Lexus' Business Strategy in Germany


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This is a presentation that was created by myself and several group members for our International Business Capstone class for the Spring of 2009. This was our final presentation in which was graded at a 94%. This outlines our results and findings using business analysis and tatctics to draw conclusions and make recommendations for Lexus' business strategy in Germany.

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  • Lexus' Business Strategy in Germany

    1. 2. Alvin Alex Imani Carrasquillo Michelle Chin Hoon Choi Abhinav Dadarkar Kirby York
    2. 3. Eine Neue Dimension des Hochleistungsfahrens
    3. 5. <ul><li>Analyses </li></ul><ul><ul><li>History </li></ul></ul><ul><ul><li>SWOT, PEST, Industry Analysis </li></ul></ul><ul><ul><li>Corporate and Business Level Strategy </li></ul></ul><ul><ul><li>Market Research </li></ul></ul><ul><ul><li>Performance </li></ul></ul><ul><li>Results </li></ul><ul><ul><li>GDP and Price Inelasticity for luxury goods </li></ul></ul><ul><ul><li>Lack of establish history from Lexus </li></ul></ul><ul><ul><li>German pride in automobile industry </li></ul></ul><ul><li>Recommendations and Conclusions </li></ul><ul><ul><li>Lexus should stay in Germany </li></ul></ul><ul><ul><li>Competitive pricing away from value-luxury </li></ul></ul>
    4. 7. History <ul><li>Lexus </li></ul><ul><ul><li>Launch of Toyota into US </li></ul></ul><ul><ul><ul><li>1989 </li></ul></ul></ul><ul><ul><li>Popularity Increase </li></ul></ul><ul><ul><ul><li>Mid-1990’s </li></ul></ul></ul><ul><li>Separation and Globalization </li></ul><ul><ul><ul><li>2005 </li></ul></ul></ul><ul><ul><ul><li>Struggle with brand recognition in Europe </li></ul></ul></ul><ul><ul><ul><li>2006 first hybrid and diesel vehicles </li></ul></ul></ul><ul><ul><ul><ul><li>Lexus IS 220d did well in the United Kingdom </li></ul></ul></ul></ul>
    5. 9. <ul><li>Strengths </li></ul><ul><li>Expertise in the automobile industry. </li></ul><ul><li>Cost Advantage from know-how. </li></ul><ul><li>Top designs and functionality for the price. </li></ul><ul><li>Weaknesses </li></ul><ul><li>Lack of prestige due to its relationship with to the parent company Toyota. </li></ul><ul><li>Price does not match up to the European conscience of luxury. </li></ul><ul><li>Lack of Brand equity. </li></ul><ul><li>Opportunities </li></ul><ul><li>First-Mover Advantage. </li></ul><ul><li>New Distribution Channels. </li></ul><ul><li>Customer Taste and Preference. </li></ul><ul><li>Threats </li></ul><ul><li>Existing Competitors follow you. </li></ul><ul><li>Well established local competition. </li></ul><ul><li>Customer Taste and Preference. </li></ul><ul><li>Unionization </li></ul>
    6. 11. Political <ul><li>Currently run by the Christian Democrat Union </li></ul><ul><li>Powerful Green Party </li></ul><ul><li>CDU and SPD minimum wage battle </li></ul>
    7. 12. Economic <ul><li>Steady decline in GDP </li></ul><ul><li>Powerful Union makes doing business difficult </li></ul><ul><li>High unemployment rates </li></ul><ul><li>Two economic stimulus packages in 4 months </li></ul>
    8. 13. Social <ul><li>Competition with US in exporting goods </li></ul><ul><li>Environmental activism </li></ul><ul><li>C.A.F.E. (Clean Air for Europe) </li></ul><ul><li>Friends of the Earth </li></ul><ul><li>Anti-nuclear movement </li></ul>
    9. 14. Technological <ul><li>Known for engineering and innovation </li></ul><ul><li>Hydroelectric power </li></ul><ul><li>Wind energy </li></ul>
    10. 16. Threat of new entrants is Low. This is a capital intensive industry. Start up and R&D costs are very high. The bargaining power of suppliers is Low. Lexus works with small, high quality suppliers the selection of which takes 3-5 years. The threat of substitutes is relatively High. Competitors have a very similar line-up of cars. Differentiation is key <ul><ul><li>Bargaining power of consumers is Low: Consumers have weak bargaining power for luxury cars </li></ul></ul><ul><ul><li>Luxury is high and price, therefore “What you pay for, is what you get” </li></ul></ul>
