IC-TMT20121

PESTLE Analysis on Toyota Prius

Abstract

Toyota Prius Hybrid is using the Hybrid Synergy Drive (HSD) that perfectly optimizes power from both petrol engine and electric motor according to the driving condition. The electric vehicle (EV) which allows the vehicle run purely for low noise and zero fuel consumption [1]. The objective of our research paper is to investigate the factors that move Toyota Prius into production. The research is based on the PESTLE analysis (which is based on various factors like P-political, E-economy, S-social, T-technology, L-legal and E-environment) by using secondary data and qualitative analysis. In annuals ales worldwide since 1997 until 2011, Toyota Priusis performed well and popular in global market. Based on the analysis, Toyota Prius did move into hybrid vehicle production which influenced by the factors that mentioned above (PESTLE).

Keyword:

PESTLE, Toyota Prius.

1.0 Introduction

Toyota Prius is a compact sedan which manufactured and developed by Toyota. Prius was named with meanings “ahead or leading” and “the predecessor of cars to come”. The first generation of Prius experienced great sales in US with 32% grow from2001 to 2003. It became the world first mass-produced gasoline electric hybrid car with aimed to reducing air pollution and increasing fuel efficiency. The second generation was redesigned as a mid-size lift back, with the redistributed on interior design and mechanical space significantly increasing luggage room and rear-seat legroom.

4.1 Political Factors

Based on our research, Toyota Prius have positive political impact. By producing the environmental friendly cars which use less gasoline and reduce dependency on petrol, Therefore, the country itself reduce the dependence of the petrol (import from other country) especially U.S government and western country which does not produce oil and need to focus on the way to obtain oil from the foreign countries.

President of U.S Obama stated that he wants to end America’s addiction to foreign oil which encourages the people to use the hybrid car and contribute on his plan to decrease U.S reliance on foreign oil. Based on the result of U.S survey which conducted by Hudson Institute are 75% of Americans prior to reducing their reliance on foreign oil and gas. Secondly, about 83% of Americans agree that the top for the next administration must be focus on the reducing our dependence on foreign oil. Moreover, the 91% of Americans believe that when come to energy, they must relies that on its own ingenuity and innovation but not depend on Saudi royal family. The dependence of the natural gas and oil from the foreign source will directly and indirectly affect one country economy growth and also the national security. In the past decade, the dependence on oil and gas has cost many western country economy dearly until the alternative energy vehicles start become more commonplace. For U.S in 1979 to2000, U.S cost around 7 trillion on natural gas and oil which as much as spent on national defense in the same period. Nowadays, the oil price keep raise and the transportation of this country become more and more expensive. Therefore, Government Policy such as the degree of using the renewable energy should be focus so that the environment and economy of country were protected. We also found that the international and national policies moved Toyota into hybrid vehicle production is United State Federal Law. The energy Policy Act of 2005 established a federal income tax credit up to$3,400 for the new hybrid vehicles, purchased or placed into service. Vehicles purchased after December 31, 2010 are not eligible for this credit. The law limited the tax credit to the first 60,000 eligible vehicles per carmaker. These policies [pic]encourages the purchase of low emission vehicles. Besides that, the Energy Independence and Security Act of 2007 expanded these incentives to include emerging electric vehicles and plug in hybrid, technology.

4.2 Economic Factors

Economy is also another impact to almost all country around the world. The consumers start to choose the hybrid car based on the benefits of fuel savings overtime which means the “paid back”. Moreover, the cost of insurance and road tax for hybrid car are much lower than a gasoline-car. Due to the oil fuel become higher and higher nowadays, this means that the hybrid car users can save more money. The inflation of fuel prices causes the negative effect on the nation’s gross domestic product. The higher the fuel efficiency offered by hybrid cars shields families and business from fluctuating oil prices and leaves more money available to circulate through economy.

[pic]IC-TMT20125In year 2008, oil prices raised to $120 per barrel, asa result oil responsible for 75 percent of the U.S.trade deficit, according to RCF, a Chicago-basedeconomic consulting company. Anything thatreduces oil imports has a positive net effect on thetrade imbalance because domestic supplies havepeaked and environmental and cost concerns makeextraction of the more difficult to reach reservesuntenable. Broader market permeates of hybridvehicles will eliminate the oil imports, which are thesingle biggest driver of the trade deficit no matterwhat the price of oil is. [20]Moreover, we will discuss the extension andenhancement of tax incentive application periodhybrid cars. Due to the decrease in the excise duty by50%, so the price of Toyota Prius in the market willlower than the previous price in the market. With thereasonable price, the people are affordable to buy ahybrid car. As a result, the reduction in the taxincentive will become an encouragement for Toyotainto hybrid vehicles production.

