure timely delivery of materials that it cannot produce in-house (Borowski, 2010, p .9). This will ensure the no issues arise in the supply chain.
4.1. 2.Power of the Buyers
The bargaining power of buyers in this industry is extremely high (Larsen, 2009). Buyers have access to a lot of information and can compare prices easily. In addition, buyers can switch their preferences to suit their needs (Pride & Ferrell, 2008).
4.1. 3.Threat of New Entrants
The safety issues as well as the design of hybrid cars require heavy investments. This makes entrance into the market rather hard. In addition, customers try to maintain brand loyalty in the automobile market. New entrants might find it hard to make an impact because of these two factors (Pride & Ferrell, 2008).
4.1. 4.Rivalry in the Industry
The competition in the automobile industry is quite strong. Therefore, consolidation of market share is a critical issue in the industry (Larsen, 2009). Moreover, governments have created laws that protect their companies from foreigners. To keep an upper hand in the eco-friendly segment, Toyota has to invest in continuous research and development. This will mitigate against recalls that affected the company in 2010 (Borowski, 2010, p .9).
4.1. 5.Threat of substitutes
Substitutes are many in the automobile industry. When prices increase or oil prices go up, people can look for alternative means of transport, including walking. The targeted group can shop for cheaper hybrid cars or resort to conventional vehicles.
The segmentation strategy pursue by Toyota is based on the philosophy of the company. The management believes in having “the right car at the right place” (Peck, 2007, p. 10). The company targets its clients based on a well-orchestrated demographic and psychographic form of segmentation. Geographic segmentation is when a company divides a market into distinct geographical units. For instance, the geographic unit could be a country, city, or neighborhoods. Toyota sees the whole globe as its market. However, it has put specific focus on several markets for the Prius including the following countries: the US, China, Indonesia, India, and Canada. Since the US takes about 30% of all the cars manufactured by Toyota, this market has been set as a priority (Henry, 2008, P. 195).
The second notable segmentation is psychographic which refers to setting a market apart based on group distinctiveness. These character traits include social class, lifestyle, or one’s personality. Toyota has unique cars that appeal to different characters in the above-mentioned geographic areas. This has been achieved by producing products that have specific attributes. For example, there are those that appeal to different age groups and those, which are aimed at the working class. There are sport utility vehicles for sports people. For instance, the Prius is an environmentally friendly vehicle designed for those people who are conscious of the environment (Baker & Hart, 2010, p. 579). In addition, there are varieties of trucks that are targeted to professionals who desire them. To achieve a well-balanced segmentation, targeting and positioning, Toyota has a host of brands whose features meet the targeted group’s needs.
In addition, Toyota has drawn its market strategy on three levels after a thorough appraisal of the needs and preferences of the customers. At the global, regional, and national levels, the company is at least assured of continued growth in the next decade for the entire category of vehicles. In essence, it is on this premise that the company executes a balance between the emotions and ecological orientation of those who buy the Prius. Indeed, on the most critical factors in the success of the company is its ability to access the market and the purchasing power of the customers. Based on this principle, Toyota can pursue customers with incomparable technologies in the hybrid market (Baker & Hart, 2008, p. 390).
Another approach that Toyota uses is the application of a strong promotional stratagem. The company embraces the integrated marketing communication tool (IMC) (Kurtz, 2011. p. 47). In addition, it has a blog that perpetuates the promotional campaigns. In recent past, people have shifted from formal channels of getting information like family and friends towards the digital networks (Pride & Ferrell, 2009. P. 144). However, this does not mean that these traditional channels are ineffective. In the digital forum, the company follows on the concerns of customers and provides amiable responses to many people concerning the Prius. Indeed, the realities of such maneuvers have been reflected in the avalanche of superb performance for Toyota over the decades.
The development of a new product is not a simple matter considering that about 80% of new products do not make any impact in the market (Pride & Ferrell, 2009. P. 238). Toyota success in the production of hybrid cars such as Prius lay in extensive research to understand the needs of the market. Consumers preferred status, above average performance as well as high resale value among other qualities (Cho, 2001). These were the attributes that developers gave high consideration in developing the Prius. To extend the maturity stage of the product life cycle, the company increased the product mix by increasing the number of buyers and investing in international markets, such as India.
Pricing is a critical component in the marketing mix of Prius. In the US, Toyota used the penetration strategy. The demand for hybrid cars in the US is price elastic (Henry, 2008). This means the demand is affected by the price. However, in other markets like India, it had to switch the mode of pricing because of high import duties. In some cases, Toyota uses price discrimination to attract renowned corporate businesses, since they have a continuous demand for luxurious cars. This strategy increases the revenue for Prius (Pride & Ferrell, 2008). In addition, it is a creative way of reaching the target market.
Toyota has worldwide presence and has a vertical marketing structure. The Prius is sold at specified locations. With an elaborate market presence, place is not a big issue in marketing the Prius.
Prius is an environment friendly vehicle. The vehicle grabs attention by its features and has one of the most unique marketing strategies (Pride & Ferrell, 2008). The reason is that the Prius creates a direct communication with the buyers, thus creating awareness. Besides, the use of integrated marketing communication has greatly helped market Prius in many markets.
The marketing mix provides a clear picture for understanding the strategies and tactics employed by Toyota in marketing the Prius. With a good implementation of the diverse elements of the marketing mix, the company has been successful in the use of strategies and tactics in its marketing effort. Indeed, the application of these tactics helps Toyota derive a good reputation for Prius in the competitive market arena (Pride & Ferrell, 2008). Besides building its reputation, the company can also continue making profits in the automobile industry. To continue meeting its objectives in the futures, these elements should be varied to reflect the trends in the market.
Based on the above discussion, a set of recommendations can greatly help Toyota increase its profits in the premium brands category. First, joint venture initiatives should be used as an entry strategy for Prius. This will minimize import duties levied on the car and thus improve company profits. This will see a reduction in the costs of the car and strengthen its position in the markets. Secondly, the use of celebrities in the promotional campaign can position the car well in the luxury market. The strategy is used with other brands such as Toyota Corolla. Indeed, if employed on the Prius, it can expand its market significantly. Finally, Toyota should invest heavily continuous research to understand future trends in customers’ wants and preferences. This is in addition to marinating high quality standards in the production process.
In conclusion, Toyota Company provides a good example of how a company can effectively employ a marketing strategy in the marketing a premium brand in a competitive market arena. The successes discussed above indicate the company has creatively used marketing strategy to achieve the mission as well as the organizational goals spelled out by the company. In the realization of its vision, the company has idiosyncratically spelled out its key competencies and strategies in pursuit of its goals in positioning the Prius in the market. Overall, the success of the Prius is rooted on an ingenious marketing strategy.
In essence, it can be concluded that Toyota is an exceptional multinational that presents a unique model on the development and execution of an effective marketing campaign. Through such strategies, the company has learned how to enter a certain market, manage its products properly in different phases, as well as maintain its position as a leader, in spite of the competition. Moreover, the application of integrated marketing communication (IMC) and branding creates an image that cannot easily disappear from the minds of customers. This quintessentially proves that marketing strategy is the heart and life of a company and its executives.
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