I. Background of the Country
Japan has a long history with the first humans arriving around 35,000 B.C.. The position of Japan relative
to the Asian mainland had played a significant role in the country's development. Although the
archipelago is situated near the mainland, there is still a considerable amount of open sea, which
separates the two landmasses. Throughout most of Japan's history, it has been closed to the outside
world refusing to open its borders to foreigners. The sakoku policy, literal translation "locked country",
enacted in 1633 by the Tokugawa Shogunate prevented foreigners from entering Japan on penalty of
death. The same policy also prevented Japanese from leaving Japan.
The first historical documents mentioning Japan date to around the 5th century. Japanese myth holds
that Emperor Jimmu was the first emperor of an imperial line that is still in place today. However,
archaeological evidence gathered by a number of researchers place the imperial rule starting later
around the third to seventh centuries AD, during the Kofun period. The following Asuka regime during
the mid 8th century is noted for a more centralized Japan in which Chinese culture significantly
influenced Japanese traditions.
Nara was the first centralized capital of the nation established in the late 8th century. The layout of the
capital city was influenced by Chang’an, the capital of China during that time. The Nara period was the
last time that political power was held by the emperor. The following Heian period was characterized by
an affluent aristocracy with eccentric social customs, and the moving of the capital from Nara to Kyoto.
The capital city of Kyoto became the residence of Japan’s emperors until the late 19th century. Toward
the end of the Heian period, the aristocracy lost their power and the Kamakura period marked the
beginning of military rule. Regional warlords became powerful and often rose to become Shogun, a
position that sometimes wielded more power than the Emperor. During this period, a caste system
developed with the Shogun at the top. The Shogun controlled large areas of land and would divide it up
and delegate responsibility to a Daimyo, or regional warlord. The Daimyo ruled with an army of Samarai
who protected the land and its people. Feudal Japan did not allow for social mobility and marrying
outside one’s own caste was prohibited.
After a succession of powerful Shogun, Japan fell into a state of near-anarchy as provinces
declared war upon one another during the 15th century. In 1600 during the Azuchi-Momoyama
period, Tokugawa Ieyasu moved to reunify the country and successfully established the
Tokugawa Shogunate. Under the Tokugawa Shogunate the feudalist system was re-established.
During his reign, Tokugawa ruled from Edo, the location of present day Tokyo. Under the
Tokugawa Shogunate the Edo period was a time of stability for the Japanese people, but there
was little or no development when compared to other nations in the rest of the world during the
same period. From 1852-1854, Commodore Matthew Perry negotiated a trade agreement
between Japan and the United States. The government at Tokyo was forced to agree to the
demands of the United States as they were intimidated by the technologically advanced and
heavily armed fleet of steam frigates under the command of Commodore Perry. The ships in
Perry's fleet are now known in Japan as the "Black Ships" and have come to symbolize the threat
imposed by western technology.
In 1867, the Tokugawa Shogunate collapsed, and gave way to the Meiji Restoration. The
imperial capital was moved from Kyoto to Tokyo, renamed from Edo to Tokyo (Eastern
Capital). Japan then directed their efforts toward industrialization and modernization. During
World War I the United States and Japan fought on the same side although relations were not
favorable between the two nations due to policy disagreements over China and competition for
power in the Pacific. After World War I Japan's economy began to decline and hit a low point
during the Showa recession in 1926. The negative impact of the recession combined with
domestic political turmoil (assassination attempts on the emperor, coups d'etat attempts, terrorist
violence) ultimately contributed to the increased militarism in Japan during the late 1920's and
Japan surrenders at then end of WWII
Japanese imperialist policy aimed to dominate China to acquire its vast material reserves and
natural resources. In the early 1930's there were many small-scale military engagements in so-
called "incidents" between the two sides. This culminated into a full-scale war in 1937. Western
powers were reluctant to provide support to the Chinese who they thought would eventually lose
the war. The United States entered the war in 1942 after the surprise attack on Pearl Harbor by
Japanese forces. In 1945, atomic bombs were dropped on the Japanese cities of Hiroshima and
Nagasaki and Japan surrendered soon afterward. After surrendering Japan was occupied by the
Allied Forces marking the first time in the nation's history it had been occupied by a foreign
power. After the occupation ended in 1951, Japan's government shifted from imperial and
military rule to a parliamentary democracy.
Today, despite suffering massive losses during World War II and possessing very little natural
resources, Japan has become an economic and technological powerhouse.
Political Environment, Democracy and Japanese Outward FDI: a
panel data analysis
This paper attempts to examine empirically the effects of Political Environment (PE) and
Democracy on the Japanese outward Foreign Direct Investment (FDI) activities with a panel
data of 56 developed and developing countries for the period of 1995-2010. The estimation
model is constructed on the basis of the OLI (ownership, location and internalization
advantages) and general equilibrium theoretical models. Various measures of PE and
Democracy are included as additional explanatory variables with market potential, wages,
skilled workforce endowments, investment cost and openness. We found that, a model with
PE and Democracy factors and some traditional explanatory variables reasonably explains
recent Japanese Multinational Companies (MNCs) activities. Japanese outward FDI flows
revealed sensitivity to different levels of PE and Democracy in developed and developing
countries. These findings have important implications for future policy consideration by host
countries and academic research on Japanese outward FDI.
The politics of Japan is conducted in a framework of a parliamentary representative democratic
monarchy where the Prime Minister of Japan is the head of government and the head of the
Cabinet that directs the executive branch. Legislative power is vested in the Diet, which consists
of the House of Representatives and the House of Councillors. Japanese politics encompasses the
multi-party system. The judicial power is vested in the Supreme Court and lower courts. In
academic studies, Japan is generally considered a constitutional monarchy with a system of civil
The Imperial Palace in Tokyo is the primary residence of the emperor
National Diet Building in Tokyo
The Constitution of Japan defines the emperor
to be "the symbol of the state and of the unity of
the people." He performs ceremonial duties and holds no real power, not even emergency reserve
powers. Political power is held mainly by the Prime Minister and other elected members of the
Diet. The Imperial Throne is succeeded by a member of the Imperial House of Japan as
designated by the law. Sovereignty is vested in the Japanese people by the constitution. Though
his official status is disputed, on diplomatic occasions the emperor tends to behave as the head of
state (with widespread public support).
The chief of the executive branch, the Prime Minister, is appointed by the Emperor as directed
by the Diet. He must be a member of either house of the Diet and a civilian. The Cabinet
members are nominated by the Prime Minister, and they must also be civilian. Since the Liberal
Democratic Party (the LDP) was in power, it has been convention that the President of the party
serves as the prime minister.
The Cabinet is composed of Prime Minister and ministers of state, and is responsible to the Diet.
The Prime Minister has the power to appoint and remove the ministers, a majority of whom must
be the Diet members. The liberal conservative LDP was in power from 1955 to 2009, except for
a very short-lived coalition government formed from the likeminded opposition parties in 1993;
the largest opposition party was the social liberal Democratic Party of Japan in the late 1990s and
DOING BUSINESS IN JAPAN
Japan is very much open for business, despite the 9.0 magnitude earthquake
and tsunami that devastated the Northeast coast of Honshu, Japan‟s main island,
on March 11, 2011. Indeed, U.S.-Japan trade actually increased in 2011 over
Japan remains the world„s third largest economy, after the U.S. and China, with a
GDP of roughly $5.9 trillion. Japan is the fourth largest export market for U.S.
goods, and our fourth largest trading partner overall in 2011 with over $181 billion
in two-way goods trade, a 23.1 percent jump over 2010. In 2011 the U.S.
exported $66.2 billion in goods to Japan, up from $60.5 billion in 2010. In
services trade, the United States maintains a $19.2 billion surplus with Japan on
two-way trade totaling $71.1 billion.
Japan is the second largest foreign investor in the U.S., with more than $257
During 2011 the Japanese yen strengthened significantly against the U.S. dollar,
reaching a 15-year high of 75.86 yen to the dollar in October 2011. American
goods and services have never been more affordable for Japanese buyers.
Japan's large government debt, which is over 200 percent of GDP, persistent
deflation, and an aging and shrinking population are major complications for the
In 2011, the top exporters to Japan were China, US, Australia, Saudi Arabia,
UAE, South Korea, and Indonesia. The top importers from Japan were China,
US, South Korea, Taiwan, and Hong Kong.
The U.S.-Japan alliance is a cornerstone of U.S. security interests in Asia and is
fundamental to regional stability and prosperity. Despite the changes in the post-
Cold War strategic landscape, the United States-Japan alliance continues to be
based on shared vital interests and values. These include stability in the Asia-
Pacific region, the preservation and promotion of political and economic
freedoms, support for human rights and democratic institutions, and securing of
prosperity for the people of both countries and the international community as a
whole. Japan is one of the world„s most prosperous and stable democracies.
The difficulty of penetrating the Japanese market depends to a great extent on the
product or service involved. Key variables include the degree of local or third-country
competition, the number of regulatory hurdles to be overcome, and cultural factors such
as language (both spoken and written), strict service and quality expectations, and
Generally, tariffs on most imported goods into Japan are low. However, cultural,
regulatory, or other non-tariff barriers continue to exist that can impede or delay the
importation of foreign products into Japan. These can include Japanese import license
requirements, restricted or prohibited imports temporary entry of goods, certifications,
standards, labeling requirements, etc.
The Japanese market offers numerous opportunities for U.S. companies in a wide
variety of sectors. Best prospects for U.S. exporters in the Japanese market include the
Cosmetics & Toiletries
Education & Corporate Training
Safety & Security
Soil Remediation & Engineering Services
Travel & Tourism
Market Entry Strategy
U.S. companies wishing to enter the Japanese market should consider hiring a
reputable, well-connected agent or distributor, and cultivating business contacts through
frequent personal visits. Japan„s business culture attaches a high degree of importance
to personal relationships, and these take time to establish and nurture. Patience and
repeated follow-up are typically required to clinch a deal. The customs and pace of deal-
making in Japan are quite different from the United States. U.S. business executives are
advised to retain a professional interpreter, as many Japanese executives and decision-
makers do not speak English, or prefer to speak Japanese.