4.3 Social Factors

The social factors that moved Toyota into hybridvehicle production will be discussed. Due to theclimate change become a serious topic nowadays, soToyota should produce a vehicle which it will notbring pollution to the environment.Moreover, fossil fuel is a non renewable energywhich it will exhaust at one day, so to overcome thisproblem, Toyota need to produce a vehicle which itwill not only depend on fossil fuel. After hybrid cartechnology has been invented, high demand fromthose country which are not producing fossil becausethey do not need to depend on the country whichproducing the fossil fuel.Conventional cars are significantly cheaper than thehybrid cars due to the high technology used on thehybrid cars. This reflects on the new technologiesdeveloped during the early of the 21

st

century.However, the price of the hybrid car should declineaccordingly after the hybrid car’s technology becomemore familiar.A hybrid car has an electric battery which serves asfuel cell for the car. However, because of thecomplex electronic configuration of hybrid cars, theyare often heavier than conventional gasoline enginescars. These factors must be counted with the fuelsavings for hybrids once they make it onto the road.The potency and number miles which hybrid car willgo on a single battery has result battery-powered carsmanufactured largely in early of 21

st

century forhighway driving in United Stated. However, thelimitation can be reduces when the battery chargingstation become common at every places.However, a more serious environmental problem isthe disposal of spent battery packs in hybrid andelectric cars. Car manufacturers are aware of thisissue; as a result they make research and develop lesstoxic battery packs for electric and hybrid cars. [21]

4.4 Technological Factors

The technology used in Plug-In Hybrid ElectricVehicles (PHEV) is the idea of using the batterypowered car. The recharging time is 1.5 hours for240V AC or 3 hours for 120V AC and the maximumof the electric vehicle cruising range isapproximately 15 miles at a speed of up to 62 milesper hour. Beyond that, the plug-in will switch tohybrid mode, providing an estimated 49 miles pergallon. [22]Toyota Prius using a 1.8 Liter displacement enginewhich able to generate higher output and torque.Another advantage of Toyota Prius is the eliminationof the drive belt along with using an electric drivewater pump to reduce the supplemental of engineload. Moreover, the engine also has a Cool-EGRsystem which able to recalculate exhaust temperatureas well as recirculation system that reuses heat tohelp the Prius warm up faster.Besides that, the Toyota Prius also using theadvanced of the aerodynamics to reduce drag. Whendriving on the freeway, most of the work of the Priusengine does goes into pushing the car through theair.For the Toyota Prius, low-rolling resistance tireswere used. The tires on cars are optimizing to give asmooth ride with the minimum noise and alsoprovide good traction in variety of condition. Thehybrid car uses the special tires that are both stifferand inflated to a higher pressure than conventionaltires.Besides that, the material to build the Toyota Priusbody also is the lightweight materials such as carbonfiber, aluminum, magnesium, titanium which used toreduce the overall weight of the vehicle body andincrease the mileage.

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4.5 Legal Factors

For legal and policies, available PHEV technologywill decrease emissions of conventional airpollutants substantially as compared to a standardvehicle on the roads today. While similar emissionreductions can be achieved with, for examplecompressed natural gas (CNG) and clean dieselvehicles with advanced emission controltechnologies, the PHEV combines both non-CO

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andCO

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reductions.PHEVs decrease fuel consumption substantiallycompared to conventional vehicles used today andalso compared to CNG and the new generation of cleaner diesel vehicles. Calculations have shown thatover the average PHEV useful life time savings canamount to 6,000 L of fuel.While PHEVs are more expensive initially, the fuelsavings are recouped based on mileage and drivingconditions. Analysis has shown that the PHEV lifecycle cost, including the cost of purchase, fuel andmaintenance costs, is, in most cases, less thanowning a conventional vehicle. However, thesecalculations are strongly dependent on fuel prices,taxes and rebates.PHEVs, HEVs, full electric vehicles, and fuel cellvehicles share basic technologies such as electricmotors, batteries, and power electronics. Therefore,plug-in hybrids and HEVs function as stepping stonetechnologies to the large-scale electrification of fleetsthat is required for a long-term reduction of CO

