Toyota Case Study
This study analyzes the marketing strategy and environmental concerns associated with the energy-saving car models of Toyota on the UK market. Second, the report will consider a description of the energy saving car before considering the current marketing strategy of Toyota, and finally the report will consider a number of options available to Toyota in the future to retain and grow a competitive advantage.
Alternative energy news (2008) gives a range of definitions of energy saving vehicles indicating that an energy saving vehicle has one of more of the following qualities. A stop start engine, with is a standard internal combustion engine which turns itself off when the car comes to a stop. A hybrid vehicle which combines a standard internal combustion engine with battery powered technology, allowing the car to select the most efficient source of power through an onboard computer. Finally, there are cars which run entirely from an electrical source based upon current battery technologies.
Toyota’s Marketing Strategy
At present Toyota produces and markets two models of energy saving vehicle in the UK each of which have a slightly different marketing mix (Toyota, 2011):
Toyota Prius – The Prius is Toyota’s original hybrid model and is aimed at the mid-upper end of the market for family cars. The car is marketed as product which is environmentally friendly and gives the consumer long term cost savings with low MPG consumption rate. The car is currently marketed in four specifications ranging in price from £21,000 to £27,000. While the performance figures for the car in terms of fuel consumption are a significant selling feature of the model and see the cost of running far lower than many other vehicles on the market. Critics indicate that there are also other energy saving vehicles on the market which far higher levels of performance when it comes to the issue of cost savings (Abuelsamid, 2008). With the Toyota Prius now entering its fourth generation, one may consider that the product is entering the maturity stage of the product life cycle (Jobber, 2007). Consumers now longer see the Toyota Prius as a radical innovation but a practical way of enjoying low cost motoring from the perspective of running costs.
Toyota Auris – The Auris represents the second model of energy saving vehicle to be introduced to the UK market by Toyota. Like its predecessor, the Toyota Prius the car makes use of hybrid engine technology to deliver a vehicle with low running costs and other financial benefits such as low tax duties. However, the marketing mix and target audience for the Auris model are slightly different to that of the Prius. Where the Toyota Prius clearly targeted the practical family market, the Auris is a smaller vehicle and targets the compact car market. Despite the fact that the car is a smaller offering than the Toyota Prius, the vehicle is still aimed at the premium end of the segment with models still costing in excess of £20,000 at the entry level. Like Prius the car targets those who are either environmentally conscious or who are looking for long term low cost motoring. One of the model’s key sales features is low fuel consumption with an MPG of 74.3 registered.
When both of Toyota’s offerings in the energy saving vehicle market within the UK are considered, the message may ultimately be seen as a similar one. Both cars target those who are environmentally aware or who are long-term looking for low-cost motoring. However, high initial costs and premium based pricing strategy (Brassington and Pettitt, 2006) ensure that Toyota has maintained its reputation as a supplier of high value premium cars in the UK market.
The following tools give a situation analysis with regards to the external environment which may affect the performance of Toyota’s energy saving vehicles in the UK.
On the whole political changes have been favourable for the development of Toyota’s energy saving vehicles. Key political initiatives which have had such positive effects include the low rate of tax levied on vehicles with low emissions and other initiatives designed to encourage spending on newer lower pollution cars such as the government scrapage scheme.
The current economic environment may be seen as having multiple effects upon the development of Toyota’s energy saving vehicles in the UK. On the one hand, poor economic performance may be seen as depressing the market for new car sales (OECD, 2009, 2010). This may be seen as a factor which has an even greater effect in the premium segment as represented by Toyota’s energy saving vehicles. On the other hand, the long term economic benefits of Toyota’s energy saving vehicles could be seen as one way in which the company stands to benefit from continued poor economic performance. Here Toyota is able to market the long term cost savings associated with the product despite the high initial price.
Social changes may be seen as largely benefiting the development of Toyota’s energy saving vehicles. On the one hand social changes have seen consumers taking a higher level of interest in the environmental impact of consumerism, thus increasing the level of demand for products which are seen as environmentally friendly (Parsons and MacLaran, 2009). In addition, there has also been changes in social trends which have seen increasing levels of car ownership in the UK across the broad. Such social trends include the ever younger age of car ownership in the UK and an increase in the number of single occupancy households.
Technological developments have seen the development of a number of key products and markets in recent years. These include efficient engines, hybrid engine technology and technologies capable of producing wholly battery powered cars. While, batteries powered cars may be seen as the most radical development in the market for energy saving cars, the lack of infrastructure development in the UK and the limits of speed and range mean that only a few products have been developed in this sub-sector. As such, most manufactures including Toyota have opted to develop energy saving vehicles using hybrid based technologies. Toyota may in the future consider developing a wholly battery powered vehicle for the UK market however, this is unlikely to be a successful strategy until concerns over infrastructure have been developed further.
