Essay On Marketing Management Processes For Toyota Hybrid Cars." (59 Characters)

About Toyota Motor Corporation

Question:

Describe about Market Description, PESTLE Analysis and Market segmentation and targeting of Hybrid Cars Of Toyota?

Marketing management is considered as a subject that encompasses all the functional activities of the firm in context of their customer base build-up and maintenance (Chesbrough, 2009). As competition is increasing in the global business scenario, the process of marketing and its related activities have also transformed. Now firms are trying to develop a long-term sustainable relationship with their customers instead of only creating product and service awareness. Apart from these, technological growth has also contributed in the evolution of marketing processes across the global business scenario. The report focuses on the marketing management processes implemented by Toyota for their hybrid cars. 

Toyota Motor Corporation is one of the largest organisations in the global automotive industry. Toyota is a Japanese manufacturer of automobile and automobile parts and is headquartered in Aichi, Japan. Considering their financial segment, Toyota has been ranked as the 12^th largest company in the world in context of revenue generation (Toyota, 2014). The product base of the company is a diverse offering which reflects quality and innovation amalgamated for serving consumer needs (Toyota, 2014). From the first automobile produced by Toyota as Toyota AA and till the latest designs of hybrid, electric and smart cars, Toyota has marked a revolution in the production and management system of automobile industry (Toyota, 2014). Toyota also known as the father of lean production system has introduced many new operational concepts such as Lean, JIT, Jidoka, Kanban, etc. The entire workforce of Toyota consists of almost 350000 employees who are dedicated towards the organisational aims and objectives (Toyota, 2014).

The automobile market can be mainly segmented into three categories namely, luxury cars, consumer cars and sports cars (Boulton, Libert and Samek, 2009). The firms operating in the automobile industry can opt to operate in all the three segments or just be specialised in production of any one type of vehicle. Big players of the industry such as Volkswagen, General Motor, BMW, Toyota, Mitsubishi are renowned for having a diverse product base that operates in all the major automobile markets (Cool and Schendel, 2010). With highest production capability and a large range of product base, German automobile giant Volkswagen is known to be the leader of the industry in all the three segments

Considering the market of hybrid cars, Toyota and Volkswagen are the leaders of the segment. They have focuses on more specific needs of the consumers and also directed their operational process to fulfil consumer expectations and also ensure sustainability in their business process. Toyota products such as Prius, Auris, Prius + and the new Yaris have been proclaimed to be among the best cars in the hybrid section. Toyota Prius and Yaris have also been ranked as number 6 and 8 in the list of top 10 hybrid cars (Toyota, 2014). The top position in this segment is held by BMW’s i3. The competition among the top players of the industry is fierce which has also increased the focus of the management of the concerned firms towards the marketing practices. Companies such as Volkswagen, BMW and Mercedes who were not known for their traditional marketing aspects have started communicating with their consumers via various marketing means in order to improve the scope of future business sustainability in the competitive market place.

The Automobile Market Segmentation

Figure 1: PESTLE Analysis

(Source: Parasuraman and Grewal, 2008, p - 56)

Political: The political scenario of Japan and the global market place is being mainly driven by the economic contribution of the organisations towards national requirements. This is one of the major factors that have helped Toyota lead the automobile industry. Being the 2^nd largest company in Japan, in terms of market capital, Toyota has continuously shown their support for political stability (Glowik and Smyczek, 2011).  However, changes in political scenario of overseas countries have resulted in barriers as taxation policies and other regulations also change with the changes in the Government of a nation. 

Economical: The economical strength of the nation is one of the major factors that influence the operations of the automobile industry. The recent global financial meltdown of 2007-08 is an apt example of economic impact on the operations of the automobile firms. In major automobile markets such as America and Europe, the consumer spending power reduced because of the recession and hence the sales also reduced (Hall, 2011). However, Toyota was among the few firms which were able to generate profits during the recession because of in-depth penetration in the Asian markets such as India and China (Lavie, Haunschild, and Khanna, 2012).

Social: The social aspect is related to the lifestyle of the people, their taste and preferences.  The concept of hybrid cars in this regard has increased the viability of the vehicles in the industry (Parasuraman and Grewal, 2008). On the other hand, consumer groups who are price sensitive are also engaged with the automobile market because of the low fuel consumption of the cars. However, country of origin affect may hamper the business opportunities of Toyota in some countries such as China (Douglas and Craig, 2007). But Cannon and Homburg (2008) stated that as urbanisation is increasing the scope of automobile industry is further expected to increase in the business segment.  

Technological: Technological contribution is one of the pillars of automobile industry that has a large share in the development and growth of the global automobile industry. The technological changes taking place in the consumer and seller segments have created a better opportunity for the parties to communicate and understand each other. The entire concept of hybrid cars is another contribution of technology on the operations of the automobile firms (Baker, Nancarrow and Tinson, 2009). Focusing on the operational activities of Toyota, most of their supply chain system is designed on automated systems which again another technological support is provided for maintaining the daily activities of the company (Alvarez, and Casielles, 2008).         