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emissions from road transport, and a low carbontransport sector.According to the U.S department of energy loadprograms office (LPO) mission which is to acceleratethe domestic commercial deployment of innovativeand advanced clean energy technologies at a scalesufficient to contribute meaningfully to theachievement of our national clean energy objectivesincluding job creation; reducing dependency onforeign oil; improving environmental legacy; andenhancing American competitiveness in the globaleconomy of the 21

st

century. LPO endeavors toencourage commercial- and utility-scaledevelopment and adoption of new or significantlyimproved energy technologies. Besides that, fundinnovative technologies which reduce greenhousegas emissions also been created by LPO. Moreover,LPO also create jobs by financing the growth of commercial clean energy technologies and providedirect loans to eligible automobile manufacturers andcomponent suppliers for projects that re-equip,expand, and establish manufacturing facilities in theU.S. to produce advanced technology vehicles andcomponents for such vehicles. Last but not least,LPO also protect U.S. taxpayers by ensuring theloans and loan guarantees we provide have areasonable prospect of repayment [23].On July 11, 2002, the California Legislature passedlandmark legislation to propose adopting the firstGreenhouse Gases (GHG) emission regulations onmotor vehicles in the United States. AB 1493,expected to be signed into law by the Governor of California at the time of publication of this report,could significantly enhance the objectives of theState’s LEV and ZEV program. The law requiresthe CARB to adopt regulations for carbon dioxideemissions from passenger cars, light trucks, andSUVs by January 1, 2005. The bill directs theCARB to adopt regulations “that achieve themaximum feasible reduction of GHGs emitted bypassenger vehicles and light-duty trucks and anyother vehicles” in the state [24].

4.6 Environmental Factors

Respects with environment, the gases that produceby our car were carbon dioxide, carbon monoxide,sulphur oxides, oxides of nitrogen (NOx), andhydrocarbon and also lead. These gases will causeclimate change, aggravate existing heart, lungdiseases, acid rain, damage the ozone layer and leadreleased will damages organs, effect humans’ brains,blood and also heart.One of the major objectives of Toyota go into thehybrid (green) car is concern about theenvironmental effect of the Prius bring to us. For thefirst generation of Prius model NHW10 was sold at aloss due to the cost of Prius as much as US$32,000but only sales at US$16,929 per vehicle. This showthat the effort of the Toyota launches the “green”vehicles that aimed to reduce the air pollution andalso increase the fuel efficiency.As we know, the Toyota Prius is a hybrid car whichrequires less gasoline to run and with the andtherefore cheaper to run. For the public benefits of using Toyota prius is less gasoline use which leads toless pollution, less greenhouse gas emissions and lessdependence on the non-renewable oil.

[pic]IC-TMT20127Car owner know that driving a Prius provided apublic benefit at the same time Prius also did notcompromise quality, safety and functionally.Therefore, Toyota Prius provide the consumers witha role in addressing environmental concerns.For the new model of Toyota Prius which usingplug-in hybrid electric vehicle (PHEV). PHEVdeliver the largest global warming reductioncompare to other cars. Besides that, in regions of thecountry that have a relatively clean generation mix,PHEV is also reduces the smog-forming and alsosoot pollution.

5.0 Conclusion

After done our research, we came out with aconclusion it is enable higher accessible that movesToyota Prius into hybrid vehicle production based onPESTLE analysis. For political view, theGovernment Policy using the renewable energy aimsto reduce the dependence on foreign oil which willdirectly and indirectly affect the country’s economygrowth and security due to the raising of the oilprice. These energy policy acts establish newtechnologies to enable the environment and economyto coexist harmoniously by achieving zero emissionsthroughout all area. There are some internationaland national policies such as United State FederalLaw, Corporate Average Fuel Economy (CAFE),Energy Independence and security Act of 2007.The fuel saving is one of the economy factors sincethe keep rising of oil price. Moreover, the cost of insurance and road tax for hybrid car are much lowerthan a gasoline car. Based on the economy analysis,it moves Toyota Prius into hybrid vehicleproductions. The replacement of the renewableenergy instead of using fossil fuel not only resolvesthe climate changes problem. It can reduce theburden of drivers that everyone able to afford forowning a hybrid vehicle. Conventional cars aresignificantly cheaper than the hybrid cars due to thehigh technology used on the hybrid cars.Hybrid vehicle is Plug-In Hybrid Electric Vehicles(PHEV) which is using the battery powered car.Toyota did make a big step in technology that using1.8 Liter displacement engine which able to generatehigher output and torque. Other advancetechnologies such as using electric drive waterpump, Cool-EGR system, advanced aerodynamicsand low-rolling resistance tires that push the ToyotaPrius into high technology vehicle in global. Toyotause lightweight materials such as carbon fiber,aluminum, magnesium, titanium which used toreduce the overall weight of the vehicle body andincrease the mileage. After having the technologyanalysis, the advance systems or technologies moveToyota Prius into hybrid vehicle production.The PHEV technology will decrease emissions of conventional air pollutants and fuel consumptionsubstantially. The new hybrid vehicle with PHEVtechnology fulfilled U.S department of energy loadprograms office (LPO) objective which reducingdependency on foreign oil improving environmentallegacy; and enhancing American competitiveness inthe global econom\y. Besides, LPO strict ingreenhouse gas emissions, the growth of commercialclean energy technologies, provide direct loans tomanufacturer facilities and protecting the taxpayers.The California Legislature adopting the firstGreenhouse Gases (GHG) emission regulations onmotor vehicles in the United States.The major environment problem nowadays is climatechanges which may affect human health. Toyotalaunches the “green” vehicles that aimed to reducethe air pollution and also increase the fuel efficiencywhich leads to less pollution, less greenhouse gasemissions and less dependence on the non-renewableoil. Plug-in hybrid electric vehicle (PHEV) deliversthe largest global warming reduction which reducessmog forming and soot pollution.Last but not least, PESTLE analysis is a simple andeasy tool to understand and use in our research.Besides that, it is also a tool that encourages thedevelopment of strategic thinking due to its analysistools (PESTLE). Thus, after analysis, it shows thatthe Toyota Prius did move into hybrid vehicleproduction which influenced by the factors.