Please note that throughout this report, except where otherwise noted, the following
dollar / yen exchange rates were used:
Chapter 2: Political and Economic Environment
For background information on the political and economic environment of the country,
please click on the link below to the U.S. Department of State Background Notes.
Government Role in the Economy
Traditionally, the bureaucracy has played a leading role in the Japanese economy.
Members of the National Diet, from whose ranks come most of Japan's Cabinet
ministers, have small staffs and rely on bureaucrats for policy initiatives and the drafting
In addition, the ministries have exercised power directly through the
issuance of required licenses, permits and approvals that tightly regulate business
activity. For much of the post-war period, ministries also issued informal (but in practice,
virtually compulsory) directives called "administrative guidance" to the industries they
regulated, further controlling business activity.
The reach of the bureaucracy also extended through a dense web of close relations with
leading business organizations. In addition to the reliance of Japanese elected officials on
campaign contributions from business, major industry associations and quasi-governmental
regulatory bodies also provided lucrative post-government employment called amakudari
(literally "descent from heaven") for senior bureaucrats as well as lower-level bureaucrats
who regulate their industries.
However, in 2007, the Diet approved legislation that established restrictions on the types of
post-retirement jobs former senior government officials can accept and centralized authority
for finding such employment in the National Personnel Agency. The aim of the legislation is,
in part, to weaken the nexus between individual ministries and the industries they regulate,
and the central government is continuing efforts to address problems relating to the system
of post-government employment.
The role of government institutions in the economy has been changing over the past
decade as the central government pursues a long-term program of administrative
reform, deregulation, and decentralization
In 2001, the bureaucracy was reorganized from 22 ministries and agencies to 13. A Cabinet
Office was also established to coordinate policies and to provide staff support for Japan's
leaders separate from the individual ministries.
At the same time, the number of Diet members posted to senior positions in the ministries
was increased from an average of two or three to five, with the aim of strengthening the
control of elected officials over the bureaucracy.
Through such measures and other administrative reforms, the bureaucracy's influence over
the economy has diminished, but by no means been eliminated completely. Leadership of
the government by the Democratic Party of Japan since September 2009, notable for its
pledge to make politicians responsible for policymaking, has further eroded the
All foreign exchange transactions to and from Japan – including transfers of profits and
dividends, interest, royalties and fees, repatriation of capital, and repayment of principal
– are, in principle, freely permitted unless expressly prohibited.
Formal controls on the allocation of foreign exchange and most restrictions on foreign
investment have been removed. Nevertheless, the Japanese Government (GOJ) continues
to play a significant role in promoting certain favored industries, and GOJ policy and
regulatory practices in many cases still favor the interests of domestic producers.
While Japan's economic structure and business culture are somewhat different from that
of the United States, U.S. companies can and do successfully adapt.
The American Chamber of Commerce in Japan (ACCJ) is one
of the largest overseas chambers in the world. Its members come from more than 1,000
companies, and its 60-plus committees and sub-committees are highly visible advocates for
U.S. business interests. U.S.
Embassy officers liaise with more than 20 of these committees, and work closely with
the ACCJ on market access, deregulation, competition, and investment issues. Some
knotty regulatory barriers and discrimination still exist, and when a company cannot
solve such problems by itself or through its legal advisers in Japan, the U.S.
Government stands ready to help.
Japan has a fully developed physical infrastructure of roads, highways, railroads,
subways, airports, harbors, warehouses, and telecommunications for distribution of all
types of goods and services. Toll roads, however, are expensive. Although the
government has periodically implemented initiatives to reduce certain tolls, as of
February 2012, a large truck will pay over the equivalent of $428 in tolls each way
between Tokyo and Osaka (about 370 miles). Tolls for a small passenger car on the
same trip amount to about $157. Japan„s airports are also among the most expensive in
the world. Japan's port practices and import processing are generally efficient.
Agricultural Products Market
The importance of food in the Japanese culture is reflected by size of its food and
agricultural market, recently valued at approximately $745 billion. At 23 percent of
disposable income, per capita spending (for households of two or more people) on food
in Japan is higher than anywhere else on earth.
This high per capita food spending is a function of higher food prices, but it is also a
reflection of the fact that Japanese consumers are willing to pay a premium for quality and
convenience. Given the wide variety of foods produced in the United States, the
internationalization of food in Japan has given the United States an important advantage in
the Japanese food market.
Until recently Japan had a relatively uniform food market, with rice, vegetables, fish, eggs,
and soy products making up the traditional Japanese diet. As Japan became more
affluent, and more Japanese were exposed to diverse food products from around the
world, there has been a major trend toward diet diversification. Despite this trend, one
characteristic of this market that has not changed over time is the Japanese consumers„
obsession with quality.
Japanese tend to value the taste of food over the quantity of food. They are highly brand-
conscious, cognizant of the seasonality of certain foods, and
seek out freshness. Japanese are increasingly health-conscious, and given their aging
society, are leading the world in demand for functional foods. They also consider a food
product„s aesthetic appearance, on the shelf, in the package, and on the table,
important, and indicative of quality and healthfulness of the product.
Japan is a major destination for U.S. wheat, rice, corn, soybeans, pork, beef, processed
fruits and vegetables, citrus, wine, cherries, and processed snack foods. In fact, in 2011,
about 10 percent of all U.S. agricultural, forestry and fishery product exports, valued at
$15.6 billion, were destined for Japan.
The combination of improved market access, declining domestic production, and
investments in cultivating the brand awareness of American agricultural products, have
helped to make Japan one of the United States„ top overseas export markets. Given
competition from third countries, and the changes in consumer spending resulting from
nearly 20 years of stagnant economic growth, Japan is a competitive environment for U.S.
However, long-term prospects for American food and agricultural exporters in Japan are
excellent for the following reasons:
1. growing consumer demand for value plays to U.S. strengths (U.S. foods
typically cost less than local products);
2. Japanese agriculture continues to decline,
leading to increased dependence on imports for stable food supplies; and
Westernization of the Japanese diet away from fish and rice toward meats, dairy
products and other American staples; and
4. American agricultural products enjoy a
reputation for being safer than foods from competing markets.
Though domestic protection is still strong, market access has improved over the years
via persistent negotiations in the WTO by the United States and others, leading Japan to
eliminate some of the agricultural market access barriers for which it was once famous.
Where earlier quotas and outright bans restricted the market for U.S. beef, citrus, fruit
juice, cherries, apples and ice cream, all of these markets have now, to some degree,
However, access issues still hamper greater farm trade due to high tariffs
on processed food products, restrictive plant quarantine measures on fruits and
vegetables, trade-limiting quotas and complicated labeling practices. In addition, a
stringent system for regulation of agrochemical residues including strict inspection of
imported foods and a time-consuming approval process for biotechnology products also
hinder trade in agricultural products. For additional information about U.S. agricultural,
food, forestry, and fishery product exports to Japan, please see the Foreign Agricultural
Trade Regulations, Customs and Standards
On average, the applied tariff rate in Japan is one of the lowest in the world. In fiscal
year (April-March) 2010, the simple average applied MFN (most favored nation) tariff
rate was 5.8 percent, down from 6.1 percent in FY2008. In addition, import duties on
many agricultural items continue to decrease, and tariffs in many major sectors, such as
autos and auto parts, aircraft, marine vessels, software, computers, industrial machinery
and works of fine art are zero.
However, certain products including leather, rubber, footwear and travel goods, textiles and
clothing, certain processed foods and some manufactured goods have relatively high tariff
rates. While Japan's import tariffs are generally low overall, the nation„s average agricultural
import tariff of 15.7 percent (2010) is among the world„s highest for industrialized countries.
By comparison, the average agricultural import tariff is 8.75 percent (2009) in the U.S. and
9.3 percent (2008) in the European Community.
The Customs and Tariff Bureau of Japan's Ministry of Finance administers tariffs. As a
member of the Harmonized System Convention, Japan shares the same trade
classification system as the United States (limited to six-digit code). Japan's tariff
schedule has five columns of applicable rates: general, WTO, preferential (GSP),
Economic Partnership Agreement (EPA) and temporary.
Goods from the United States are charged WTO rates unless a lesser "temporary" rate
exists. Japan assesses tariff duties on the CIF value at ad valorem or specific rates, and in
a few cases, charges a combination of both. Japan's preferential system of tariffs grants
lower or duty-free rates to products imported from developing countries. Japan„s
harmonized tariff schedule is available through the website of Japan Customs:
A simplified tariff system for low-value imported freight valued at less than ¥100,000,
such as small packages for personal imports, simplifies determination of tariff rates. This
system also eliminates the extra time necessary to classify the product and its precise
value, and thereby minimizes customs brokers' handling charges. Importers can choose
either the normal rate or the simple tariff, which could be higher or lower depending on
the product. Japan grants preferential treatment to products from certain developing and
least developed countries under its Generalized System of Preference (GSP) scheme.
Under the GSP, preferential tariff treatment is offered to 140 developing countries and 14
territories, including 49 least developed countries (LDCs). The simple average GSP tariff
rate is 4.9 percent whereas the rate for LDCs is 0.5 percent. The main beneficiaries of
Japan's GSP scheme are China, Thailand, Indonesia, the Philippines and Viet Nam. The
GSP scheme excludes many agricultural products and some industrial products. Japan
also grants preferential access to imports from Singapore, Mexico, Malaysia, Chile,
Thailand, Indonesia, Brunei, the Philippines, Switzerland and Viet Nam under bilateral
Japan Customs can provide advance rulings on tariff classification and duty rates. A
summary of Japan„s customs procedures, including the customs valuation system,
import procedures, temporary admission procedures, refunds and duty drawback payments,
as well as relevant customs forms can be found on the Japan Customs
website noted above
While tariffs are generally low, Japan does have non-tariff barriers that impede or delay
the importation of foreign products into Japan. Although competition, U.S. and other
foreign government pressure, as well as ot
her factors have lessened the impact of these
impediments, U.S. companies may still encounter non-tariff barriers such as the
standards unique to Japan (formal, informal,
a requirement in some sectors or projects for companies to demonstrate prior
experience in Japan, effectively shutting out new entrants in the market;
official regulations that favor domestically-produced products and discriminate
against foreign products;
licensing powers in the hands of industry associations with limited membership,
strong market influence, and the ability to control information and operate without
cross stock holding and interconnection of business interests among Japanese
companies that disadvantage suppliers outside the traditional business group;
cartels (both formal and informal) and, the cultural importance of personal
relationships in Japan and the reluctance to break or modify business relationships.
