TOYOTA PRIUS: A CASE IN NEW PRODUCT DEVELOPMENT

Executive Summary/Background

In December 1997, Toyota Motor Corporation of Japan launched its hybrid

vehicle Prius in the Japanese market. This was one of the first mass-produced hybrid

vehicles in the world. It used the Toyota Hybrid System (THS), which combined an

internal combustion engine fueled by gasoline with an electric motor. Prius achieved

a balance between high mileage and low emissions and was the upshot of the

company’s initiative to produce environment-friendly automobiles and its goal of

manufacturing the ‘Ultimate Eco Car’. The Prius generated a lot of enthusiasm in

the industry as it was both efficient and stylish.

It was also a safe car. The car conformed to Japanese regulations and standards

pertaining to environmental pollution. Having sold more than 100,000 units

worldwide by 2002, it was the best selling hybrid car model in the world. Toyota

introduced Prius in the US market in 2000. Before entering, Toyota conducted a

research study of the US market and consumer preferences there. The price of the

new improved Prius was unchanged from that of the original Prius. In 2001, the

Automotive Engineering International recognized Prius as the ‘worlds best

engineered passenger car’. By 2002, it was being sold in North America, Japan,

Europe, Hong Kong, Australia and Singapore.

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 The Toyota Prius has defied every prediction to become the must-have-car.

The organic food business doubles every time you blink. Renewable energy,

emissions trading, environmentally conscious investing: many of the most exciting

advances in environmental thinking are happening in the private sector.

I. TIME CONTEXT:

By 2002, when it was being sold in North America, Japan, Europe, Hong

Kong, Australia and Singapore

II. VIEWPOINT:

Operations Manager of Toyota

III. STATEMENT OF THE PROBLEM:

How can Toyota sustain their marketing strategy on developing new

products?

IV. STATEMENT OF THE OBJECTIVES:

Continuously develop products with new or different characteristics that offer

new or additional benefits to the customer

- Innovation in existing and new products

- Continuous dialogue with the target market

- Market intelligence (Research, Insights, Forecasts)

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V. AREAS OF CONSIDERATIONS:

STRENGTHS:

1. Toyota Motor Corporation introduced the hybrid vehicle Prius in the Japanese

market which is the first mass produced hybrid vehicles in the world. Toyota

Prius achieved a balance between high mileage and low emissions and

produce environment friendly automobiles. The timing of the launch was the

biggest reason for its success

2. The company sold more than 100,000 units worldwide by 2002 and Prius was

the best selling hybrid car model in the world.

3. Toyota constantly strives to improve its existing models. The company

introduced further refined models in 2000 and 2003

WEAKNESSES:

1. High maintenance cost being hybrid models

2. Most carmakers have the idea that the demand for eco-friendly cars will

increase in the next few decades and thus have chosen to invest in hybrid

technologies. The customers will have more options.

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OPPORTUNITIES:

1. Toyota can become the leader of hybrid vehicles market

2. Toyota can change its brand image for environment-friendly one because

Toyota Prius is a hybrid vehicle with low emission.

THREATS:
1. High competition in hybrid cars market and most companies launch new
hybrid vehicles.
2. Toyota Prius may lose its strategic advantage of being an innovative product

VI. ASSUMPTIONS

1. Competition on automotive industry

2. Challenges of Toyota Motor Corporation on developing new products

VII. ALTERNATIVE COURSE OF ACTIONS

1. Product Innovation- Continuously develop products with new or different

characteristics that offer new or additional benefits to the customer.

2. Accelerate business expansion – Monitor market conditions in emerging

markets and introduce products suited to the needs of each market

3. Build product at lesser costs – Provide quality products at an affordable rate

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VIII. ANALYSIS OF ACA

1. Product Innovation

- Advantages (Produce unique product which provides the needs of

customer)

- Disadvantages (High cost and risk of failure, threat of imitation)

2. Accelerate business expansion

- Advantages ( Provides products to the region, Focused approach)

- Disadvantages (Additional money to meet expansion costs)

3. Build product at lesser costs

- Advantages ( Attract more customers, higher sales)

- Disadvantages (Low profit)

IX. CONCLUSION/RECOMMENDATION

I recommend ACA 1- Product Innovation. In order to remain

successful, the company must also continue to adapt. Although, the company

enjoys recognition and customer loyalty, changing tastes, new technologies and

an invigorated sense of environmental responsibility on the part of customers

require that Toyota invest large amounts of money in developing new products

and tools. If Toyota does not anticipate how the automotive industry will change

and react accordingly, it may lose business.

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X. PLAN OF ACTION:

1. Continue on Research and Development on developing products with

new or different characteristics that offer new or additional benefits to

the customer

2. Pursue the development of environmentally conscious energy saving

products while incorporating functions and services demanded my

customers.