6.0 References

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About Toyota
Founded by Kiichiro Toyoda, Toyota Motor Corporation is a Japanese multinationalcorporation that is principally engaged in the production of cars, vans, trucks, buses androbots. Alongside its extensive vertical and horizontal integration, Toyota participates in theconstruction 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 inAichi, Japan. Over time, Toyota Motor Corporation has been awarded the title of largestautomobile producer in the world, along with the privilege of being the twelfth largestcompany in the world.Toyota has 50 manufacturing plants, 170 distributors, 326,000 employees and 660,000shareholders around the globe. In the fiscal year ended 2012 March 31, it sold more than7,351,000 vehicles
1
. The largest portion of its production takes place in Japan along with mostof its sales, closely followed by those made in North America. According to the R & I (Ratingand 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 themost sold car in world history (Corolla - more than 37.5 million units).
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Through four global strategic business units (Cars & Minivans, Trucks, Crossovers & SUVsand Hybrids & EVs) and many international branches, Toyota attends to completely differentmarkets, meaning it commercializes a complete line of products for each type of customer andevery region of the world, by developing both global and regional models. Brazil is differentfrom China, which is different from India, and so on. As an example: in Brazil, the Corollamodel sells well. On the opposite, the Lexus is the Russian bestseller.
1
IJICHI, Takahiko.‟‟FORM 20
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F‟‟. UNITED STATES SECURITIES AND EXCHANGE COMMISSION.
(June 25th 2012). [Online]http://www.sec.gov/Archives/edgar/data/1094517/000119312512281223/d249054d20f.htm#rom249054_12(January 31th 2013)
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MCINTYRE, Douglas. “The Best
-
Selling Cars of All Time”. 24/7 Wallstreet.com. January 26 2012 [Online] http://247wallst.com/2012/01/26/the-best-selling-cars-of-all-time/(January 25th 2013)
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By selling quality and reliable products, Toyota harvests an intense loyalty that grows withtransferable warranties, product availability in any country, nurtured personal experiences andtestimonies 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 coststo 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, asthe ratio of debt to equity grows, increases the return on investment for shareholders.
Following we expose Toyota‟s mission, vision and values
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:
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 withtechnological 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. Weare 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 saleof 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 businessgoals of the organization."
• Respect: "We keep at all times due regard for human dignit y 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." 3
TOYOTA MOTOR CORPORATION. “Vision & philosophy”. Toyota
-Global.com [Online]http://www.toyota-global.com/company/vision_philosophy/(January 23rd 2013)
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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 socialresponsibilities.
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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 commonawareness of these principles.
To ensure compliance, special training takes place from senior managers down to the lastemployee, 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.”
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Nowadays, hybrid technologyis 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 commontechnology 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.
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Hybrids are known to consume less fuel than regular cars but the main issue is regarding thedamage of the car battery made of nickel metal or lithium ion. The sales of the Toyota Priusreached 235,000 in 2012, a number that is considerably higher than the previous year of 135,000 and 160,000 for the year 2008.
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TOYOTA MOTOR CORPORATION. “Code of Conduct”. Toyota
-Global.com [Online]http://www.toyota-global.com/company/vision_philosophy/toyota_code_of_conduct.html(January 23rd 2013)
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ORLOFF, Jeffrey. “Hybrid Vehicle”
. About.com. [Online]http://saveenergy.about.com/od/fuelingyourautomobile/g/Hybrid.htm (January 30th 2013)
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BERMAN, Brad. “History of Hybrid Vehicles”
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Hybridcars
. June 14 2011. [Online]http://www.hybridcars.com/history-of-hybrid-vehicles/(February 2nd 2013)
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COBB, Jeff. “December 2012 Dashboard‟‟. Hybridcars. January 8th 2013. [Online] http://www.hybridcars.com/december-2012-dashboard (January 30th 2013)
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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 theenvironmental awareness issue. In 1995, Toyota first presents its hybrid concept at the TokyoMotor 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.
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The companydecided to market their first generation of hybrids between the Corolla and the Camry. Inaddition of the owner fuel economy, they were eligible to a 3,400$US federal tax credit.