The tools available to overcome these non-tariff barriers depend on the industry, the
product or service's competitiveness, and the creativity and determination of the firm's
management. The U.S. Department of Commerce's Trade Compliance Center (TCC)
helps U.S. exporters and investors overcome foreign trade barriers and works to ensure
that foreign countries comply with their trade agreement obligations to the United States.
U.S. exporters experiencing non-tariff barriers or other unfair trade practices in foreign
markets can report such problems online at
Import Requirements and Documentation
Any person wishing to import goods must declare them to the Director-General of
Customs and obtain an import permit after necessary examination of the goods
concerned. The formalities start with the lodging of an import declaration and end with
issuance of an import permit after the necessary examination and payment of Customs
duty and excise tax. For additional information see the section below on
Regulations and Contact Information
in this chapter.
Certain items may require a Japanese import license. These include hazardous
materials, animals, plants, perishables, and in some cases articles of high value. Import
quota items also require an import license, usually valid for four months from the date of
issuance. Other necessary documents for U.S. Exporters may include an Import
Declaration Form (Customs Form C-5020) and a certificate of origin if the goods are
entitled to favorable duty treatment determined by preferential or WTO rates. In practice,
shipments from the United States are routinely assessed using WTO or “temporary”
rates without a certificate of origin. Any additional documents necessary as proof of
compliance with relevant Japanese laws, standards, and regulations at the time of
import may also apply.
Correct packing, marking, and labeling are critical to smooth customs clearance in
Japan. Straw packing materials are prohibited. Documents required for customs
clearance in Japan include standard shipping documents such as a commercial invoice,
packing list, and an original and signed bill of lading, or, if shipped by air, an air waybill.
Air shipments of values greater than ¥100,000 must also include a commercial invoice.
The commercial invoice should be as descriptive as possible for each item in the
shipment. The packing list should include the exact contents and measurement of each
container, including the gross and net weights of each package. The Japanese
Measurement Law requires that all weights and measures on packing list be reflected in
Metric System values.
Japan's Ministry of Finance maintains a website at
that describes import and customs clear
ance procedures, and provides contact
information and other detailed information in English.
Japan prohibits the importation of certain it
ems including narcotics, firearms, explosives,
counterfeit currency, pornography, and products that violate intellectual property laws.
For additional information see the section below on
Prohibited and Restricted Imports
When planning to import goods into Japan, you may wish to consult with your
international shipper for specific details regarding your shipment since your international
shipper should be up-to-date on Japanese import requirements.
Japan is a member of the International Convention to Facilitate the Importation of
Commercial Samples and Advertising Materials under the ATA Carnet System. Use of a
carnet allows goods such as commercial and exhibition samples, professional
equipment, musical instruments, and television cameras to be carried or sent temporarily
into a foreign country without paying duties or posting bonds. A carnet should be
arranged in advance by contacting a local office of the United States Council
Advertising materials, including brochures, films, and photographs, may enter Japan
duty free. Articles intended for display - but not for sale - at trade fairs and similar events
are also permitted to enter duty free but only when the fair or event is held at a bonded
exhibition site. After the event, these bonded articles must be re-exported or stored at a
bonded facility. A commercial invoice for these goods should be marked “no commercial
value, customs purposes only
and “these goods are for exhibition and are to be
returned after conclusion of the exhibition.” It is also important to identify the trade show
or exhibition site, including exhibition boot
h number (if known), on shipping documents
SOCIAL AND CULTURAL ENVIRONMENT IN
II. The Company Brand (Toyota)
The Toyota Motor Corporation started with humble beginnings. Kiichiro Toyoda in 1933, visited
the United States and several automobile plants. He returned to Japan and started an automobile
division in his father's loom factory. General Motors and Ford had already established
automobile plants in Japan but this did not stop Toyoda. Toyota Motor Corporation was founded
August 28, 1937. In the year 2000, Toyota was the world's third largest car company and the
largest car company in Japan. The current president of Toyota is Akio Toyoda. Toyota maintains
a 9.8 percent share of the automobile global marketplace.
Japan itself, has very few natural resources, which prompted the Toyota Motor Corporation to
develop fuel efficient vehicles. Change in political environment in Japan, prompted Japanese
auto manufacturers to rely on new technoligies to guarantee success in the industry such as the
birth of the small car. While other countries concentrated on large, luxury vehicles, Japanese
manufactures were busy focusing on building small, fuel-efficient vehicles that would grow to
dominate the automotive industry.
Political unrest can lead to military action and wars, which make materials needed for car
manufacture difficult to find. Such was the situation Toyota Motor Company faced during Word
War II, when a crippled Japanese economy forced the company to start building 'recycled'
Corporations must also comply with the laws of trade both nationally and internationally. After
World War II, "Japan's automakers knew that they could no longer count on government
protection in the form of high import duties or other barriers as they had before the war. After
World War II, in 1955, Japan joined the General Agreement on Tariffs and Trade (GATT)
anticipating the day of increasing international trade. In 1965, Japan legalized imports of foreign
passenger cars. This was the beginning of true competition between Japan and other overseas car
manufacturers. (Reference for Business 2010).
Understanding the culture of a country where you are exporting to can help a corporation to
become successful in the industry. The president on Toyota Motor Corporation in the late 1980's
was Shoichiro Toyoda. He placed great importance on public relations with the United States
and was determined to overcome their bitterness about losing business to Japan's automotive
industry. He worked to instill the concept of free competition in the minds of the American
people. He was successful in entering into a business venture with General Motors which
resulting in Toyota beginning production efforts in the United States. His perseverance in
overcoming social and cultural barriers helped Toyota become the success it is in the United
Toyota Motor Corporation has been a significant player in the global automotive marketplace
since the 1940's. Their past success and continued success can be accounted for in part due to a
diligence in accessing environmental factors including economic, technological, political and
legal, also cultural and social. Toyota continues to grow as a global leader throughout the
automotive world. Production is in excess of five million vehicles per year and employing more
than 320,000 employees.
Click here for the Toyota Passenger Car
Click here for the Toyota Light Truck & SUV
Click here for History of Lexus
Toyota Motor Sales, U.S.A., Inc., was formed
Oct. 31, 1957, establishing its headquarters in a
former Rambler dealership in Hollywood, Calif.
Sales began in 1958 and totaled a modest 288
vehicles – 287 Toyopet Crown sedans and one
Enthusiasm turned to gloom when it was found that the Toyopet, a sturdy vehicle with quality
features and room to spare, was woefully underpowered and overpriced for the American
market. Toyopet sales stalled and were discontinued in 1961. The legendary Land Cruiser, which
quickly gained a reputation as a durable, all-terrain vehicle, carried the Toyota flag in the United
Sates until 1965 when the Toyota Corona arrived.
Corona, the first popular Toyota in America, was designed specifically for American drivers.
With a powerful engine, factory-installed air conditioning and an automatic transmission, Corona
helped increase U.S. sales of Toyota vehicles threefold in 1966 to more than 20,000 units.
As more Americans discovered the quality and reliability of Toyota products, sales continued to
soar. By July 1967, Toyota had become the third-best-selling import brand in the United States.
The thrifty Corolla was introduced in 1968 and, like the Corona, was a huge success with
American drivers. Corolla has since become the world‟s all-time best-selling passenger car, with
over 30 million sold in more than 140 countries.
In 1972 Toyota sold its one-millionth vehicle. By
the end of 1975, Toyota surpassed Volkswagen
to become the No. 1 import brand in the United
States. Three years later, in 1978, Toyota won
the "Import Triple Crown" by leading all import
brands in sales of cars, trucks and total vehicles.
During the 1970s, Toyota launched some of its most memorable marketing campaigns, using tag
lines that included "You Asked For It/You Got It!" and the hit "Oh What A Feeling!" campaign
that included the popular "Toyota Jump."
As Toyota celebrated its 25th anniversary in America during 1982, it opened a new national sales
headquarters complex that it occupies today in Torrance, Calif. Toyota's success continued, and
in 1986, it became the first import automaker to sell more than one million vehicles in America
in a single year, racking up sales of 1,025,305 cars and trucks. That year also marked the
company's debut as a manufacturer in the United States, with the rollout of the first Toyota car
built on American soil. The vehicle, a white Corolla FX16, was produced on Oct. 7, 1986, at the
New United Motor Manufacturing, Inc. plant, a joint venture with General Motors.
Since then, Toyota has established many other vehicle and parts plants in North America. By the
end of 2011, Toyota will operate 14 plants across North America, including facilities in the states
of California, Kentucky, Indiana, West Virginia, Alabama, Tennessee, Texas, Missouri and
As Toyota's presence in America grew, the company sought a larger role in communities across
the nation. So, to commemorate the company's 30th anniversary in America in 1987, Toyota
established the Toyota USA Foundation with a $10 million endowment and a mission to make
Toyota a leading corporate citizen.
In 1989, Toyota branched out by establishing a
luxury line of vehicles with the debut of the
Lexus LS 400 and the ES 250. Highly acclaimed
cars, plus exceptional customer service, quickly
became the hallmark of Lexus.
In 1991, Lexus earned the title of No. 1 luxury
import in the United States, surpassing both
Mercedes Benz and BMW. That year, the brand
also dominated three independent J.D. Power
and Associates quality surveys, being named top
nameplate in Customer Satisfaction, Sales
Satisfaction and Initial Quality.
Toyota continued its strong growth through the 1990s. A highpoint came in December 1997
when the Toyota Camry first earned the title of No.1-selling passenger car in America. Toyota
also launched its first full-sized pickup, the Tundra, in 1998.
