Toyota Prius- The car of the 21st Century

8/11/2019 Toyota Prius- The car of the 21st Century

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Presented by:Muhammad Tayyab

Hassan DurraniMubashir Altaf

Najeeb Gulzar


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Evolutionary process behind the manufacturing of Hybrid car namedToyota Prius by the Toyota Motor Corporation.

Mr. Okuda the newly appointed president of the TMC. The launch of Prius is considers is to be the life line of the TMC. Concerns are technological advancement, time of launching and

marketing campaigns of the Prius in order to make it successful. Appreciating Yen is causing a negative impact on export of toyota. Auto makers are shifting their production facilities to USA in order to

achieve economies of scale. Moreover USA is also the biggest market for the auto manufacturers with

big 3manufacturers General Motors, Ford and Chrysler leading themarket

The top 12 auto manufacturers constitute almost 80% of the global market.i.e OECD countries in 1994. Mr. Okuda is involved in the manufacturing of the car of the 21stcentury

with support of his R&D department. The focus is to manufacture a fuel efficient and environmental friendly

car and hybrid technology is the best option that they have.


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Some other manufacturer that it might manufacture the same hybrid car

for the mass market even before Toyota. Weak product planning Decline in market share Delay in shifting production overseas To launch car of the 21stCentury Very tight timeline of the R&D department for early manufacturing of

the. concern about the future of Toyota and whether this program is aligned

with the long term vision of the Toyota. On the other side the Toyota also has to tackle the challenges in the

Macro Environment that includes Government and regulatory challenges,Global leadership challenges and Market challenges.

One major concern is the change in the exchange rate .i.e Yen hasstrengthened as compared to US Dollar, which has reduced the profitmargin in case of export.


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Sales of motor vehicles were cyclic and were varying with economy. Due to Arab Oil embargo and Iranian revolution in 1979, US demand for

vehicles had shifted more towards fuel efficient cars in order to rely onless oil.

Trend had shifted more towards using new technologies, sophisticatedcontrols and safety features.

Automakers had started identifying new markets and automobileindustry had gone through extensive segmentation due to sales volumefor a particular brand and model had been decreased,

Consumers had gone more conscious about style and inspirational value. Most innovations did not provide long term advantage as automakers

were quick to imitate each others products.

Major automobiles sales (nearly 80%) were driven in OECD countrieswhich accounted for less than 20% of the world population so therefore astrategy had to be defined to generate and create automobiles demandfrom less wealthy consumers in other emerging economies.

In order to cater for oil crises and fuel emissions, government policiescame into play in order to encourage fuel efficient cars.


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Entry into foreign markets, particularly in U.S,had become difficult for Japan due toappreciation in yen, weak domestic sales andtough competition in US.

Markets perception about Toyota was thatmost of the cars made by Toyota aremonotonous that is they are looked-alike.

Toyota was being perceived as a followerinstead of being a market leader.

Toyota has cut dealers incentives due to whichdealers had become distrustful of TMC.


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To develop a new car using new car-development methods andless experienced project manager.

High pressure from new vice president, Wada, to achieve 100%improvements fuel economy

All automakers who were working to comply with Zero Emission

vehicles regulations, had stepped back from doing any furtheradvancements due after CARB(California Air Resources Hoard)said that hybrid will not be considered as an alternative solutionfor ZEV.

Time line for the launch was extremely short. Difficult to estimate market demand of Toyota Prius when it was

an entirely new product with a new technology It was not possible to estimate whether after doing all the efforts,mass production of Toyota Prius would be possible or not.

Toyota Prius had deployed an entirely new technology due towhich overall cost of the car had gone massively high.


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The major problem in the short term was the decision ofmanufacturing the hybrid car or not keeping in view thehigh budgets and technological hurdles faced by the R&Ddepartment

A constant decline in the market share because of the non-

innovative products and fierce competition in the market. The perception of being the car for the old people and

having minimum attraction to the new generation. Government regulations and external environment factors

such as emphasis on fuel efficiency and hike in oil prices.