    11. 18. <ul><li>Consumer Report </li></ul><ul><ul><li>JD Power and Associates in 2008 </li></ul></ul><ul><ul><li>Lexus among the top five most reliable brands in its annual car reliability survey </li></ul></ul><ul><li>Mission Statement </li></ul><ul><ul><li>To attract and retain customers with the highest value products and services and the most satisfying ownership experience in America. </li></ul></ul><ul><ul><li>High quality with total quality management and precision </li></ul></ul><ul><li>Pricing Strategy </li></ul><ul><ul><li>Price with competition or lose “snob appeal” </li></ul></ul><ul><ul><li>Lexus models </li></ul></ul><ul><ul><ul><li>LS 600H will receive a huge price increase which would push the brand into the ultra luxury segment. </li></ul></ul></ul>
    12. 20. <ul><li>Temple students from Germany </li></ul><ul><ul><li>Informal Interview </li></ul></ul><ul><ul><li>Primary data and cultural perception obtained </li></ul></ul><ul><ul><li>3 important conclusions derived from data </li></ul></ul>
    13. 21. <ul><ul><ul><li>“ Luxury is something that has a high price tag and that there is no middle between value and luxury” </li></ul></ul></ul>
    14. 22. <ul><ul><ul><li>“ If I had a choice between buying a Benz, Beamer, or Lexus I would definitely not choose Lexus.” </li></ul></ul></ul>
    15. 23. <ul><ul><ul><li>“ There is no brand trust in Lexus because of the lack of history it has with Germany” </li></ul></ul></ul>
    16. 24. <ul><li>High price inelasticity for luxury goods, therefore no middle between value and luxury </li></ul><ul><li>German luxury brands are favored over foreign luxury brands </li></ul><ul><li>History of a company plays a huge role in gaining consumer trust in Germany </li></ul>
    17. 26. Sales/Net Income 2007 2008 Toyota 14%/ 20% 10%/ 5% BMW 14%/ 9% (5%)/ (90%) Mercedes-Benz .2%/ 6% (4%)/ (66%) Audi 8%/ 23% 2%/ 32% Gross Profit Margin 2007 2008 Mercedes-Benz 23% 24% BMW 20% 14% Toyota 20% 18% Audi 17% 16%
    18. 27. Toyota vs. Indices (S&P,DOW,NAS)
    19. 28. Toyota vs. Luxury Competitors
    20. 31. In the News <ul><li>April 21, 2009 </li></ul><ul><ul><li>Lexus improving on research </li></ul></ul><ul><ul><li>Re-enter its “LF-A” premium two seater sports car in the Nurburgring endurance race in Nurburg German </li></ul></ul><ul><ul><li>May 21 to 24, 2009 </li></ul></ul><ul><ul><li>Help build the Lexus brand among German consumers </li></ul></ul>
    21. 33. Conclusions <ul><li>Failure </li></ul><ul><ul><li>Misuse of their self reference criterion </li></ul></ul><ul><ul><li>Arrogant based off of US performance </li></ul></ul><ul><ul><li>Beating BMW and Mercedes </li></ul></ul>
    22. 34. Conclusions <ul><li>Lack of Research </li></ul><ul><ul><li>In Germany the inelasticity for luxury goods is higher US </li></ul></ul><ul><ul><li>Per capita GDP is twice as high as the US GDP </li></ul></ul><ul><ul><li>The German students </li></ul></ul><ul><ul><ul><li>“ luxury is something that has a high price tag and that there is no middle between value and luxury” </li></ul></ul></ul><ul><ul><ul><li>“ If I had a choice between buying a Benz, Beamer, or Lexus I would definitely not choose Lexus.” </li></ul></ul></ul><ul><li>Lack of Reasonable Strategy </li></ul><ul><ul><li>1% Market Share attributed to Lack of Strategy—due to inadequate Market Research. </li></ul></ul>
    23. 35. Recommendations <ul><li>Stay in Germany </li></ul><ul><ul><li>Away from value luxury </li></ul></ul><ul><ul><li>More competitive pricing </li></ul></ul><ul><li>Pricing </li></ul><ul><ul><li>Lexus should not be in the middle segment in terms of pricing </li></ul></ul><ul><ul><li>Position Lexus as a luxury car </li></ul></ul><ul><ul><li>Building on platforms (Strengthening Current Relationships) </li></ul></ul>
    24. 36. Recommendations <ul><li>Models </li></ul><ul><ul><li>Minimize the diversification of models available in Germany </li></ul></ul><ul><ul><li>Eliminate American favored models </li></ul></ul><ul><ul><li>Exclusivity with more innovative features </li></ul></ul><ul><li>German citizens </li></ul><ul><ul><li>Build Brand equity amongst German Consumers </li></ul></ul>
    25. 38. A. Lange & Sohne