At present legislation in the UK and EU as a whole is putting increasing pressure on car manufacturers and motorists to produce and purchase cars with increasingly lower levels of carbon emissions. As such, this may be seen as a key pressure for producers such as Toyota to develop further the market for energy saving cars.
Increasing levels of concern for environmental considerations may be seen as fuelling a general rise in the market for products which are considered as being environmentally friendly or have greater environmental credentials than previous generation products (Parsons and MacLaran, 2009). As such, this may see a shift in demand away from Toyota’s traditional range of cars towards the company’s portfolio of energy saving cars.
- Toyota’s brand may be seen as its single biggest asset in the UK market with the company having a good reputation for high quality cars
- Strength in R&D has seen Toyota able to bring a car to the UK market which is both an energy saving vehicle and a practical transport solution
- Recent product recalls may have damaged Toyota’s image temporarily in the UK market
- While Toyota’s technology has been well received by the market, its engines are not the market leader from a fuel efficiency perspective
- The increasing costs of standard oil based fuels and taxes associated with vehicles with low fuel efficiency may allow Toyota to grow its market share in the UK significantly in future years
- Consistent new development in the technological field means that Toyota may be able to develop an entire portfolio of energy saving vehicles for the UK market in future years
- Competition is likely to increase in future years as other manufactures develop effective solutions to the rising costs of motoring including the development of energy saving vehicles
- The possibility of further poor economic performance may lead to a slow uptake in the ne vehicles market, ultimately this may slow down the rate at which Toyota is able to penetrate the UK market for energy saving vehicles
- Slow infrastructure development for vehicles which use wholly barite powered technologies may mean that Toyota is unable to develop and market such products effectively in the UK for many years to come
Having analysed the background information, the report has identifdied the folling strtagic marketing options for Toyota:
As such it may be considered that at present Toyota has a relatively limited product portfolio with just two models in the sub-category. One option for Toyota to consider may be to devlope a wider portfolio of products which competitors are as yet unable to offer. This may see Toyota focusing on a range of strategies developing small budget models to compete with a cost leadership model (Porter, 2004) in the lower end of the market. Alternatively, the company may look to devlope new products which fit in with a premium based strategy such as the development of environmentally friends sports cars and SUV’s, none of which are offered by Toyota’s competitors at present.
Price Based Strategy
Despite Toyota’s premium based pricing strategy, the researcher considers that economic performance is likely to worsen in the coming years which may see a greater level of growth in the budget sector (OECD, 2009, 2010). As such, it is recommended that Toyota in the coming years adapt its pricing strategy to one based around a cost leadership model in relation to the environmentally friendly car sector. Here the company should take advantage of the falling costs of technology in its existing models to assist the development of a budget range of cars using exiting hybrid technology. This may give Toyota a significant cost based advantage in comparison to other companies who are still in the expensive R&D stage of the development of energy saving vehicles.
One of the major advantages seen in the marketing of the Toyota Prius has been the high level of association between the product and role models within society such as Hollywood celebrities. However, such marketing techniques still need to be used officially by Toyota. As such, one recommendation of the report is that Toyota should adapt the promotional element of the marketing mix to make use of celebrity endorsements and other associations which may help to lift sales of both existing and new models. Here the researcher recommends that such changes to the promotional element of the marketing mix should be linked to a web marketing strategy including the use of viral methods and online social networks.
- Abuelsamid, S. 2008. The Prius may not be the best way to cut energy costs. Available online at: http://green.autoblog.com/2008/04/23/the-prius-may-not-be-the-best-way-to-cut-energy-costs/ [Accessed on 02/11/11].
- Alternative Energy News. 2008. Cars of tomorrow with energy saving technology. Available online at: http://www.alternative-energy-news.info/cars-of-tomorrow-technology/ [Accessed on 01/11/11].
- Brassington, F, Pettitt, S. 2006. Principals of marketing. 2nd ed. Harlow: FT Prentice Hall.
- Jobber, D. 2007. Principles and practice of marketing. 5th ed. London: McGraw Hill.
- OECD. 2010. OECD Economic outlook. 2010. Vol 2. No. 88. Nov.
- OECD. 2009. OECD Economic outlook. 2009. Vol 2. No. 86. Nov.
- Parsons, E, Maclaran, P. 2009. Contemporary issues in marketing and consumer behaviour. Amsterdam: Butterworth Heinemann.
- Porter, M, E. 2004. Competitive advantage. Export edition. United States: Free Press.
- Toyota. 2011. Hybrid cars from Toyota. Available online at: http://www.toyota.co.uk/cgi-bin/toyota/bv/generic_editorial.jsp?navRoot=toyota_1024_root&noLeftMenu=true&fullwidth=TRUE&nodiv=TRUE&edname=Hybrid-Cat-Landing&zone=Zone+Cars&id=Hybrid-Cat-Landing [Accessed on 02/11/11].