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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 2,152cars for 2006 and only 414 in 2007. The significantly low sales were partly attributed on thehigh 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, andsome plant-derived ecological bio plastics. Moreover, they installed a 6.1 touch screen, whereyou 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 tothe car fan.
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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 has50% more interior space than the original one. The third one is the Prius C which has a highdemand because it is listed at a lower price than all of the others. However, it is smaller thanthe Prius hatchback. The fourth and last one is the Prius plug-in hybrid which you can easily plug to an external source of power.
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“
Federal tax credits for hybrids”. U.S. department of energy. [Online] http://www.fueleconomy.gov/feg/tax_hybrid.shtml (January 31th 2013)
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DUNN, Max. “Case Study: The Toyota Prius”
.
Academia.edu.
March 3rd 2010. [Online] http://www.academia.edu/239996/Prius_Marketing_Case_Study(January 30th 2013)
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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 USHybrids market share. Today, three models from the Prius Family are among the top 10 mostfuel efficient cars sold in the United States
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.To analyze the proper Market Environment of the brand, it is essential for the company toknow and understand the environmental factors that surround it, in order to adapt the rightstrategy. Analyzing these environments permit to better understand the marketplace and itsconsumers.How Toyota can react to changes in the marketing environments? We will focus on micro andmacro 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 thestudied 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 andassociates their leading role in the value delivery system.As for the company itself, Toyota is a clear model of an organization that managed to growwithout letting its size comes in the way of its flexibility and values. Always innovating andkeeping state of the art equipment to work with, Toyota´s employees have been able to followthe lines of the Jikoutei Kanketsu, Jidoka and Kanban concepts
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, enabling the company to cutdown on stocks, defective production and wasted time, while maintaining a close and crucialrelationship with its customers. Every team in the factory is able to solve most situations thatmight appear at their station - this is a big difference between Toyota and its competitors.
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“Case Study: Toyota Prius Marketing Strategies”. MBA Knowledge base. [Online] http://www.mbaknol.com/management-case-studies/case-study-toyota-prius-marketing-strategies/(January 30th2013)
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Alvarez Newman, Diego. “El toyotismo como sistema complejo de racionalización”.
Scielo.org.ar [Online]June 2012http://www.scielo.org.ar/scielo.php?pid=S1514-68712012000100003&script=sci_arttext(January 28th 2013)
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The development and production of the Prius was handled as only Toyota could ever havedone. Taking advantage of the relationships Toyota had built with its suppliers thru years andnew strategic agreements (like the one with Tesla Motors), the G21 project was launched withthe objective of developing an efficient eco-friendly vehicle
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. Three years later, the Prius wasalready 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 mainadvantage 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 thehybrid showed the world how efficient it is to be respectful of the environment, more peoplegot interested, and even celebrities started to see in it a good business partner
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it is a clear statement of the kind of values they hold as people. The Prius started to be popular amongcelebrities like Larry David (TV producer), Demi Moore, Cameron Diaz, Owen Wilson,Jessica Parker, Adrian Greiner, Kate Bosworth, Gwyneth Paltrow, Leonardo Di Caprio, MileyCirus, and the list goes on.
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The timing for the launch of the Prius could not have been better. Yet again showing howrewarding courage and patience can be, this Japanese company developed a new market for its new product
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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 whichare 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 nodirect competitors, only a few imperfect substitutes (like small non-hybrid cars, publictransport, 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 Insightmodel. However, the Insight does not offer the same convenience and overall value as the
13
TOYOTALAND. “Toyota
Prius Chronological History”. Toyotaland.com [Online] http://www.toyoland.com/prius/chronology.html(January 23rd 2013)
14
CELEBRITYCARS. “How Many Starts Own a Prius?” Celebritycarsblog.com [O nline]http://www.celebritycarsblog.com/2011/01/how-many-celebrities-drive-a-prius/(January 29th 2013)
[pic]
[pic][pic]8
Prius
– explaining why the Prius represented more than half the sales of its own segment.
15