Toyota marked the start of the new millennium with the launch of the Prius, the world's first
mass-produced gas/electric hybrid car. Prius, which in Latin means "to go before," was
revolutionary, featuring an EPA-estimated fuel economy rating of 45 city/51 highway and ultra-
clean tailpipe emissions that were 90 percent less in smog-forming gases than conventional cars
at the time.
By the end of 2000, following its tag line, "The Relentless Pursuit of Perfection," Lexus edged
out Mercedes Benz by 423 units to become the top-selling luxury brand in the United States, a
position it has held for ten years running.
May 2001 marked the incorporation of Toyota Motor Sales de Mexico, Toyota's new sales and
marketing subsidiary in Mexico. By the end of the year, Toyota had grown to become the third-
best-selling automotive brand in the United States, surpassing Dodge with best-ever sales of
In December of 2002, Toyota delivered its first two zero-emission, market-ready hydrogen fuel
cell vehicles to customers in California for real-world testing. The next year, Toyota's new,
breakthrough hybrid technology, "Hybrid Synergy Drive," debuted in the all-new 2004 Prius.
Toyota's growth in America continued in 2003 when Toyota launched Scion as its third line of
vehicles. The Scion line featured three modestly priced but feature-rich vehicles brought to
market by most Toyota dealers under an innovative, youth-oriented marketing program. Scion
was a success, and in 2004, Toyota's U.S. sales topped two million vehicles per year for the first
In 2005, Toyota continued expanding its environmentally advanced lineup with the introduction
of the world‟s first luxury hybrid, the Lexus RX 400h, and a hybrid option for the Toyota
Toyota added a hybrid option to its popular Camry sedan in 2006 and began building it in the
United States at its massive Kentucky plant. The company also opened up its 10th U.S. plant in
San Antonio, Texas, to build pickups. In addition, the company launched the FJ Cruiser with a
design that harkens to the early years of the rugged Land Cruiser, the only vehicle Toyota has
continuously sold throughout its entire 50-year history in America. As a result, sales surged to
more than 2.5 million for the first time and Toyota established itself as the third best-selling
automotive company in the United States.
During 2007, its 50th year in America, Toyota introduced its largest pickup truck ever, the
rugged 2008 Toyota Tundra, as well as the second-generation of its iconic Scion xB urban utility
vehicle and the world‟s first V8 hybrid, the Lexus LS 600h.
As a result of an economic recession, Toyota‟s sales were down in 2008, but the Toyota brand
outsold Chevrolet to become the No. 1-selling automotive brand in America, and Camry retained
its crown as the No 1-selling car in the nation for the 11th time in 12 years. Toyota also passed
General Motors in global sales to become the world‟s largest automaker for the first time in
In 2009, Toyota launched two all-new
gas/electric hybrids, the third-generation Prius
with an estimated EPA fuel-economy rating of
50 miles per gallon in combined driving, and the first dedicated hybrid from Lexus, the HS
250h. Lexus also introduced the all-new, second-generation GX 460 luxury utility vehicle and
the next generation of its trend-setting RX luxury utility vehicles, the V6-powered RX 350 and
the hybrid RX 450h. By the end of the year, total combined sales of Toyota and Lexus hybrids in
the United States topped the one million mark. In addition, Toyota Motor Sales, U.S.A., Inc.
received an environmental achievement award from the EPA‟s Pacific Southwest Region
Office. Toyota announced a safety recall in November to address concerns that unsecured or
multiple floor mats could entrap the accelerator pedal on certain Toyota vehicles.
During 2010, Toyota began production of the third-generation Sienna at its Indiana plant,
however, in late January, Toyota briefly suspended sales of eight models while it developed a fix
for a rare potential safety issue – sticking accelerator pedals. A fix was rolled out in early
February but heavy news coverage of the situation and additional recalls led to Congressional
hearings and the company paying three federal penalties. Toyota took major steps during the
year to improve communications and the quality and safety of its vehicles. However, the intense
media coverage combined with the lingering effects of the recession weakened results with the
company reporting a slight 0.3 percent drop in sales for the year. Despite the setbacks, Camry
retained its title as the best-selling passenger car in the United States, Toyota was still the No. 1
retail brand, Lexus remained the No. 1 luxury brand, and Toyota‟s brand conquest rates returned
to historically high levels.
On March 11, 2011, a 9.0 magnitude earthquake struck the Tohoku region of Japan. It was the
most powerful earthquake to ever hit that country followed by a tsunami that claimed the lives of
nearly 16,000 people. Entire cities were destroyed and many businesses were shut down,
including four Toyota plants. As production started returning to former levels, floods in Thailand
halted production in two more plants. But, despite these natural disasters, production returned to
near-normal levels by the end of the year, a testimony to Toyota‟s resiliency and efficiency.
Toyota, along with its Lexus and Scion brands, continued to move forward in 2011 with new and
redesigned vehicles. Toyota unveiled a bigger and more diverse Prius family of vehicles,
including the third-generation Prius liftback, the Prius Plug-in Hybrid, the larger Prius v and the
smaller Prius c concept vehicle. Additional Toyota vehicles revealed in 2011 included the next
generation 2012 Yaris liftback and the completely redesigned 2012 Camry. Lexus introduced the
CT 200h, a premium compact hybrid that earned a Top Safety Pick award from the Insurance
Institute for Highway Safety. Later in the year, Lexus took the wraps off the all-new 2013 GS
350, GS 450h and GS 350 F SPORT with the bold new face of Lexus. Meanwhile, Scion
introduced the 2012 iQ, which along with the Toyota Camry and Scion tC, won five star crash
test ratings from the National Highway Traffic Safety Administration.
Other 2011 milestones included the sale of the one-millionth Toyota Prius in the United States,
and Toyota Motor Manufacturing Kentucky celebrated 25 years of production in Georgetown,
Kentucky. Toyota also expanded its vehicle manufacturing in the United States and created
2,000 American jobs by beginning production of the Corolla at the newly opened Toyota Motor
Manufacturing, Mississippi plant.
Through the strong efforts of its associates in Japan and around the globe, Toyota recovered
rapidly from the supply disruptions caused by the natural disasters, and in 2012 began regaining
its sales momentum as dealer inventories were fully restocked. By mid-year, U.S. sales of
Toyota, Lexus and Scion vehicles had sped past the one-million-sales mark, something that had
not happened until mid-August the prior year because of short supply. In fact, starting in March,
Toyota was once again the No. 1 retail brand in the United States. The company‟s resurgent U.S.
sales were driven in large measure by the launch of a record number of 19 new and redesigned
products. Also contributing to the company‟s recovery, five Toyota and Lexus vehicles captured
segment awards and five Toyota manufacturing facilities won plant awards in the annual J.D.
Power and Associates Initial Quality Survey. In addition, Toyota models earned five out of the
10 top spots in the Consumer Reports‟ 2012 Top Picks, the first time in nearly a decade that a
single brand had captured half the categories. And a total of 17 Toyota, Lexus and Scion 2012
models earned Insurance Institute for Highway Safety Top Safety Pick Awards.
Vision & Philosophy
Vision and mission
Toyota will lead the way to the future of mobility, enriching lives around the world with the
safest and most responsible ways of moving people. Through our commitment to quality,
constant innovation and respect for the planet,we aim to exceed expectations and be rewarded
with a smile. We will meet our challenging goals by engaging the talent and passion of people,
who believe there is always a better way.
Toyota South Africa is dedicated and committed to:
Supplying the range of vehicles, parts, accessories and services to meet the requirements of the
South African and export markets that it services
Ensuring that products are of outstanding quality, value for money and instil pride of ownership
Toyota Vision Statement
We have provided below details of the content of the ToyWe have provided below
details of the content of the Toyota Vision Statement, one of the most successful
companies in the World. An effective and successful Vision Statement is powerful and
compelling, conveying confidence and inspiring views of the future. The importance of a
Vision Statement should not be underestimated. One good paragraph will describe the
values, services and vision for the future.
e most successful companies in the World. An effective and successful Vision
Statement is powerful and compelling, conveying confidence and inspiring views of the
future. The importance of a Vision Statement should not be underestimated. One good
paragraph will describe the values, services and vision f
Guiding Principles at Toyota
1. Honor the language and spirit of the law of every nation and undertake open and fair
business activities to be a good corporate citizen of the world.
2. Respect the culture and customs of every nation and contribute to economic and social
development through corporate activities in their respective communities.
3. Dedicate our business to providing clean and safe products and to enhancing the quality
of life everywhere through all of our activities.
4. Create and develop advanced technologies and provide outstanding products and services
that fulfill the needs of customers worldwide.
5. Foster a corporate culture that enhances both individual creativity and the value of
teamwork, while honoring mutual trust and respect between labor and management.
6. Pursue growth through harmony with the global community via innovative management.
7. Work with business partners in research and manufacture to achieve stable, long-term
growth and mutual benefits, while keeping ourselves open to new partnerships.
Established in 1992, revised in 1997. (Translation from original Japanese)
Five Main Principles of Toyoda
Founder of Toyota
Always be faithful to your duties, thereby contributing to the company and to the overall
Always be studious and creative, striving to stay ahead of the times.
Always be practical and avoid frivolousness.
Always strive to build a homelike atmosphere at work that is warm and friendly.
Always have respect for spiritual matters, and remember to be grateful at all times.
Toyota was established in 1937 in Japan. First time it introduced its product Corona in the
US in 1965. By the 70‟s, Toyota was the best-selling import brand in the US. During the 80‟s, it
started manufacturing vehicles in the US. In 2006, it had globally become the second largest car
seller and third largest car sellers in the US having more than fifteen percent market share. It is
estimated that by 2008 it is going to be the number one car producer and seller both in the US
and across the world. This profound success of Toyota is associated with its most proficient
market strategy. The case of Toyota notably proves that how important is market strategy in the
life of a company to be a market leader.