Legal: The legal factors relating to the operations of the automobile industry is mainly related to the taxation aspects for import and export of goods. The multinational organisations such as Toyota, Mitsubishi and Volkswagen have set up manufacturing units in various geographic regions for reducing the taxation imposed on the business (Viardot, 2007). Other important aspect is based on the environmental concerns such as pollution and waste management process of the business.  

Toyota vs Volkswagen in the Market of Hybrid Cars

Environmental: The environmental concerns for the automobile industry are one of the primary barriers for business growth. The rapid urbanisation and the increase in the consumption of automobiles have also subsequently increased the environmental concerns. Global authorities such as EU and UNESCO have provided standards for operations in order to reduce the overall carbon footprint of the industry and manage the industrial wastage (Doyle and Stern, 2010).

Competitor Analysis (High): The automobile market is highly competitive because of the growing demand of the consumers and also the increasing rate of urbanisation. The aspect of globalisation has also enhanced the scope of the companies operating in the concerned sector. Big players such as Volkswagen, Mercedes, General Motors, Ford, Toyota, etc are battling it out for being the best service provider (Bowman and Gatignon, 2010). The focus of these organisations has however mainly aligned towards the emerging BRIC nations (Barker and Chitty, 2009). Apart from this, the growth of popularity of the hybrid and sports cars segment has also increased the complexity of operations as business firms. The hybrid car segment has also been considered as the most value added car segment for the consumers considering the consumption of fuel. Companies such as Toyota, Volkswagen and BMW are among the leaders in the hybrid section of automobile industry (Adair, 2011). 

     

Figure 1: Porter’s Five Forces

(Source: Aaker, 2010, p - 69)

Threats of new entrants (Moderate): The threats of the new entrants are considerable low in the automobile industry because of the high capital requirements and strict regulatory requirements of the industry (Aaker, 2010). On the other hand, new firms are entering the industry not as complete manufacturers but as producers and providers of individual parts (Viardot, 2007). This is reducing the customer contact of the existing firms and also creating scope for joint operations of the new producers.    

Threats of substitute products (High): The substitute products for automobile industry are low considering other means of transportation as only the public mode such as bus and other commercial public transport systems. However, similar products are increasing in the market which is also fuelling the competition among the firms. Products such as Toyota Prius + and Volkswagen Golf Hatchback are almost similar in context of features and fuel consumption (Hall, 2011). These factors suggest the requirement for more intense innovation in the operational process of the firms.   

Bargaining Power of Consumers (Low): Although the number of firms operating in the automobile segment is increasing but the bargaining power of the consumers remains to be minimal. This is mainly because of the brand value of the products and the high brand switching cost attached with the products (Bowman and Gatignon, 2010). The consumer power however has started to increase with the increase in the access to market information courtesy improvement in information and technology aspects (Lavie, Haunschild, and Khanna, 2012).  

Bargaining Power of Suppliers (Moderate): The bargaining power of the suppliers have been considered to be moderate because of the specific nature of demands of the automobile firms. The requirements of quality standards and technological compatibility of the products are among the primary needs of the companies which allow the suppliers to maintain their pricing process (Hall, 2011). However, organisations such as Toyota have reduced the bargaining power of the suppliers by introducing vertical integration in their supply chain (Viardot, 2007). Apart from this, the high brand equity of the firms also reduces the bargaining power of the suppliers.

The Fierce Competition Among the Big Players

The market segmentation of Toyota for the hybrid cars will mainly depend upon the services and features of the concerned product base. The hybrid cars are mainly appreciated by the consumers because of their low fuel consumption and ability to use different sources of energy such as electricity, petrol or diesel (Hall, 2011). This allows the producers to target the middle income groups of the society whose decisions are based on utility of the vehicle and value for money. Another segmentation of the consumer group can be based on the age which allows the manufacturers to focus on a younger consumer group. For Toyota, the focus has always been the mass consumers rather than the niche consumers (Bowman and Gatignon, 2010). Their products are designed for the daily usage of the customers and thus, the market segmentation of the consumers will not be a new aspect in their product launch or promotional process.

The targeting of the consumers will also depend on the segmentation and positioning aspects of the consumers group. The primary target for the hybrid car section of Toyota will be the emerging nations and the major markets of Europe. Toyota already is the top firm in the domestic market but considering their multinational operations, the company needs to enhance its brand equity (Hall, 2011). The price sensitive consumer groups are the major target for Toyota. Countries such as India, Brazil and Russia are the potential market growth scopes for the company considering their capital structure and the increasing purchasing power parity of the consumers of the above mentioned nations (Viardot, 2007). Although, America is still overcoming the after-effects of the global recession, sales in US will boost the brand name of Toyota and also help them in expanding to other sections such as Middle East and African markets. The target markets have been decided mainly on the basis of the consumer purchasing power.

