Leading a Wave of Hybrids

Microenvironment is defined as forces that are close to a company yet outside its internal environment that influence the ability of a business to serve its customers. Entities such as customers, suppliers, competitors, and other businesses that assist or influence a business’s ability to sell, distribute, promote, and develop products or services. (Marketing - defined, explained, applied, p.15, 2010). Based on this definition and the facts provided in the case study, the factors that affected the first and second generation Prius models are as follows: Consumers: The Gen I Prius was a “small, cramped, slow compact car with a dull exterior” which US based consumers did not find appealing since the US industry has always thrived on the “muscle car” look and feel.

This prompted Toyota to re-design the to the Gen II Prius which was more appealing based on several factors such as boost in power, a sleek exterior design, roomy interior with plenty of rear leg room and storage space, and advance technological features typically found in luxury vehicles.

The target market was for early adopters and techies who were attracted to the advanced technology and the environmentally friendly consumers. Suppliers: The suppliers had a major role in the success of the Prius by being able to design and manufacture batteries that were used in the hybrid vehicle. Without the aid of these suppliers Toyota would not be able to introduce the first hybrid car in the industry. Competitors: Toyota did not have any competitors with the Generation I Prius but they knew that competition was around the corner and dealt with pending competition by improving to the Gen II Prius which had better fuel economy, and better cost.

They also continued to increase their hybrid models and now supply 6 of the 15 U.S. hybrid models. Governments & Eco-Friendly Companies: Huge tax incentives from both federal and state governments, some states issuing permits for hybrids to drive in high occupancy lanes (HOV), and some states have provided free parking. Even eco-friendly companies have given employees monies to purchase hybrid vehicles has all helped to promote the Prius sales. Question 2 - Outline the major macroenvironmental factors- demographic, economic, natural, technological, political and cultural – that have affected Prius sales. How well has Toyota dealt with each of these factors?

Demographic – Toyota targeted the Prius for early adopters, environmentally friendly consumers, and techies who were attracted to the interesting gadgets and advance electronic technology that it offered. Economic – The Economic factor is solely based on the price of gas. As the price of gas rises it makes more sense to invest in a vehicle that has high fuel efficiency. The Gen I Prius averaged 42 miles per gallon (MPG) while the Gen II was at 48 MPG. The rise in oil prices around the world and the financial crisis that affected many people helped boost the sales of Prius. Natural – Toyota knew that crude oil resource is limited and that other substitute resources needs to be developed so as to break our dependence on crude oil.

The Prius was designed to use fuel more efficiently with fewer emissions to pollute the atmosphere which suits the need of current times well. Technological – Toyota incorporated several advance technological features into the Prius which were only found in high end luxury vehicles like cruise control, 7-inch energy monitors, 6 disc CD players, and dashboard display screens with built in navigation systems. These features appealed to the technological savvy customers who not only used these features as designed but also modified them by hacking into the computer system and modifying them so they could play video games, watch TV, and show computer files.

Political – The federal government and several state governments’ encouraged the sales of the Prius by giving big tax incentives and deductions, allowing owners to drive in HOV lanes, and provided free parking. But after these incentives phased out, Toyota was already spending millions on its campaign targeting the environmentally conscious and consumers desiring greater fuel efficiency. Cultural – As the awareness of global warming rises, the demand for more eco- friendly vehicles will increase which has been Toyota’s philosophy of being an environmentally concerned company. Question 3 – Evaluate Toyota’s marketing strategy so far. What has Toyota done well? How might it improve its strategy?

The marketing strategy consists of 4 P’s which are product, price, place and promotion. When the Gen I Prius was launched in the US in 2001 it was looked upon as “a small, cramped, slow compact car with a dull design.” (Marketing Casebook, 2010, p. 3) The product was then re-designed and the Gen II Prius was launched with state of the art technological features, roomy interior with plenty of leg room and gobs of storage, a sleek exterior appearance, available in 6 different colors, and most of all an increase of 6 mile per gallon in fuel economy than its predecessor.

These improvements were well appreciated by the consumers especially the targeted techies which showed in the increased sales. The price was right in line with competitive market segments which helped Toyota maintain an edge over other competitors and also retained its current customer base and profitability. There were several places where the Prius got its exposure; these included the dealers and showroom and the internet. The show room staff were well versed in the functions and features of the new Prius and detailed websites were available for consumers to get information from and make informed decisions. Promotions were done through owners who shared their hacking secrets through Priusenvy.com, through TV advertisements, auto magazines including Consumer reports, newspapers, and billboards.

Toyota created websites to distribute information and mailed out e-brochures to prospective buyers. All these avenues led to the success of marketing the Prius. By giving the consumers several ways and means of finding out detailed information about the Prius and by listening to the customer’s needs and wants and implementing them in the Gen II Prius, Toyota has captured the hybrid market. Going forward Toyota can better its strategy by developing additional improvements and/or incorporating additional customer wants and needs into future models e.g. giving more power to the vehicle while maintaining or even improving its fuel economy and eco- friendly emissions. Question 4 – GM’s marketing director for new ventures, Ken Stewart, says “If you want to get a lot of hybrids on the road, you put them in vehicles that people are buying now.” This seems to summarize the U.S. auto makers’ approach to hybrids. Would you agree with Mr. Stewart? Why or why not?

I would disagree with this statement because of several new developments that have happened in the hybrid/ electric car market. Firstly, if this statement was true GM would not have spent millions of dollars in the development of the Chevy Volt. Secondly, a unique hybrid model that has been developed properly with all the “bells and whistles”, and marketed well can capture the consumer market better than making every other model a hybrid model. Thirdly, a purely hybrid model stands out from the rest of the brands. Consumers tend to want to have something that is different and cool. Fourthly, price is a major factor in how consumers tend to buy their products, so having a unique model can be priced correctly to meet the customer demand. Even with all the hybrid models out there today, Toyota is still number one in sales on hybrid vehicles.

Several companies such as GM, Tesla, Fisker, and Nissan to name a few have developed or are developing unique vehicles which are powered 100% by battery and have very little if any fuel dependency and pollution. Consumers want to have trendy, most up-to-date technology that is practical, economical, and as a plus environmentally friendly in their products. The way of the future is being paved by these companies, and soon every car will be powered solely by electricity vs. gasoline.