Toyota‟s mission statement is as follows: “To sustain sustainable growth by providing the best
customer experience and dealer support.” (Toyota, 2007)
Customer satisfaction is the driving force for Toyota, which inspires it to provide the highest
quality products and services. “Kaizen” is a word that Toyota upholds, which means “continuous
improvement” of its technology, products, and services. In short, Kaizen for customer
satisfaction is Toyota‟s mission. Toyota further explains its mission as follows:
“Around here our values are just like yours. We are hard working. We are active in
community. We are creating jobs. We celebrate our diversity. We are building cleaner greener
cars. And this is just the beginning.” (Toyota, 2007)
2. Distinctive Competencies of product
Among others, three distinctive competencies of Toyota are remarkable. These distinctive
competencies appeal the consumers, build trust with them, and make them satisfied. These
competencies are as follows:
i. Popular Economy Car: Toyota is best known for „popular economy car‟. It has successfully
branded the concept of „popular economy car‟, by producing cars matching to the concept.
It has garnered its success by selling the concept to the consumer. It has also become
profoundly successful in segmenting, targeting, and positioning. As a result, based on the
pricing reports generated by over ten million visitors, out of top ten cars, three are Toyotas
– Toyota Camry (No. 2), Toyota Corolla (No. 4), and Toyota Avalon (No. 8). (Kelly Blue
Book, 2007) It produces eight varieties of cars. Among them, the prices for the four
varieties cars range 10,000.00 US $, three varieties range 15,000.00 US $, and one
variety ranges slightly over 20,000.00 US $.
ii. Cutting-edge Technology: Toyota simply did not stop to the concept of „popular economy
car‟. This concept could have easily turned into product maturity and decline. But Toyota
continuously engaged in improving technology – design, looks, comfort, fuel efficiency,
environmental friendliness, and other technical improvements. For example, Toyota
Corolla was first introduced in Japan in 1966 and in the US in 1968 as a first generation
Toyota Corolla. Since then roughly in every three years it is being developed and
marketed in a new model. By 2006, tenth generation of Toyota Corolla was already
launched with significant technological improvements. Toyota‟s hybrid cars can be taken
as another example. It started producing hybrid cars in 1995 however till 1999 Japan was
the only market for its hybrid cars. Coming to 2005, it became successful to capture a
large chunk of US market. Today, it is selling almost seventy five percent of its hybrid cars
alone in the US market.
iii. Low maintenance and operating Cost: Why consumers purchase Toyota? The simple answer
is that Toyota‟s cars are distinctive with the properties of low operating cost. For example, a
survey carried out by Toplin Strategy Group in 2007 has revealed that 73% of Prius
owners had bought Toyota Prius because of financial incentive to purchase the vehicle
such as lower sticker price or lower operating cost than other choices. (Marketing Green,
2007) Similarly, based on 45% highway driving and 55% city driving with annual 15,000
miles Toyota Prius has been proved to be the most fuel efficient car than any of its
competitors such as Honda Civic Hybrid, Ford Escape Hybrid, and Lexus GS 450. (Fuel
3. Trends / Conditions
Among many other factors, demand for energy efficient and greener cars, demand for low
operating cost, and demand for high level of safety and comfort are the most significant factors
that are influencing the trends and conditions of automobile marketplace.
Today‟s automobile sector can be best described as one of the sectors that are trying
utmost to respond these important marketplace demands. Based on these demands, there is
both good and bad news for the auto industry, including for Toyota. Good news is that there is
surprisingly robust vehicle sale in the market. The bad news is that some of the leading
automakers are shedding thousands more jobs. Some of the automakers are also projecting
downward market trends. These trends are important because, automobiles are responsible for
13.3 million US jobs, and US $ 675 billion revenue in the US economy.
On a year-on-year basis, Toyota sales has surged 10.5%, General Motors Corp. has
showed a year-on-year improvement posting 12.1% sales gain, and Chrysler has taken a 15%
year-on-year sales dive, whereas Ford Motor Co. has stayed mostly flat, down 0.5%. In terms of
global sales, Toyota is in second position following GM. In terms of sales in the US market,
Toyota is in third position having 14.9% of market shares in 2006.
Union of concerned scientists in their 2007 report state that Toyota has regained second
place overall in the environmental rankings as well and is the only automaker to make
consistent improvements on its global warming score since 2001. Toyota has the best global
warming performance in six out of ten classes and better than average performance in the rest.
If past trends continue, Toyota may overtake Honda‟s global warming score within two years.
Doing so will require continued investment in hybrids. Globally, 53 millions new cars are sold in
2007. Out of them, 15.9 millions are sold alone in the US. In 2007, around the world, it is
estimated that there will be 806 million cars and light trucks on the road, out of them 244 million
will be in operation in the US alone. Currently, these vehicles burn nearly 260 billion gallons of
fuel yearly and by 2020, the number of cars and light trucks is estimated to reach above 1
The years of 2004 through 2007 will long be remembered as a pivotal period in the
automobile industry as during this period gasoline prices started a sea change among US
consumers that is finally creating a significant demand for fuel efficient vehicles. As a result,
has lead to the phenomenal demand for Toyota‟s Prius hybrid car. Responding to the demands
of consumers Toyota has expanded its investments in Georgetown, Kentucky plant to enable to
manufacture 48,000 hybrid cars yearly. Ford launched its first hybrids, and other carmakers,
including GM, were greatly encouraged in their own efforts to bring more hybrids to the market.
However, response to hybrids from U.S. makers has been lukewarm at best. Consumers
generally aren‟t as impressed with U.S. hybrid technology as they are with that of Toyota
In short, while the US based Big Three struggle, Toyota is being more strategic. It has
increased its capacity to manufacture over 1.5 million vehicles yearly in North America. On a
global scale, the company plans to sell 10.4 million vehicles by 2009, up from 8.8 million in
2006. The big news is that Toyota is most likely surpassing GM in global sales by 2008, making
Toyota the world‟s largest carmaker.
4. Organizational Objectives
Toyota has set seven fundamental objectives. Among them, to dedicate in providing clean
and safe products and enhance the quality of life everywhere through better production and
services is the main objective of Toyota. Similarly, its other objectives are: to honor the law,
language and culture of every nation with fair corporate activities; contribute to economic and
social development of communities around the world through corporate activities; create and
develop advanced technologies and provide outstanding products and services to customers;
foster individual‟s creativity and teamwork value; pursue growth through innovative
management; and work with business partners for mutual benefits.
To achieve these objectives and their effective implementation, it has clearly set fourteen
principles that are widely considered as Toyota‟s Ways. Based on these principles, Toyota
takes management decisions on a long-term philosophy, even at the expenses of a short-term
financial goal. It believes in a continuous process flow to bring problems to the surface, uses
visual control so that no problems are hidden, uses pull system to avoid overproduction, and
works like tortoise and not the hare. It standardizes the tasks and processes as the foundation
for continuous improvement and empowers employees by which it further enhances its ability to
use only reliable and thoroughly tested technology that serves the customers.
Similarly, its organizational objectives are further substantiated by its idea of developing
exceptional people and teams who follow the philosophy of Toyota, respect the network of
partners and suppliers, and learn from the practices. It believes in making decisions slowly by
consensus thoroughly considering all options and once the decisions are taken, it implements
the decisions rapidly. On top of that, by becoming a learning organization through relentless
reflection and continuous improvement of its products and services, Toyota can be exemplified
as a case that has achieved its organizational objectives successfully.
5. Strategic Business Unit
Toyota offers energy efficient, green, and popular economy cars, SUVs/Vans, hybrids, and
light trucks with safety and comfort measures in place. It produces more than two dozen
varieties of products. All of its products are globally very popular. Its products are sold in over
200 countries across the globe. On top of that, the US is the biggest market for Toyota. For
example, till 2006 it had sold more than 7 million Toyota Corollas alone in the US. In the
financial year 2006-07, in consolidated terms, it sold its products of 226.06 billion US $
(23,948.00 billion yen) and earned net income of 15.17 billion US $ (1,644.0 billion yen).
In 2006, Toyota was engaged in a variety of projects designed to solidify its foundations
while continuing to grow. On the product front besides its two dozen already launched products,
Lexus has launched its new flagship model, the LS, and the new global Camry went on sale. In
manufacturing, several new projects were started around the world. In May 2006, manufacturing
of the Camry began in Guangzhou, China, while in the United States, the Kentucky plant, which
in October 2006 celebrated 20 years of production, has started manufacturing the first Toyota
hybrid vehicle to be made in North America, the Camry Hybrid. In November 2006, the Texas
plant began producing the new Tundra truck, a key vehicle in Toyota‟s North American lineup.
In Japan, Toyota Motor Kyushu, Inc. has begun full-scale operations at its engine factory, and
Toyota Motor Tohoku Co., Ltd. has increased its manufacturing capacity.
In human resources development sector, following the establishment of the Asia Pacific
Global Production Center in Thailand in August 2005, Toyota has established the North
American Production Center in the U.S. in February 2006, and the European Global Production
Center in the United Kingdom in March 2006. Established as branches of the Global Production
Center in Japan, these were created to spread Toyota‟s manufacturing knowledge and skills
throughout the world in pace with the rapid growth of Toyota‟s overseas manufacturing.
In R&D side, Toyota has focused its efforts on three key areas: environment, safety, and
energy. It has made a special effort in the area of the environment by expanding its lineup of
hybrid vehicles, and has worked on R&D relating to plug-in hybrid. In addition, as part of
Toyota‟s efforts to respond to the diversification of energy, in 2007 Toyota has introduced a flex
fuel vehicle in the Brazilian market that will run on 100% bio-ethanol fuel. From this point on,
based on the philosophy of providing “the right car, in the right place, at the right time,” and in
accordance with the infrastructure and customer needs of each region, Toyota is striving for
promoting efforts to develop environmentally friendly technology and vehicles.
6. Portfolio Matrix
Based on the Boston Matrix, the market situation of Toyota is Healthy. To support this
statement, three products are chosen here – Camry, Prius, & Corolla. These all fall into the
category of Star as they are holding high market share and high market growth. All these three
products are well established and the growth is exciting. These are creating fantastic
opportunities. The only challenge is Toyota needs to maintain its Stars. And, it seems that for at
least a couple of years Toyota will maintain its Stars.
