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Toyota Motor Corporation: Launching Prius

Group Members:
Ali Haider
Amna Fayyaz
Hooria Adnan
Sara Khan
Neha Javed
Hassan Waqas Khan Sial
Section : B Marketing (II)
Submitted to: Ms. Mahvesh Mahmud

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In the year 1995, the president of Toyota, Hiroshi Okuda, was pondering over the decision that
whether to opt for an aggressive launch strategy of Toyotas new hybrid car, Prius or to delay the
launch in order to deal with the technical problems and ensure a smoother launch. The case sheds
light on issues like market dynamics and structure, competition, planning and strategy
formulation, product strategy, competitive advantage and CSR. We support the decision to get
Prius to the market in 1998, since this technologically advanced car could radically alter the
image of TMC and get back its market share which it had lost due to complaints of look-alike
cars. This early launch is an aggressive decision yes but one that has potential long term benefits.
This will give Toyota a first mover advantage because Prius would be the first ever hybrid
vehicle in the market which will give Toyota an edge over its competitors. Therefore launching it
before other carmakers will establish Toyota as the pioneer of hybrid vehicles. Secondly,
launching a state of the art vehicle such as Prius is exactly what a company like Toyota needs
whose annual sales (Exhibit 5) have been generally stagnant between the years 1990-1995. Thus,
Prius can potentially play the role of a catalyst in the revival of a company like Toyota.
Demand could be determined by analyzing the gasoline prices in Exhibit 1b that shows that the
prices were volatile. Demand for cars is derived demand, and the demand for automobiles falls
when gasoline prices rise. Thus, bringing a fuel efficient car to the market would not only help
the consumers but also Toyota. Demand of hybrid cars would also depend upon consumers
perceptions, and the case states that consumers are smart and are aware of the environmental
concerns, thus they would favor this technology. Moreover, Exhibit 1a suggests that the average
distance driven in US is the highest, thus the demand for fuel efficient cars would be highest in
that market. The positioning and marketing on Prius should be based on product innovation,
environmental protection and cost reduction (as a result of efficient fuel consumption). Initially
the company should produce around 10,000 vehicles in the first year. This is because Toyota has
to be careful and ensure that its production/operational effectiveness and efficiencies are not
compromised. However in the next couple of years the number of vehicles produced will be
gradually increased depending on the market response. The per-unit cost of Toyota Prius should
be $19,000 for the base model and $21,000 for the upscale variant that has some extra features.
This price is more than that of Toyotas compact car Corolla and is roughly equal to that of its
midsize sedan, Camry. Although Prius itself is a compact vehicle with only basic luxury features

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but its cost is higher compared to corolla because of its technologically advanced engine which is
expensive to produce.
Toyota Motors Corporation is the pioneers of the Just in time strategy which has enabled them to
increase the efficiency of their processes. They believe in concepts such as Kaizen and Toyota
Production System (TPS) which helps them to identify the loopholes in the production process
and makes them visible to the entire workforce so that everyone can fully understand the root
problem and solve it scientifically. It also aims to provide safe and environmental friendly
products to its clients. The operations strategy for Prius consisted of the formation of G21team
which did not rely on precedents on prior conventions rather eliminated prior assumptions and
built everything from scratch. Not only that, they believed in total quality management and
continuous improvement of all processes, hence they broke down all silos and worked together
which led to more direct and free flow of information among various key players involved. This
is how product planning was done and this later developed as a model for developing new cars.
A 100% improvement in fuel economy was set as the target in comparison to a conventional car.
Unlike a typical development process, the processes of engine development, vehicle
development and mass production were all undertaken simultaneously by Toyota since they were
dealing with a new technology, namely the Hybrid technology. Team G21 studied 80 existing
technologies and selected the most efficient technology and not the easiest or cost effective.
To produce the batteries required for hybrid technology Toyota worked with Matssushit electric
to develop the nickel metal hydride battery. This process led to an in increase in the overall
complexity in addition to the costs. This was the overall operations strategy followed for
launching Prius.