Why Toyota was, is and will be Number 1

Why Toyota was, is and will be Number 1

I’ve recently conducted a research on the automotive industry in Australia and found out that over forty brands from all over the world are represented in Australia (AutoSourse, 2016). Considering the population of just over 24m (Statistics, 2016) the market should be so saturated that most of the car manufacturers would find themselves competing in the red ocean (Jones, Charles W.L. Hill & Gareth R., 2010) with squeezed margins and market share of 10% and under. Partially so.. see the table below:

Top 10 manufacturers in July 2016 in Australia (Davis, 2016)
Number	Manufacturer	Number of vehicles sold in July 2016	% of market share
1	Toyota	17645	25.39%
2	Mazda	8460	12.17%
3	Hyundai	7603	10.94%
4	Holden	7071	10.18%
5	Ford	6894	9.92%
6	Mitsubishi	5412	7.79%
7	Nissan	5304	7.63%
8	VW	4193	6.03%
9	Kia	3555	5.12%
10	Subaru	3356	4.83%
Total		69493	100.00%

 

The market is clearly dominated by Toyota, where others fight for their life in the top ten….

How does Toyota manage to maintain number 1 position in such a competitive market?

The secret of success lies in successful STP – Segmentation – Targeting & Positioning

How is Toyota segmenting the market and who do they target?

Toyota has implemented a successful tailored strategy and is targeting basically the whole market:

Toyota is supplying different products (Toyota, 2016) to cover all segments of the market:

If you look for your first car: Yaris, Corolla or used certified would be suitable

If you look for something sporty – 86 is your choice

Families with kids have a wide choice of sedans and SUVs (Camry, Aurion, RAV4, Kluger, Prado etc.)

Baby boomers might be interesting in LandCruiser, Prado, FJ Cruiser

Tradies may consider HiLux, LandCruiser 70, HiAce

Eco friendly: Hybrid range now includes Prius, Corolla and Camry

Luxury: Lexus

Well, where’s the competitive advantage here?

Mazda, number 2 in sales, has got similar range…although… no hybrid vehicles, no vans, no 4WD similar to LandCruiser, Mazda 3 costs $28’989 (Mazda, 2016) where Corolla with similar specs is currently at $21’990.00 (Toyota, 2016)

Mazda has finally introduced the capped price servicing where Toyota had it for a few years now.

Toyota is also greatly leveraging of their financial services, providing flexible finance & insurance options.

A friend of mine has booked a car for service with Toyota and has come back with a brand new car. A dealership has advised him that he can have a brand new car today and he’ll finish paying less per week than he was before. It is pointless to say, that he’s taken the offer and is currently enjoying his new car.

Market positioning

Generally, the companies compete on either quality or price:

1. Low price, low quality, widely available, heavy promotions
2. High price, high quality, exclusive availability, light promotions (Iacobucci, 2014)

The companies compete by either compromising on price and being low quality or being at the high end on the quality as well as price.

Toyota has managed to build a brand around the excellent quality for a very attractive price, which allows them to compete with such “low costers” as Hyundai and Kia and being ahead of the others like Nissan, Mitsubishi and Mazda on price.

It is also worth pointing three basic operational strategies that create value and allow to achieve a market share:

1. Operational excellence
2. Product leadership
3. Customer intimacy (Iacobucci, 2014)

Toyota has 53 overseas manufacturing companies in every part of the word, which, in partnership with parts manufacturers, allows them to service the global market.

 

Toyota way and continuous improvement has become synonym for operational excellence in production. Toyota was a pioneer in producing the first hybrid vehicle with very low emissions and excellent fuel economy.

Toyota was first to introduce the capped price servicing, allowing the customers to know their maintenance cost upfront. Ability to tailor the features in the vehicle and offering wide range of models has paid off in customer loyalty, lifetime value and therefore – great market share.

PS

The author is a Volkswagen owner and has not been paid by Toyota for this material, which may appear as a marketing promotional materials for Toyota.

References

AutoSourse, 2016. Car Manufacturers. [Online]
Available at: http://www.autosource.com.au/car-kitcar-manufacturers-2.php
[Accessed 6 August 2016].

Davis, B., 2016. Australian vehicle sales for July 2016. [Online]
Available at: http://performancedrive.com.au/australian-vehicle-sales-july-2016-corolla-returns-form-0312/
[Accessed 2016 Ausgust 6].

Iacobucci, 2014. Marketing Management. 4th ed. Mason OH USA: Cengage.

Jones, Charles W.L. Hill & Gareth R., 2010. Srategic Management Theory. 9 ed. Mason OH: South-Western Cengage Learning.

Mazda, 2016. Mazda 3 Pricing. [Online]
Available at: http://www.mazda.com.au/cars/mazda3/price-specification/
[Accessed 7 August 2016].

Statistics, A. B. o., 2016. Population Clock. [Online]
Available at: http://www.abs.gov.au/ausstats/abs%40.nsf/94713ad445ff1425ca25682000192af2/1647509ef7e25faaca2568a900154b63?OpenDocument
[Accessed 6 August 2016].

Toyota, 2016. Toyota Corolla. [Online]
Available at: http://www.toyota.com.au/special-offers-and-great-value/2016-Aug/Corolla_Ascent_Sport_Hatch_Manual?_ga=1.106713675.91191149461.26520608440
[Accessed 7 August 2016].

Toyota, 2016. Toyota Range. [Online]
Available at: http://www3.toyota.com.au/home?gclid=CLiUq-TQrs4CFdOSvQodOLAFOg&gclsrc=aw.ds&dclid=CIjDgOXQrs4CFY_PvAodiAgHfw
[Accessed 7 August 2016].