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 thecompetitors. Today, there is more offer than ever for hybrid vehicles. Toyota monitors itsrivals closely, trying to predict their marketing strategy, taking advantage of being the firstdeveloper 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 buildrelationships 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 relationsh ips 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 valuethese 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 anexample, Toyota has always announced its need for workers within itself before announcing itto the public, therefore giving the opportunity for its own employees to go for the new vacantif 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 tohelp balance work of women caring for their children by supporting their professionaldevelopment, while promoting the building of a culture that encourages them to make themost 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‟semployees 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 companymade the donation of a Hilux pickup to the General Hospital of Zarate, which will beequipped as the first unit of pediatric transports and will be used to assist the Newborn Center.
15
HYBRIDCAR. “Market Dashboard” Hybridscar.com [Online] http://www.hybridcars.com/market-dashboard/(January 25th 2013)
[pic]
[pic][pic]9
With this donation, Toyota seeks to promote the integration and dialogue with communitiesnear the industrial plant. In Canada, through the Toyota Canada Foundation, Toyota provesthat it is committed to give back to local communities. This foundation focuses inenvironmental, educational and social safety actions. Another example is the Toyota EarthDay 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 theenvironment through the important work they accomplish
”
16
. These dedicated youngCanadians are emerging as tomorrow's environmental leaders and advocates. Toyota Canadaand the Toyota Canada Foundation in partnership with Earth Day Canada established theToyota Earth Day Scholarship Program to help cultivate and nurture this environmentalleadership. The Toyota Earth Day Scholarship Program encourages and rewards graduatingCanadian high school students who have distinguished themselves through environmentalcommunity service, extracurricular and volunteer activities, and academic excellence. Todate, Toyota Canada, the Toyota Canada Foundation and Earth Day Canada (EDC) haveawarded 160 students with $800,000 in scholarships. The Toyota Earth Day Scholarship isCanada's best recognized environmental entrance scholarship.
”
17
The company was also confronted to macro-environmental factors that have affected Priussales. Macro-environmental factors are themajor externaland uncontrollable factors thatinfluenceanorganization'sdecision making,andaffectitsperformanceandstrategies.Thesefactorsincludetheeconomic factors, demographics, legal,political, andsocialconditions, technologicalchangesand natural forces.
MACROENVIRONMENTDemographic
16
Cultivating Tomorrow‟s Environmental Leaders. Toyota Earth Day Scholarship Program. [Online] http://www.earthday.ca/scholarship/about.php(January 30th 2013)
17
TOYOTA EARTH DAY PROGRAM. “About the Scholarship”. EarthDay.ca [Online] http://www.earthday.ca/scholarship/about.php (January 25th 2013)
[pic]
[pic][pic]10
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 andcontrol 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 eachgeneration should earn its own money.
18
Why should they choose a car to show to the society that they care instead of choosing comfort and luxury? Researches show that „‟ links betweendisplays of caring, environmental behaviors, and competition for status’ ‟
19
.Before they maketheir 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
-friendlycustomers, those who are interested by fuel-efficiency vehicles but also a larger audience, likefa milies 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, inflationand 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 thiscrisis, Toyota lost about $6 billion in 2009, and its sales went down of 15.1% on the previousyear. However, sales of the Prius reached 2 million sales.
20
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
18
21
KOTLER, ARMSTRONG, CUNNINGHAM & TRIFTS.
Principles of Marketing.
Toronto.
Eight Canadian,2011.
19
GRISKEVICIUS, Vladas; TYBUR, Joshua M; VAN DER BERGH. “Going Green to Be Seen: Status,Reputation, and Conspicuous Conservation”. BramJournal of Personality and Social Psychology
, 2010, Vol. 98(3), 392-404
20
Major forces impacting Toyota‟s environment –
Google documents [Online]http://satya.limewebs.com(January 30 th 2013)
[pic][pic]
[pic][pic]11
Prius is one of the few hybrid cars to recover the premium price and save their owners moneyafter five years and 120.000 kilometers.
21
Disregard of the weak economic growth and high oil prices, the sales figures for automobilehave been constant lately in Europe, North America and Asia and this had resulted to theemergence of new customer and growth. Competition among the manufacturers had urgedToyota to conduct more research and development on Prius. Therefore, Toyota launched asecond generation Prius where they continue making amendment according to the latesttechnology 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 inAmerica help to promote eco-friendly vehicles by supporting cars such as the Prius. The biggest incentives were monetary. The federal government offered tax breaks (amountingthousands 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 OccupancyVehicle) even if there is only one occupant. Some eco-friendly companies like Google andTimberland
