The world’s largest automaker, Toyota has come a long way in its nearly 80-year history. The company launched its first passenger car, the Model AA, in 1936, copying the body design of Chrysler’s landmark Airflow and the engine of a 1933 Chevrolet. Toyota then suffered several challenges, including a financial crisis in 1950. However, when consumers wanted smaller, more fuel-efficient automobiles during the 1973 oil crisis, the company responded. The Toyota Corona and Toyota Corolla offered basic features and acted as the company’s new entry-level cars. Toyota also launched the Cressida, with the fuel efficiency consumers desired but space and amenities like air conditioning and AM-FM radio.
During the 1980s and 1990s, Toyota gradually added more models ranging in price, size, and features. In 1982, the company introduced the Camry—a four-door, mid-sized car that offered more space than the Corona and became the best-selling passenger car in North America. The first of the company’s popular SUVs, the 4Runner, appeared in 1984 looking and acting much like a pickup truck. It later morphed into more of a passenger vehicle and led the way for the Rav4, Highlander, and LandCruiser. Toyota also introduced a full-sized pickup truck—today’s Tundra—and several sporty and affordable cars that targeted young adults.
In 1989, it launched Lexus, its luxury division, promising an unparalleled experience starting with white-glove treatment at the dealership. Toyota understood, however, that each country defines luxury differently. In the United States, it meant comfort, size, and dependability; in Europe, attention to detail and brand heritage. As a result, the company varied its advertising depending on the country and culture.
In 1997, Toyota launched the Prius, the first mass- produced hybrid car, for $19,995—between the Corolla and the Camry. The company’s keen focus on developing a clean-energy car was brilliantly timed. Before the second-generation Prius hit showrooms in 2002, dealers had already received 10,000 orders. Over the next decade, Ford, Nissan, GM, and Honda followed the Prius with models of their own.
Toyota also started creating vehicles for specific target groups, like the Scion for young adults. Having learned this market wanted more personalization, the company now builds the car “mono-spec” at the factory, with just one well-equipped trim level, letting customers choose from dozens of customization elements at dealerships. Toyota marketed the Scion at music events and has showrooms where “young people feel comfortable hanging out and not a place where they just go stare at a car,” said Scion Vice President Jim Letz.
Another big reason behind Toyota’s success is its mastery of lean manufacturing and continuous improvement. Its plants can make as many as eight models at the same time, bringing huge increases in productivity and market responsiveness. The company also relentlessly innovates; a typical Toyota assembly line makes thousands of operational changes in a year. Employees see their purpose as threefold: making cars, making cars better, and teaching everyone how to make cars better. The company encourages problem solving, always looking to improve the process by which it improves all other processes.
Toyota has integrated its assembly plants around the world into a single giant network that can customize cars for local markets and shift production quickly to meet surges in demand from markets worldwide. The company is thus able to fill market niches inexpensively as they emerge, without building whole new assembly operations. “If there’s a market or market segment where they aren’t present, they go there,” said Tatsuo Yoshida, auto analyst at Deutsche Securities Ltd.
Over the years, Toyota automobiles have consistently ranked high in quality and reliability. In 2009 and 2010, however, the company recalled more than 8 million cars for potential perceived problems ranging from sticking accelerator pedals to sudden acceleration to software glitches in the braking system. The Lexus, Prius, Camry, Corolla, and Tundra brands were all affected. Next, Toyota lost billions of dollars when an earthquake and tsunami in Japan destroyed the company’s plants and parts suppliers in 2011. TMC President Akio Toyoda said, “We have faced many challenges since 2009, but have learned valuable lessons including the need for Toyota to maintain sustainable growth.”
Despite these challenges, Toyota recouped its losses. Its strong focus on hybrid vehicles has proved profitable and helped the company rebound. It sold its 4 millionth unit in 2012 and plans to continue to innovate hybrids, believing “there are many more gains we can achieve with hybrids.” Today, Toyota offers a full line of cars for the global market, from family sedans and sport utility vehicles to trucks and minivans. In 2013, the company earned more than 22 trillion yen (or $217 billion) and sold 8.87 million automobiles, edging past General Motors to become the world’s largest carmaker.
Source: Kotler Philip T., Keller Kevin Lane (2015), Marketing Management, Pearson; 15th Edition.