Toyota and the Hybrid Vehicles

An important figure in this case is the growing number of vehicles in the world: From 50 million in 1950 to 479 million vehicles in 1996. This figure will attain billion in the next decades and so involve an environmental problem if people still continue to use gasoline-combustion engine in the future. It will involve more carbon dioxide on Earth and weaken our environment. In addition, regulations and customer’s awareness of environmental problems push the car manufacturers to find a new technology to meet this new demand. The car market has changed in nearly 50 years. In 1960, import manufacturers were only holding 5% of the US market. In 2002, they were controlling about 40% of the market. Japanese manufacturers have changed the market by bringing more efficient vehicles and reliable transportation. Nowadays, the auto industry has to concentrate on providing performance, reliability and an environmental friendly vehicle that match with the customer’s expectations.

Toyota who launched in 1957 its first model failed because it didn’t understand the market. On today, Toyota understands and even anticipates the customer’s expectations. Toyota being leader in the hybrid market is not surprising because it follows a strategy that consists of anticipating future needs and regulations. The Japanese manufacturer wants to use the hybrid technology because it fits to the demand but also because it combines an innovative technology with an existing structure, and a similar performance. Fuel cell technology means important investment in research and development. Electric vehicles don’t meet the performance of existing vehicles. So, hybrid technology seems to be the right compromise for Toyota.

Competitors such as General Motors, Ford or even Honda, its biggest competitor on the hybrid market, didn’t choose to concentrate their resources on this technology, arguing non short-term profit or preferring to concentrate their effort on Fuel cell technology. Regulations and legislation have also evolved, forcing manufacturers to increase fuel economy and to reduce air pollution. In order to meet these requirements, the auto industry had to find a disruptive technology that will change the market.

In 2000, Toyota launched the Prius model targeting the “early adopters”, with a web-based marketing campaign focusing on the benefits for the environment and the customers. The car manufacturer used a premium strategy targeting an average driver that was female, 51 years old, educated and earning $74,700. Since the launch of the Prius, the primary objective for Toyota has been to increase awareness beyond the consumers of the advantages of a hybrid car. Its objective is to bring the hybrid-electric vehicles from a niche market to the mass market by 2012.

Evaluation of strategic options

Toyota wants to become the first worldwide car manufacturer in the next few years. To achieve this goal, the Japanese manufacturer has to be the leader in the new hybrid-electric technology that Toyota wishes to move from a niche market to a mainstream acceptance.

The first strategy that Toyota can choose is to stay on a niche market. It can continue to use a premium strategy and slowly bring the consumers to a new market. In this way, the manufacturer would reduce its efforts in research and development, control its advertising budget and become a follower in this market. Using this strategy, the objective would be to bring mainstream acceptance with the other competitors. This option offers a low strategic risk because it means that Toyota will wait to see which new technology will be used in the future. Failing with the hybrid vehicles will certainly affect the market share of the manufacturer but also its brand image. But acting as a follower could provoke the same effects. Thus, Toyota will also lose the opportunity to lead the market and so miss the opportunity to be considered as a pioneer in the market and as a strong leader of the auto industry. That’s why I think this is not