Toyota Corolla: It is a compact car, very popular throughout the world since it was first
introduced in 1966. In 1997 it became the bestselling car in the world; in 2004 it was the number
one selling car in the US in its segment with over 30 million sold as of 2007. In the US alone,
more than 7 million Toyota Corolla cars have been sold. Over the past 40 years, one Toyota
Corolla car has been sold on average every 40 seconds. Today, it is manufactured in 16
countries in the world. It has been almost steadfast in face-lifting each generation after two
years, and replacing it with an all-new model every four year. As a result, it has brought in
market its 10th generation model in 2006 in Japan and has been introduced to the US market
since October 2007. This product strategy of Toyota Corolla has helped it to be continuously in
the Star quadruple.
Toyota Camry: It is a mid-size car manufactured in the US, Australia, China, and Japan. In
some markets, the top range Camry models are seen as executive cars. The Camry has been
the bestselling car in the US, its largest consumer market, for nine of the last ten years starting
in 1997, with the only exception in 2001. The first generation Camry was introduced in 1983
in 2007 the sixth generation Camry has been introduced. The sixth-generation Toyota Camry is
the first generation in which it has been available as a gasoline/electric hybrid. EPA fuel
economy estimates for the 2007 Toyota Camry Hybrid 38 MPG in city and 40 MPG on
Toyota Prius: It is a hybrid electric vehicle and one of the first such vehicles to be massproduced
and marketed. The Prius first went on sale in Japan in 1997, and worldwide in 2001.
By the end of 2003, nearly 160,000 units had been produced for sale in Japan, Europe, and
North America. The Prius has won several awards, including the Car of the Year Japan in
1997/98, the North American Car of the Year 2004, and the European Car of the Year 2005.
EPA has recently revised environmental standards and the Prius 2007 has been acknowledged
as the most fuel efficient car sold in the US. Its market share in the US is growing each year. In
2000, Prius market share in the US was very negligible but by 2005 out of its total sale the US
alone had consumed about seventy percent.
7. Organizational Strategy for Growth
Toyota has already got market over 200 countries across the globe. Only in 2006, it sold
8.52 million of its products and has planned to be a number one car producing and selling
company by 2008. This ambitious strategy of market penetration is associated with its proficient
demographic and psychographic segmentation and targeting. It has successfully got high level
of positioning in the mind of the consumers with its brand and distinctive competencies as
discussed above disseminating through integrated market communication (IMC) techniques.
Toyota has diversified its product with a brand of right car in the right place. For example, it
has introduced a flex fuel vehicle in the Brazilian market that will run on 100% bio-ethanol fuel.
has introduced hybrid electric car (Prius) mostly for the market in the US, Japan, and EU. On
top of that in each two year it improves looking of its product and in each four year transforms
model into new one. By upholding this strategy of product development, Toyota has become
successful in managing product life cycle, more specifically it introduces product and keeps the
product growing without letting them to be matured and decline. Its exceptional organizational
strategy for growth is importantly nurtured by its strategy working with around 522 subsidiaries
around the world and successfully creating a wider market chain around the globe.
Another way of Toyota‟s organizational strategy for growth is that it reads the public mind
through its research department that monitors the industry and keeps tabs on demographic and
economic developments. Its mission: to predict consumer trends and create a lineup of cars and
trucks to capitalize on them. Each professional is expected to spend time out in the field talking
to car buyers. The Japanese have a name for it: genchi genbutsu - go to the scene and confirm
the actual happenings.
8. Market Share
While looking at the market share of Toyota in the US market since 1980 to 2006, it is
realized that its market share is continuously growing. For example, in the 80s Toyota‟s market
share in the US was about 5% and that has risen to above 15% by 2006. So in a twenty-five
years time Toyota has outstandingly tripled its market share in the US. On the other hand,
market share of its three major competitors GM, Ford, and Chrysler is gradually declining. In the
80s GM‟s market share in the US was above forty-five percent. But by 2006 GM‟s market share
has shrunk to 24%. Similarly, in the 80s Ford had more than twenty-three percent market share
but by 2006 its market share has come down to sixteen percent.
By being successful in increasing market share, Toyota has become the world‟s most
profitable automaker. In 2006, it sold 2.5 million cars and trucks in the US market alone.
Because, Toyota is already bigger than Chrysler in the US and is about to pass Ford by 2008,
Toyota‟s presence in the US is now so prominent that the 3,322 business leaders surveyed by
Fortune have named Toyota as one of America‟s most admired companies.
On the financial side, Toyota‟s net revenue for the fiscal year 2007 is 23.94 trillion yen,
which is an increase of 13.8 percent compared to the fiscal year of 2006. In 2007, its operating
income has increased by 19.2 percent to 2.23 trillion yen. Its net income has increased by 19.8
percent to 1.64 trillion yen. All of these figures marked record high. It is estimated that the
consolidated vehicle sales for the fiscal year 2008 will be 8.89 million units. The revenue for the
fiscal year 2008 is estimated to be 25.00 trillion yen. While we compare its net income from
2004 to 2006, it is clearly shown that its net income is increasing each year. For example its net
income for the year 2004 was 1,162,998 million yen that increased to 1,171,260 million yen in
2005, and in 2006 that further increased to 1,372,180 million yen.
9. Elements of Marketing Strategy
Toyota‟s segmentation and target market is guided by its philosophy of „right car in the right
place‟. Toyota has employed both demographic and psychographic form of multiple
segmentations and targeted its market on that basis. For example, it has segmented all the
countries across the globe as its market. But has also identified its focused market such as the
US, Canada, EU, Australia, China, India, and Indonesia. On top of that US is its first priority
being the biggest market. It is because, US consumes almost 30% of its products. Its products
range with different prices from US $ 10,000.00 to 30,000.00 plus. The economy class cars are
targeted to lower and middle level income people and the luxury cars are targeted to higher
middle and higher income group people. With a variety of product attributes it targets different
age group and professional groups of people. For example, for sport people it has sport cars.
For environmentally sensitive people it has Prius – environmentally green car. Likewise, it has
offered 100% bio-ethanol fuel car in Brazil, where is bio-ethanol potential. Likewise, those who
are truck lovers or professional who need trucks, it offers them different variety of trucks. In
its marketing strategy – segmentation, targeting, and positioning is nurtured by its variety of
offers and product attributes.
Further, it has designed its market strategy at different levels – global level, regional level,
and national level based on the assessment of customer needs and choices. Toyota focuses its
products in market with comfort, kindness, and excitement. Toyota claims that its products
harmonize ecology and emotions. One of the key factors for designing segmentation and
targeting, Toyota‟s analysis is always based on the condition of market, economy, purchasing
capacity, and consumers‟ choices. Based on these factors Toyota is launching its global
motorization strategy with leading-edge technology.
Likewise, Toyota has upheld a very strong promotional strategy using integrated market
communication (IMC) tool. On top of that, Toyota blog (http://blog.toyota.com) is another very
successful mechanism of advertising and promotion. On its blog, Toyota closely pays attention
to the voices of its customers and provides responses to a large amount of inquiry.
10. Elements of Market Planning
Toyota has adopted three important elements in its market planning – green, safety, and low
operating cost. Being based on these three important factors, Toyota has become successful to
garner the market opportunity. On the whole, there seem more opportunities for Toyota than
threats. However, there are some threats that cannot be denied.
Opportunities: Toyota‟s market share is growing each year. From about 5 percent market
share in 1986, it has acquired more than 15 percent market share in the US in 2006. Its
competitors‟ market share is declining each year, which is the biggest opportunity for Toyota.
Toyota and its competitors have similar segmentation and targeting but in creating positioning
Toyota has come off much ahead than its competitors because of its products‟ attributes.
Further, it is also ahead of its competitors in technology front. For example, it is the first
automobile producer that introduced hybrid in the market. Today, the market share for its hybrid
is growing exponentially. At the same time, hybrid products of its competitors are not
Threats: Besides opportunities in the marketplace, Toyota‟s most illustrated product – Prius has
not got much success in Europe and its market share is declining in Japan itself. Further, its
competitors – GM, Ford, and Chrysler have become more strategic and are being focused on
from cutting-edge technology to leading-edge technology. Toyota is growing with ambition to
pass the GM but still GM is the number one automobile in the US and the globe.
From the perspective of marketing strategy, Toyota can be taken as a company that has
successfully achieved its mission statement, successfully branded its distinctive competencies,
and profoundly achieved its organizational objectives. This success is based on its successful
market strategy. This is corroborated by the fact that all of its products studied in this paper
(Toyota Corolla, Camry, and Prius) do fall into Star quadruple under the Boston Matrix.
In quintessence, it can be said that Toyota is an outstanding case for learning how to build
and implement market strategy, get penetration in the market, manage product life cycle, uphold
market positioning, best use of integrated market communication (IMC), and branding its
product in the mindset of the customer. In short, Toyota is a notable example that proves how
important is marketing strategy in the life of a company and managers.
“Toyota: Developing Strategies for Growth” 2011
In order to have a successful strategy for growth, businesses must first find, evaluate and select a
strategy to capture a potential market. Since it entered to American car market in 1967, Toyota
has developed a diverse business portfolio with its existing line of cars as well as brands such as
Lexus and Scion. It became a successful car manufacturer by having an effective marketing
process that allowed it to attract customers and expand its product range to other market
When Toyota and other Japanese carmakers entered the American market, they were not
considered a threat to the American auto industry because it was believed their cars had no
appeal to American consumers. However, in the 1970s, due to problems such as the 1973 Oil
Embargo, environmental regulations, and quality control issues with American cars (Ford Pinto),
a good number of American car owners began searching for alternatives to their gas guzzling,
poorly made American cars. In response to these changes, Toyota and other Japanese carmakers
aggressively marketed their cars to Americans as being fuel-efficient, environmentally friendly,
and having better build quality than American cars. In addition, Toyota marketed their cars as
being hip and fun with memorable slogans like, “you asked for it, you got it, Toyota,” and with
commercials involving young Toyota drivers jumping in the air. As a result, the Japanese‟s
marketing campaign along with continuing problems from the Big Three auto manufacturers,
allowed import cars to make up about 20 percent of the US car market by 1980.