Technological advancement and high cost involved inadopting this technology. and to achieve economies of scalein the production process.

Regain dealers trust that was lost by cutting dealer margins.


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POLITICAL

Government regulationstowards the use of fuel efficient

and zero emission vehicles.

ECONOMICALMarket share declining.

Yen was appreciating

Increasing labour

Socio-cultural:Consumer preferences were changing

with time. They had become moreinclined towards Green products withcustomized features, unique style and

high level of comfort.

Technology:Trends were shifting towards new technologies of

fuel efficiency and emission in order to comply withCARB.

Increasing consumer awareness for theenvironmental threats

PEST


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Threat of Entry (High)

Bargaining Power of Suppliers (Low)

Bargaining Power of Buyers (Low)

Threat of Substitutes (Moderate)

Degree of Rivalry among competitors (High)


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Strengths

Strong position in the industry.

Renowned for R&D and cost reductiontechniques.

Effective productivity enhancement toolslike JIT and TQM.

Highly targeted marketing.

Weakness

Only targeting the markets of US and Japan.

Huge production capacities and high cost oflabor retention without production.

Declining perception of Toyota.

OpportunitiesEnvironmental friendly cars like Prius.

Established dealers network which couldbe effective.

Potential in market share with newtechnology and economical product.

Threats

Economic slowdown .

Competition in the global automotive market.

Tightening emission standards.

Appreciating Japanese Yen against US Dollar.

Short time line to deliver the product.

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SWOTAnalysis


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Alignment with Long Term vision and mission

Cost of production

Technological advancement

Vendor Development

Competitors analysis

Exchange rate fluctuation

Profit Margin

Time management


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To keep the setup in Japan, continue the R&D,develop the hybrid car Prius, launch it wellbefore the timeline and develop a strong

marketing plan to achieve the sales target usingthe established dealers network. In the longrun a new manufacturing setup should belaunched in US to be more competitive in the

market.


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To identify the new emerging market like Indiaand china, continue with the R&D in Japan,develop the Hybrid car prius, develop the

production facility in India/China for export toUS and develop a strong marketing plan toachieve the sales target using the establisheddealers network.


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Solution 1 is recommended. This is the most optimal solution for Toyota in the short term plans, as new product like Prius is the need of the hour for survival of Toyota. R&D is strength of Toyota so hybrid car technology should be most

advances in all respects and it would difficult to replace Prius. Cost reduction by effective vendor development and optimum

productivity achievement Toyota should plan to launch this car as soon as possible to achieve the

first mover advantage. A strong marketing campaign should be planned to make Prius a big

success. Regain the trust of dealers as a part of marketing strategy.

In future the laws will defiantly shift to some permissible limits ofemissions . In the short term Toyota should launch this car while keeping the

manufacturing setup in Japan but in the long run they must launch amanufacturing setup in US as well to be more competitive in the market.


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Hiroshi Okuda was appointed as the president ofToyota Motor Company and he was the first one tobe appointed for such a position from outside thefamily of Kiichiro Toyoda.

Yashiro Kimbara was appointed as the executivevice president for R&D of The car of the 21stcentury project.

A separate team was selected from ten differentdivisions of Toyota to work on Toyota Prius. This

team was named as G21. The team was headed by Takeshi Uchiyamada as

the leader of this G21 team though he lacked theexperience required.


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The existing executive vice president, Yashiro Kimbarawas replaced by a new vice president named Wadawho gave an ultimatum to put all possible efforts inorder to make Prius project successful. This helped in

expediting on all activities and efforts else G21 teamcould be disbanded.

The organization structure had changed to autocraticstyle. Direct instructions and ultimatum were beinggiven to focus on 100% improvements in fuel economy.

Hiroshi Okuda was actively participating in Priusproject and all day to day activities were beingreported to Okuda directly from all general managerswho were reporting to R & D vice president, Wada.


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Documents

Toyota Prius- The car of the 21st Century