The consumer behaviour analysis is based on the target markets selected for the launch or introduction of hybrid cars of Toyota in the above segment. The nature of the consumers can be evaluated based on their needs and expectations from the available brands. The consumer needs have changed with the increase of the market information available to them (Aaker, 2010). However, Bowman and Gatignon (2010) mentioned that consumer expectations in context of the automobile products and services are now focused on their environmental sustainability. Furthermore, Lavie, Haunschild, and Khanna (2012) added that as the fuel prices are increasing all over the world, consumers also consider the consumption capability of the vehicles. These factors have a direct impact on the consumer behaviour of the automobile industry. Another crucial aspect of the consumer behaviour depends upon the economic status. The economic instability created in most of the major markets of the automobile industry has resulted in slow growth and revenue generations for the companies. For instance, Ford Motors faced a negative revenue stream till 2011 before they could regenerate profit from their operations (Adair, 2011).      

PESTLE Analysis of the Global Business Scenario

The consumer behaviour also depends on social factors such as country of origin. The political and historical relationship of the host nations with the country of origin of the manufacturer plays a crucial role in the consumer decision making process (Aaker, 2010). This is also focused on the emotional and psychological aspects of the consumers. Apart from this the positioning of the brands also influences the consumer behaviour towards the brand or the products of a particular brand. For instance, the positioning of Volvo vehicles for American consumers is that of a safe car and hence consumers needing a safe vehicle opt for Volvo cars. Apart from these, the marketing process, promotional aspects and the consumer relationship of the manufacturers are also influencing factors which help the consumer make the decision for their preferred vehicles. However, as per the observation of Glowik and Smyczek (2011), consumers are now thinking logically for purchasing their products which has reduced the influence of sellers on their decision making process.

Product: The product base considered for this marketing mix is the hybrid car section of Toyota. The hybrid cars produced by Toyota are mainly for the middle income group consumers. The cars are designed in a manner so that the cost of operations is less and the end price can be set in accordance with the market standards. Products such as Yaris and Prius have already made huge impact on the market of the hybrid cars (Glowik and Smyczek, 2011). Toyota is mainly trying to increase the engine performance of their products and reduce the fuel consumption rate (Lavie, Haunschild, and Khanna, 2012). They are also trying to enhance the electricity consumption process so that the utilisation of fuel can be reduced.   

Place: The place signifies the markets selected for the products. As mentioned above, Toyota is focusing on the emerging BRIC nations. India has come up as a major market for the automobile companies. Apart from this China has also transformed to a big market place for the automobile market (Glowik and Smyczek, 2011). Both these countries have focused on enhancing and improving their infrastructure and transportation process (Aaker, 2010). These two countries will be the major markets for Toyota Hybrid cars in Asia. On the other hand, the market of Brazil and Russia are not as price sensitive as the markets of India and China (Adair, 2011). Toyota will have to promote their brand and utility in these markets for promoting their hybrid vehicles.          

Price: The pricing process of the Toyota products are mainly focused on the market standards and the purchasing capability of the consumers. The price of Prius in UK is around £22000 and that of Yaris is within £10000-£20000 (Lavie, Haunschild, and Khanna, 2012). In comparison to other hybrid cars, the pricing of Toyota can be observed as economy pricing. This is also a form of penetration considered by Toyota for building their product market in overseas.

Promotion: The promotional process to be utilised by Toyota will focus on a customised method of both online and traditional promotional means. The traditional promotional means of the company will include television ads, kiosks and banners posted in the markets and industrial hubs of the nations (Glowik and Smyczek, 2011). The online marketing process will mainly focus on building consumer relations. Social media marketing, SEO, viral marketing will be the most preferred form of marketing to be considered by Toyota for launching their hybrid models (Adair, 2011). The promotional process will also indulge in creating public relations with the stakeholders so that genuine information can be processed to the consumer base.

The Political Factors Affecting Toyota

Based on the findings of the study, the primary recommendation for Toyota will be to enhance their branding activities in the overseas markets. Toyota is a known name in the international business segment however the domestic firms are still leveraging the advantage of home nation despite of the superior quality of Toyota products. These factors have to be nullified for improving the business performance of Toyota Hybrid cars in the international business segments. Another crucial recommendation will be to utilise the core strengths of the company for value added production process i.e. the supply chain management process Toyota supply chain is known for continuous improvement and adaptations to the changing business environment. In this regard, Toyota should focus on further improving their supply chain for creating innovative aspects in the Hybrid cars while maintaining the price tags of the products. This will provide them a cost competitive advantage in the price sensitive zones and help them develop a long-term sustainable business process.

Conclusion

The report is based on the marketing management process of Toyota in context of their hybrid models of vehicles. The automotive industry is one of the most fiercely competitive segments of the global market place. The growth of the business for Toyota has been continuous since their launch. The importance of Hybrid cars in the present conditions is mainly based on their environmental significance. This has prompted the big players and competitors of Toyota such as Volkswagen, BMW to produce hybrid cars and serve the customer needs. However, Toyota being a firm focused on technological intelligence and resource utilisation should be able to enhance their market presence by engaging in online and offline marketing processes in target markets. The business process of Toyota will also need to focus on building unyielding customer relationships and enhance consumer brand loyalty for the business.

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