22
joined the incentive by offering $5000 for the purchase of a hybrid car.Insurance companies lastly offer discount to these cars.
Sociocultural forces
22
“What macro and micro environment affected the launch of Toyota Prius”.
Edublogs
. June 6th 2011.http://leonardwalto211.edublogs.org/( Febuary 2nd 2013)
[pic]
[pic][pic]12
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 wan ts.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.
23
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, becauseof the growing demand for eco-friendly vehicles.Another trend in the society is that more households are getting two revenues. As morewomen are joining the workforce, the disposable income is increasing and more people canafford to buy a more expensive car or to have a second. The Prius would be also considered asa 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 thatfamilies will choose the Prius as an affordable family car with comfort, style and low costservicing.
Technological Forces
These one are the application of knowledge and creativity in solving problems and increasingefficiency. Industries can get a competitive advantage if they can come up with technologyadvances 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, inorder to develop green cars. Thus, Toyota saw this opportunity and responded to it byintroducing the first hybrid car in the world, the Prius. This one uses a combination of petroland electricity to power and motor and that leads to fuel economy. In addition, gas emissionsare lowered.
The Prius also uses new technologies. The “Solar Ventilation system” are panels embedded inthe 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
23
GRISKEVICIUS, Vladas; TYBUR, Joshua M; VAN DER
BERGH. “Going Green to Be Seen: Status,Reputation, and Conspicuous Conservation”. BramJournal of Personality and Social Psychology, 2010, Vol. 98
(3), 392-404
[pic]
[pic][pic]13 and driving information on the car‟s screen. T here is also an intelligent parking assistance andan active cruise control.
24
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 anddepend less of oil. Furthermore, fuel is a non-renewable resource. Thus, consumers are moreand more focusing on the environmental problems, and they prefer to buy a car with lowconsumption and emission rather than any regular car.
The Toyota‟s compromise with the environmental sustainability is expressed in its vision a s “
Continued awareness for the Earth and environment” and “Lead the way to the future of mobility”.
25
Toyota’s strategy in response to the Marketing Environment
Based on the market environment, Toyota has adopted a strong and effective marketingstrategy 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/rentalor for company fleets but these are few and already known to Toyota. The environmentalfeatures make the Prius particularly interesting for business buyers, because of its lowoperating 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 environmentallyfriendly 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.
24
“Toyota Prius‟ features cutting edge technology”
[Online]http://www.toyota.com.au/prius/features/cutting-edge-technology(January 30th 2013)
25
TO
YOTA MOTOR CORPORATION. “Vision & philosophy”. Toyota
-Global.com [Online]http://www.toyota-global.com/company/vision_philosophy/(January 23rd 2013)
[pic][pic]
[pic][pic]14
Consumers also interested by values and looking for the ideal combination of high fueleconomy and low cost of maintenance in the long run, as families, are targeted by Toyota. Allthree 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 a bout theenvironment 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 ableto 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 distributionnetwork.
26
The company did not offer online purchase facilities to the customers, but hiredmarketing intermediaries to advertise the new hybrid. These intermediaries helped to provide professional training to offer the best satisfaction. They also used taglines with emotions thatwere 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 appearedin 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.
27
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 isneeded for repairs and servicing. In addition it requires many unique components that maymake long-term part availability difficult.
26
“Toyota‟s extensive history”
[Online]http://www.writing.com/main/view_item/item_id/1659853-Toyota-Motor-Corporation(January 30th 2013)
27
TOYOTA Co.
Vehicles
. Toyota.com [Online]http://www.toyota.com(January 23rd 2013)
[pic]
[pic][pic]15
In the future, Toyota would have the opportunity to evolve into a “Plug
-
in Hybrid”
28
withhigher capacity batteries and to spread into other market sectors. The company would also beconfronted 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 Priusis 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, Toyotagot 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 solvethe 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 thecurrent approach to hybrids is seemed to be not working right now. Due to the last financialcrisis, 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 notseem to be an efficient way nowadays. Although people are getting more concerned aboutenvironmental 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.
28
DUNN, Max.
“Case Study: The Toyota Prius”.
Academia.edu.
March 3rd 2010.http://www.academia.edu/239996/Prius_Marketing_Case_Study(January 30th 2013)
[pic]
[pic][pic]16
BIBLIOGRAPHY
Books:
KOTLER, ARMSTRONG, CUNNINGHAM & TRIFTS.
Principles of Marketing.
Toronto.
Eight Canadian, 2011.