After successfully gaining a sizable market share in the US, Toyota decided to create the Lexus
brand in 1989 to target the luxury-car market segment, which was dominated by Mercedes-Benz
and BMW. They decided to create a new brand because of their reputation at the time for being a
company that only offered fun and fuel-efficient compact cars and because the introduction of
luxury models into their existing lineup would dilute the Toyota brand. Therefore, Toyota
marketing strategy was to market Lexus as a separate company with almost no references to
Toyota, a heavy emphasis towards quality customer service and it had a separate dealership
network from Toyota. This marketing strategy has allowed Lexus to become one of the best
selling luxury cars in the US by 2000 and it encouraged Nissan to sell luxury cars with the
Despite the successes of both Toyota and Lexus, it began to face a new problem: age. Presently,
Toyota‟s new customer base is 47 years old, which is higher than the industry average of 45 and
placed Toyota‟s average customer base with the likes of Buick, Mercury, and Lincoln. In
response to their aging customer base, Toyota formed a study group called Project Genesis to
develop a marketing campaign to attract younger buyers to Toyota. The result of Project Genesis
was the introduction of sportier and “youthful” models to the US: the Celica, MR2 Spyder and
Echo in 2000. Unfortunately, Project Genesis was a failure because it had a dull marketing
campaign that failed to create a common theme for the different cars, sales for each of the
models did not reach Toyota‟s expectations and the entire study group failed to realize that
Toyota had developed a reputation for making generic cars. As a result, Toyota Motor Sales
USA has decided to phase out the Celica and MR2 Spyder by 2005.
Although Project Genesis proved to be a failure, Toyota made another attempt to capture the
youth market by creating a third brand called Scion in 2003. Unlike Lexus, which was created to
sell luxury cars, Scion‟s purpose is eventually attract American youth into becoming Toyota
customers by first introducing them to relatively cheaper and radically designed cars. Scion
currently has three cars in its lineup: the xA and xB, rebadged Japanese-only cars whose design
does not fit the Toyota and Lexus brand philosophy, and the tC, a newly designed car based on
the preferences of American youths. In addition, Toyota focuses mainly on the youth market by
advertising through youth-oriented media (Rolling Stone, MTV, late-night programming),
creating a flashy website to highlight their brand philosophy, and sponsoring live concerts. Not
only does it specifically target the young buyers, but they also simplified their sales tactics by
offering no-haggle pricing, which means that Scion dealers will not be allowed to negotiate
prices or pressure a potential customer into buying, and giving their customers a high degree of
vehicle customization. Because of these marketing tactics, Toyota was not only able to bring in
younger customers but it also encouraged Honda and Nissan to consider introducing youth-
oriented cars into their lineup.
Toyota‟s successes are due largely to its ability to identify growth opportunities and develop
market strategies to capture them. First, they achieved greater market penetration by marketing
their cars as fuel-efficient, well-built alternatives to the gas-guzzling, problem-prone American
cars, which eventually allowed them and other Japanese companies to take a sizable market
share away from the Big Three carmakers. Second, Toyota was also able to identify new
opportunities for market development and spent time on product development to tap into these
markets. The results of Toyota‟s product development were the creation of Lexus and Scion,
brands that both offer a unique lineup of cars, a unique brand philosophy, and services that target
the luxury and youth market. Third, in spite of their successes in capturing new markets and
achieving greater market penetration, Toyota occasionally downsizes their products such as the
Celica and MR2. To sum up, Toyota is a great case study on how a company should develop,
identify, and evaluate market opportunities and how to develop the right products and marketing
tactics to capture such markets.
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IV. COMPETITORS ANALYSIS
Brief History of Honda
Honda is well known worldwide due to it's various models of cars,
motorcycle, power equipment, marine engines and automobile engines. Honda is now the six largest
auto manufacture in the world. Honda is known to be of one of the worlds biggest motorcycle and
engines making company since 1959. Within 5 years, it became the largest motorcycle distributors in
the market at that time.
October 1949, Honda's founder Soichir Honda
established a research institute in Hamamatsu, Japan. He there developed and produced small 2-cycle
motorbikes engines. Later on, in 1948, Honda Motor Company was created. Then in 1959, Honda
established its first store front in Los Angeles. By 1962, Honda moved into the truck and automobile
sales. By then they controlled 65% of Japanese motorcycle market. During the 60's, America opened
doors for Honda to manufacture motorcycles for millions of Americans.
Honda Aviation - A Brief History
6/27/2007 1:00:00 PM
1986: Honda begins research in Japan on both small aircraft and jet engines.
1993: Honda begins research on composite body aircraft with Mississippi State University
(MSU), leading to development of aircraft called "MH-02" that is jointly fabricated and tested by
Honda and MSU. Research continues until 1996.
1995: Honda begins high altitude testing of its first generation turbofan engine, HFX-01,
conducting more than 70 hours of tests through 1996.
1999: Development begins of the HF118 turbofan jet engine in the 1,000 to 3,500-pound thrust
class, featuring a compact, lightweight, and fuel efficient design.
2000: Honda R&D Americas establishes a research facility at Piedmont Triad International
Airport in North Carolina in October 2000 for the purpose of researching, fabricating and flight
testing of HondaJet.
2002: Honda conducts high altitude tests of the HF118 engine starting in June 2002.
Honda publishes and reports its first technical paper in June 2002 concerning technological
achievements of the new airframe. Honda continues publishing technical papers, with the most
recent paper in June 2005.
2003: HondaJet takes first test flight, December 3, 2003. Honda makes first public
announcement of the achievement days later.
2004: Honda and GE Aviation announce February 16, 2004, an alliance to commercialize the HF
118 engine, and establish a joint venture, GE-Honda Aero Engines, LLC, in October 2004, to
pursue the development, production and sales of Honda's HF118 turbofan engine in the light
business jet market.
In July 2004, Honda establishes Honda Aero, Inc. to manage its aircraft engine business in the
U.S. and the Wako Nishi R&D Center in Japan to research and develop turbofan jet and piston
2005: HondaJet makes its public "world debut" at the EAA (Experimental Aircraft Association)
AirVenture 2005 in Oshkosh, Wisconsin, July 28, 2005.
2006: Honda announces that it will commercialize HondaJet at the EAA AirVenture 2006 in
Oshkosh, Wisconsin, July 25, 2006.
Honda Aircraft Company, Inc. (HACI) established in August 2006, responsible for Honda's
overall airframe business strategy, and the further development, sales promotion and production
of the innovative HondaJet.
Honda Aircraft Company, Inc. begins sales of HondaJet at the NBAA (National Business
Aviation Association) annual convention in Orlando, Florida, on October 17. HondaJet will be
powered by the HF120 turbofan engine. HondaJet is targeted for type certification in 3-4 years
with production in the U.S. beginning 2010.
2007: Honda Aircraft Company announces location of its $100 million world headquarters and
production facility at Piedmont Triad International (PTI) Airport in Greensboro, North Carolina,
Feb. 9, 2007.
Honda Aircraft Company breaks ground for new headquarters and production facility, June 27,
2007. Construction of the 218,000 sq. ft. offices and airplane hanger is scheduled for completion
in Spring 2008. The remaining 150,000 sq. ft. production facility is expected to be completed by
The American Honda Motor Company was established as a subsidiary by Honda
in1959. During the 1960's the type of motorcycles brought by Americans
underwent amajor change. Motorcycle registrations increased by over 800,000 in
five years from1960. In the early 60's the major competitors were Haley -
Davidson of U.S.A, BSA,Triumph and Norton of the UK and Motto - Guzzi of Italy.
Harley-Davidson had thelargest market share with sales in 1959 totalling a6.6
million dollars. Many of themotorcycles produced were large and bulky and this led to the
image of the motorcycler i d e r a s b e i n g o n e w h o w o r e a l e a t h e r j a c k e t
a n d w e n t o u t t o c a u s e t r o u b l e .
The Boston Consulting Group ( BCG ) report was initiated by the British governmentto study the
decline in British motorcycle companies around the world, especially in theUSA where sales
had dropped from 49 0n 1959 to 9 0n 1973. The two key factors thereport
identified was the market share loss and profitability declines an the
scaleeconomy disadvantages in technology, distribution, and manufacturing. The
BCGreport showed that success of the Japanese manufacturers started with the
growth of their own domestic markets. The high production for domestic demand
led to Hondaexperiencing economies of scale as the cost of producing motorbikes declined
with thelevel of output. This provided Honda to achieve a highly competitive cost
positionwhich they used to penetrate into the US market. " The basic philosophy of the
Japanesemanufacture is that high volumes per model provide the potential for high
productivityas a result of using capital intensive and highly automated techniques. Their
marketingstrategies are therefore directed towards developing these high model
volumes, hencethe careful attention that we have observed them giving to growth
and market share."( B C G
The report goes on to show how Honda built up engineering competencies through
theinnovation of Mr Honda. The company also moved away from other companies
whorelied upon distributors to sell their bikes when the company set up its
headquarters inthe west coast of America. The BCG found that the motorcycles available
before Hondaentered the market were for limited group of people such as the
police, army etc. ButHonda had a "policy of selling, not primarily to confirmed motorcyclists
but rather tomembers of the general public who had never before given a
second thought to a motorcycle"( SP p.116 ). The small, lightweight Honda
Supercub sold at under 250dollars compared to the bigger American or British
machines which were retailing ataround 1000 to 1500 dollars. In 1960 Honda's
research team comprised of around 700designer and engineer staff compared to
the 100 or so employed by their competitorsshowing the value which the company
placed on innovation. Production per man-year was 159 units in 1962, a figure
not reached by Harley-Davidson until 1974.
