I.

Case Analysis
A. PRODUCT LIFE CYCLE
Introductory Stage
Product
-

Has gasoline engine

Diversity options to consumers
Energy savings and environmental friendliness
Comes with different color variants and features

Price
-

Costs about $3,000

Place
-

Easily available in dealers showrooms and online prius.toyota.com

Chat rooms priusenvy.com

Promotion
-

Educating consumers about Prius two years before introduction through

internet marketing
Initial ads with innovative tag line - A car that sometimes runs on gas power,
sometimes runs on electric power, from a company that runs on a Brainy

power.
Established a website and send e-brochures
Spent $15 million in marketing
Toyota has asked for tax incentives to stipulate purchase of Prius

B. MICROENVIRONMENTAL FACTORS
Company

With

the

increasing

gasoline

prices

and

becoming

more

environmentally conscious, introducing a gasoline hybrid car like Prius has

become a great challenge for Toyota.
In developing and marketing the Prius, Toyota has established a strong
model of how to effectively align sustainable goals and values with the
lifestyle needs of consumers, while drawing on its own core competencies.
Toyota continuous to drive revenue growth & brand equity from the
Prius,

which

improves

environmental

benefit

without

compromising

traditional product quality while including the intangible consumers values.

 Suppliers
Innovation from the nickel-metal hybrid batteries supplier "Panasonic
EV Energy" may contribute towards reducing costs through its own economies of
scale.

Marketing Intermediaries
Agents and dealers have become an important intermediaries toward
the success of the Prius and Toyota in general. These specially trained people
help explain and promote hybrid autos.
Toyota did not offer online purchase facility to customers as they did
not want to take any chance for interpretation of the features of Prius.
Consequently, Toyota hired agents and provided professional training to
them to provide maximum customer satisfaction.
Publics
To stipulate purchase of hybrids, government give tax incentives to
automakers. Besides, some states issued permits for hybrids to drive in the
HOV lanes without restrictions.
Moreover, politicians believe that they must appear tough on emissions
and gas mileage standards.
Consumers
The Prius was targeted to early adopters Baby Boomers and techies
who were attracted by the car's advanced technology and environmentally
friendly features. Similarly it is presumed that the value of the Prius is
justified by its fuel savings advantage.
Competitors
The Toyota Prius is not the only hybrid vehicle in the US market.
Another companion hybrid from Honda, the Insight, is another competitor
that was introduced in the first wave of hybrids. Other American car

manufacturers like Ford, DaimlerChrysler, General Motors, etc. were among

the major competitors of Toyota.

C. MACROENVIRONMENTAL FACTORS
Demographic Forces
Techies and youngsters are the major market in the US. They are known for
their interest in quality and willing to try new innovations like electronic ad-ons,
gadgets, etc.
Economic Forces
With the rising oil prices plus the financial crisis that affected peoples buying
power and spending patterns, saving on fuel was of utmost importance, and an

added value to this hybrid car.

Natural Forces

Toyota is an environmentally concerned company since it had

greater fuel efficiency and lower emissions. Prius was designed to be
environmental friendly for less air pollution and less need for oil exploration and
gasoline production. It took advantage of the environmental appeal by sending

out green seed cars shaped like Toyotas logo to prospective buyers,
wrapped some Priuses in green and gave away cars on Earth Day.
Technological Forces
Toyota aimed at working in technological advancement through many
features such as adding cruise control by some wiring, dashboard display

screen, playing video games and ad-ons like MiniDisc Player, MP3 players,
etc. Toyota was able to maintain customer loyalty since consumers favor scientific
and technological advancement.
Political Forces

To encourage purchase of hybrid cars, government gives tax incentives and

deductions which had a great impact on boosting the sale for Prius.
Cultural Forces
Americans love their cars and they are concerned about the environment.
They buy high-tech autos that provide high gas mileage and emit fewer air
pollutants. They have this culture that worships scientific and technological
advancement.

D. SWOT ANALYSIS
Strengths
-

Environment Friendly The Prius emits less air pollutants such as the Carbon

Dioxide (CO2)
Savings on fuel expenses Being a hybrid, it uses less fuel so it can have

higher gas mileage

Brand Equity The Toyota brand has established a good reputation globally

and is known for its quality products.

Strong Market Presence Toyota has been very aggressive in promoting the
Prius to the US two years before its introduction (e.g. Website, print ads, and

TV ads).
Product Differentiation The Prius is one of the first hybrid cars which can run
either in electric power or in gas power, depending on the speed. It boasts of
its advanced technologies such as its computer system and its regenerative

braking system.
Leader in green cars Development Prius was the first in a wave of hybrid
cars

Weaknesses
-

Expensive It is $3,000 more expensive than the Toyota Echo, which has a
similar engine power and has nearly similar features like the Prius, except for
the hybrid technology. Furthermore, there are other more cars which offer

higher performance but belong to the same price range as the Prius.
Weak Engine Power It is not a muscle machine, having a 1.5L 4-cylinder
engine which delivers only 114 horsepower. Hence, it is limited to certain
driving conditions.

Opportunities
-

Rising Environmental awareness Emerging campaigns for environmental

awareness such as Earth Day can help boost the Prius popularity.
Environmental Laws regarding CO2 emissions (UN) The growing concern for
the environment makes the US government create laws/regulations to
minimize the fuel emissions of cars, which Prius has a competitive advantage

on.
Government Incentives The tax incentives mentioned in the case makes the
Prius more attractive, and other government incentives may even be created

in view of the environmental concerns.

High Gasoline Prices The rising gasoline prices makes the Prius more

preferable than other regular cars, SUVs, or trucks.

Partnerships with Suppliers - Establishing partnerships with its suppliers,
especially the supplier of the battery, will help Toyota Prius improve its quality

and may lessen costs.

Technological Advances The Prius heavily relies on its technology and as
time passes, technology improves so Toyota can capitalize on this to further
enhance the Prius and achieve economies of scale to lessen costs.

Threats
-

Intense Competition As mentioned in the case, other car producers such as

Ford, Chrysler, and General Motors are also planning to enter the hybrid

market and these companies have the resources to enter the market.
Decreasing Fuel Prices Due to its volatility; it is also likely that fuel prices
may significantly decrease, especially when the demand for fuel decreases,

which can be brought about by the rising use of hybrid cars.

New emission standards

E. PORTERS 5 FORCES OF TOYOTA PRIUS

Supplier Power: High?
Buyer Power: Low?
-

Aspirational value (environmental)

Savings on gasoline

Competitive Rivalry: Low

-

As mentioned in the case, only one other hybrid is available in the US, which
is the Honda Insight; but Toyota was very aggressive in its marketing
strategies so it eventually gained a strong market presence.

Threat of Substitution: High

-

There are a wide variety of cars which can be substituted for the Prius
SUVs, pick-up trucks, sedans, and other compact cars which have already
established a good reputation in the American market. Moreover, the SUVs
and pick-up trucks are more attractive to the Americans because of their
space, comfort, and power which they highly value.

Threat of New Entry: Medium

-

As mentioned in the case, other US automakers are planning to enter the

hybrid market and they have the resources to do so. However, they may be
behind Toyota in terms of research and development, especially the
technological aspect of a hybrid car.

IV. Alternative Courses of Action (ACA)

V. Recommendation
Continue to improve fuel efficiency and maintain a leading position in technology
industry
Expand into new markets
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