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Energy Policy
, 2011, Vol. 39 (5), 2217-2227GRISKEVICIUS, Vladas; TYBUR,
Joshua M; VAN DER BERGH. „‟Going Green to BeSeen: Status, Reputation, and Conspicuous Conservation‟‟.
BramJournal of Personality and Social Psychology
, 2010, Vol. 98 (3), 392-404
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BERMAN, Brad. „‟
History of Hybrid Vehicles
‟‟.
Hybridcars
. June 14 2011. [Online]http://www.hybridcars.com/history-of-hybrid-vehicles/ (February 2nd 2013)
COBB, Jeff. „‟ December 2012 Dashboard‟‟.
Hybridcars
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DUNN, Max. „‟ Case Study: The Toyota Prius‟‟.
Academia.edu.
March 3rd 2010. [Online] http://www.academia.edu/239996/Prius_Marketing_Case_Study (January 30th 2013)
IJICHI, Takahiko.‟‟FORM 20
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION.
June 25 2012. [Online]
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S. „‟ Hybrid Car Vs. Gasoline Car‟‟.
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. „‟ El Toyota Prius cumple quince años‟‟.
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ORLOFF, Jeffrey. „‟Hybrid Vehicle‟‟.
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ROOS, Dave. „‟Does hybrid car production waste offset hybrid benefits?‟‟.
Howstuffworks.
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/
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„‟ How Many Stars Own A Prius?‟‟.
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(January 30 th 2013)
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„‟ Prius: Leading A Wave Of Hybrids‟‟.
ClubEnsayos
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Toyota
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-profit Organizations Focused on the
Environment, Education and Safety‟‟.
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Case Study – Toyota Motor Corporation: Launching Prius
This was a classic game theory within the car industry. As it had a long development time of the technology, the first mover had a huge advantage in being the first on the market. It would set up the first company on the market with an imagine of being an environmentally friendly car company, which could have explicit benefits to the company into the future.
There was a lot of imperfect information within the case for Toyota to make its decision. Toyota did not know whether any of their competitor companies were going to develop the hybrid technology as well. They knew that other companies started developing the technology to meet CARB’s zero emission vehicle (ZEV) policies. However, when CARB’s said that hybrid would not qualify to meet their polices, it was suspected that most companies dropped out of researching and developing the technology.
Looking at their competition the most likely competitor who might be producing the hybrid technology is Honda, as it was the first car company in the world to meet the strict environment standards set under Muskie Law in the US. Honda was appealing to a younger market than most other cars and therefore as being environmentally friendly is more appealing to the younger generations, Honda might want to produce the hybrid to cement its market position.
Also the Japanese car markets have been traditionally more efficient in labour hours per vehicle than their American counterparts. And they also used few resources. This means that Toyota and Honda have consistently been able to make cars for lower costs, giving them a cost advantage. This may be a large advantage in developing hybrid technologies. Other companies such as GM may consider the costs too high in developing the technology and therefore may not find it financially sustainable.
There may be some benefit for one or more companies to release hybrid cars at similar times however the benefits are not as great as the benefit for a company if it is the only first company to release of hybrid cars. Okuda (president of Toyota Motor Corporation) realized the advantage of acting first and therefore constantly thought about launching vehicle as early as possible. Also he knew that if Toyota launches a hybrid car and another company launches a better more efficient hybrid car, Toyota’s first mover’s benefits would be limited, therefore he said that the company should use the very best technology it can use so that there is more chance it can take advantages of first mover benefits.
For Toyota there seemed to be a significant amount of advantages if it develops and releases the first hybrid car. It would capture the youth market, in which has never really captured before and also it would look like Toyota would become a significant worldwide. Europeans would warm to a environmentally friendly car. Also there is a good chance that CARB’s ZEV policy will not be meet for some time, so they probably will endorse a hybrid car policy, and therefore Toyota would be able to gain a dominant market share in California, which could lead to possible gain a larger market share throughout America.
I would imagine Toyota’s dominant strategy should be to proceed with the hybrid technology and release as early as possible. The chance of having a first movers advantage to too great for Toyota to not try to be the first car company to release a hybrid. Even if Toyota is not the first mover on the market, having the technology to be the next mover quickly after the first would also I would imagine have great benefits. Especially with Toyota using the best hybrid technology, there is a likely chance that another company hasn’t used the best technology and Toyota can extinguish some of their first mover advantages.