Honda was following a strategy of developing region by region. Over a period of four to five
years they moved from the west coast of America to the east coast. The
reportshowed the emphasis which Honda paid to advertising when the company spent
heavilyon the advertising theme " you meet the nicest people on a Honda"
Honda Motor Co develops, manufactures and markets a wide variety of products, ranging from
small general-purpose engines and scooters to specialty sports cars. The Japanese company uses
“The Power of Dreams” as its positioning statement and its car marques include Civic, Accord
RSS feed for Honda
Honda switches to selling the brand not product
Fri, 28 Jun 2013 | By Rosie Baker
Global brand campaign driven by telling stories about epic journeys on social media.
Brands and Bond
Thu, 20 Sep 2012 | By Sebastian Joseph
Marketing Week rounds up the best marketing campaigns around the upcoming release of the
latest James Bond film Skyfall.
Mainstream brands make a play for the super rich list
2 February 2012 | By MaryLou Costa
Recession? What recession? A new set of brands is muscling in on territory that until recently
was occupied exclusively by luxury goods and services providers by targeting the wealthy but
time poor community.
Honda ventures into the unknown with latest Civic ad
Tue, 31 Jan 2012 | By Rosie Baker
See the campaign here.
Honda partners with Love Hearts for tailor made ad
Fri, 6 Jan 2012 | By Rosie Baker
The car marque is offering drivers the opportunity to create a bespoke package of offers and has
teamed up with sweets maker Swizzels Matlow for a Love Heart themed campaign.
Engagement strategy aims to take long-term interest rates higher
10 February 2011 | By Michael Barnett
When Honda launched the UK‟s first TV ad that links to an iPhone app, the car maker sent a
clear signal that the focus of its marketing strategy has moved from driving sales to increasing
Honda Jazz ad jumps from TV to smartphone
Mon, 31 Jan 2011 | By Rosie Baker
See the interactive Honda Jazz ad here.
Advertising campaigns go green
Tue, 7 Dec 2010 | By Mary-Louise Clews
Honda and Heineken are bidding to reduce the environmental impact of their advertising
campaigns following the launch of new technology by Starcom MediaVest Group.
Honda unveils first crowd-sourced activity
Tue, 13 Jul 2010 | By Joe Fernandez
Honda is launching its first crowd-sourced, social media activated, documentary film, Live
Every Litre, following a nationwide search for ideas.
Honda looks within for head of UK marketing
24 June 2010
Honda has promoted Martin Moll, currently head of marketing for its power division, to the
newly created role of head of UK marketing for all its products.
Honda promotes new motorcycle with digital push
Tue, 15 Jun 2010 | By Joe Fernandez
Honda has unveiled a pan-European online campaign to promote its latest motorcycle model, the
VFR1200F Dual Clutch Transmission.
Honda readies major ad push for CR-Z hybrid coupe launch
Tue, 8 Jun 2010 | By Joe Fernandez
Honda is unveiling a pan-European integrated campaign to co-incide with the launch of its
hybrid coupe, the Honda CR-Z.
Honda brings back “Impossible Dream” ad
Mon, 26 Apr 2010 | By Joe Fernandez
Honda is to re-launch an “enhanced and extended version” of its ‟Impossible Dream‟ television
advert which features past and present Honda products.
HSBC names global banking marketing chief
Mon, 15 Mar 2010
HSBC has appointed Sarajit Mitra as global head of marketing and client experience for its
global banking and markets division.
Honda unveils new campaign as it boosts agency roster
Thu, 11 Mar 2010 | By Joe Fernandez
Honda has unveiled a new digital affiliate marketing campaign to promote its hybrid sports
coupé, the CR-Z. The marque has also appointed Elvis to handle its pan-European direct
marketing and digital advertising account after a pitch against undisclosed agencies.
Honda promotes marketers to Europe division under restructure
Fri, 5 Mar 2010 | By Joe Fernandez
Honda UK is restructuring its marketing department ahead of David Hodgetts joining as its new
managing director on 1 April.
othy Alcock February 13, 2011 0 Comments
An overview of the Mitsubishi motor company.
A look at the history and key vehicles of the Mitsubishi motor company.
Mitsubishi was originally founded in 1870 and was initially intended to be ran as a shipping
firm. The company regularly needed coal supplies for its ships and made the natural progression
into coal mining operations in the Takashime mine in 1881. Following this, the company went
on to manufacture aircraft and engineering parts and Mitsubishi then began shipping their
The first vehicle, the PX33, was created in 1937 and was a prototype
sedan intended for military use. This was the first Japanese passenger car with full time four-
wheel drive, something that Mitsubishi would integrate into future vehicles to gain success on
both the motorsport and commercial market. In 1947 the company manufactured an electric bus
and continued developing their ideas for scooters. The automotive division of Mitsubishi was
officially established in 1970 and from then on the company focused more on automobiles.
Throughout the 1960s Mitsubishi progressed further with the release of the company‟s first
micro-compact vehicle, the Mitsubishi 500 saloon. Following this, in 1960 the Galant was
released and went on to earn the company both widespread critical acclaim and commercial
success on the consumer market. During the 1970s Mitsubishi sold a 15 percent share in the
company to Chrysler. Through this deal Chrysler began selling re-badged Galants as Dodge
Colts which pushed the production of the model to well beyond 250,000 vehicles. In 1980
Mitsubishi reached an annual production of one million cars and in 1982 the Mitsubishi brand
was officially introduced onto the American market with the release of the Tredia sedan.
Recently the company released the Outlander Sport which features
steering wheel mounted audio and cruise controls, advanced gearless CVT transmission and a
new anti-lock brake system. The company have also branched out into environmental car
development with the new Mitsubishi „i‟ which is set to be released this Autumn featuring a 330
V Lithium-Ion battery and a rear wheel drive system.
Mitsubishi's Marketing Makeover
y Kathleen Kerwin Two years ago, Pierre Gagnon sounded like a man on a mission. The head of
Mitsubishi Motors North America bragged that his company's U.S. sales were soaring and would
double to 600,000 cars. And thanks to music-heavy TV ads and ultra-generous "0-0-0" financing
(a 0% loan rate, no money down, no payments for a year), the carmaker had what Gagnon called
"demographics to die for" -- plenty of young customers. The only trick, he said, was maintaining
momentum. "When we lose momentum, we cruise like a rock," he quipped.
For Gagnon, that caveat proved prophetic. Mitsubishi couldn't afford to maintain the incentives,
and sales crashed, falling 49% in two years. Many of those demographically appealing buyers
couldn't keep up with their car payments. A flood of repos and red ink later, Gagnon is gone,
replaced in late 2003 by Finbarr O'Neill, who steered Hyundai Motors to a major North
NO REASON TO SURVIVE? O'Neill is rushing to create the same magic at Mitsubishi. New
models won't arrive until next year, so until then his top priority is retooling Mitsubishi's
marketing. A new ad campaign, launched Oct. 11, promotess extended warranty and service
policies -- the same tricks he used to get buyers to look at Hyundai. The ads are catchy, but it's
yet another image shift for a Japanese brand that has struggled to find a niche in the crowded
U.S. car market.
Some analysts fear O'Neill's efforts come too late to save Mitsubishi. "They've been in the
market for 22 years, and they've failed to distinguish themselves from their competitors," says
John Wolkonowicz, auto analyst at Global Insight economic forecasters. "I don't see any reason
they should survive in the U.S."
O'Neill may be the last chance -- one reason he has been in overdrive since taking the wheel last
year. He has already taken the ax to the auto maker's Cypress (Calif.)-based operations. He has
killed the slow-selling Montero Sport SUV and Diamante sedan, halved low-profit sales to daily-
rental fleets to some 16% of sales, and cut production at the Illinois factory from two shifts to
one, a layoff of 1,035 workers there. Two rounds of layoffs have trimmed sales staff by 288 jobs,
"180-DEGREE TURN." Parent Mitsubishi Motors in Japan is anxiously awaiting improved U.S.
results. The carmaker is reeling from the scandal of its cover-up of past quality problems, and it
continues to bleed red ink, after 2003's $843 million loss. It's counting on a revival in North
America, where it racks up one-third of its sales.
O'Neill has a proven track record with his strategy at Hyundai of widely promoting extended
warranties to reassure customers that car quality has vastly improved. The theme of Mitsubishi's
new ads sounds awfully familiar. But in Mitsubishi's case, quality worries aren't the biggest
problem. It earns middling marks in J.D. Power & Associates' initial and long-term quality
rankings. However, O'Neill says the ads "address concerns that our brand might not be as good
as other Japanese brands."
Until recently, Mitsubishi styled itself as a brand with exciting cars appealing to the younger
crowd. "They're doing almost a complete 180-degree turn from where they had positioned the
brand," says Wesley R. Brown, an analyst with Iceology auto consultants in Los Angeles. "That's
only going to add confusion to an image that is already fuzzy."
THREE-PRONG MESSAGE. The real problem, analysts say, is that most of Mitsubishi's lineup
is fairly nondescript. The exception: the Lancer Evolution, or "Evo," modeled on a rally car and
launched last fall. Auto enthusiasts rave about the Evo, a $28,000-plus, turbocharged sports
compact. It scores "off the charts" with consumers, Brown says.
In January, Mitsubishi will introduce an updated Eclipse sporty sedan, followed late in 2005 by
the new Raider pickup truck, based on DaimlerChrysler's (DCX
) Dodge Dakota. Analysts don't expect either to be a hot seller.
The new ads, O'Neill says, are just the first phase of a three-prong message: Mitsubishi cars have
no-worries backing, distinctive design, and are fun to drive. Mitsubishi wants to be the brand
that's "a little bit different," he says. Car buyers "don't necessarily want plain vanilla. We need to
let them know that Rocky Road and Cherries Jubilee are out there."
LOTS OF INSECURITY. Perhaps, but whatever the flavor, O'Neill acknowledges that the
immediate goal is "about getting on shopping lists." It's an urgent priority. Researchers at
Compete.com say only 3.6% of current car shoppers are considering Mitsubishi, down from
6.2% in mid-2003. Its U.S. market share has already fallen to 1% this year, from 1.6% a year
If he can't improve those ratings quickly, O'Neill may find he has just as much job security as his
predecessor, Gagnon, no matter how good the ads, the extended warranties, or the cars. Kerwin
is BusinessWeek's Detroit bureau chief