KSBM – Why has the Lexus model been very successful in the U.S. but has not been marketed in Japan? (Suggestion: Review the frequency of repair records of luxury cars. Also talk to Lexus dealers or Lexus owners).


Why has the Lexus model been very successful in the U.S. but has not been marketed in Japan? (Suggestion: Review the frequency of repair records of luxury cars. Also talk to Lexus dealers or Lexus owners).

Why has the Lexus model been very successful in the U.S. but has not been marketed in Japan? (Suggestion: Review the frequency of repair records of luxury cars. Also talk to Lexus dealers or Lexus owners).

 

General Management

 

Case : 3

One of the best examples of global competition is in the car industry. As the Japanese gained market share in America, U.S. car makers required the Japanese to self-impose quotas on cars exported to the United States. This encouraged Japanese firms not only to establish their plants in the United States but also to build bigger and more luxurious cars to compete against the higher-priced U.S. cars and the expensive European cars as the Mercedes and the BMW.

One such Japanese car is the Lexus, by Toyota. This car is aimed at customers who would like to buy a Mercedes or BMW but cannot afford either. With a sticker price of $35,000, the Lexus is substantially less expensive than comparable European imports.

In 1983, Toyota set out to develop the best car in the world-measured against the Mercedes and the BMW. The aim was to produce a quiet, comfortable, and safe car that could travel at

150miles per hour and still avoid the gas guzzler tax imposed on cars getting less than 22.5 miles per gallon. This seemed to be an idea of conflicting goals: cars being fast seemed irreconcilable with cars being at the same time fuel-efficient. To meet these conflicting goals, each subsystem of the car had to be carefully scrutinized, improved whenever possible, and integrated with the total design. The first version of the 32-valveV-8 engine did not meet the fuel economy requirement. The engineers applied a problem-solving technique called ‘’thoroughgoing countermeasures at the source.’’ This means an attempt to improve every component until the design objectives are achieved. Not only the engine but also the transmission and other parts underwent close scrutiny to make the car meet U.S. fuel requirements.

Toyota’s approach to achieving quality is different from that of German car manufacturers. The latter use relatively labor-intensive production processes. In contrast, Toyota’s advanced manufacturing technology aims at high quality through automation requiring only a fraction of the workforce used by German car makers. Indeed, this strategy, if successful, may be the secret weapon to gain market share in the luxury car market.

In the development of the Lexus, each aspect of the car was carefully studied with the consumer in mind. The car body and the rear, for example, were meticulously designed and tested  for  air  drag.  The  cars  of  competitors  serving  as  benchmarks  were  thoroughly studied. Similarities of the Lexus with the Mercedes and BMW are unmistakable. The name Lexus, by the way, was carefully chosen. Several potential names consisting of nonsense words were selected by the computer. Lexus, it was thought, conveys a sense of luxury.

To market the car, Toyota established a separate dealer network, an approach taken previously  by  Honda  to  sell  its  Acura  cars.  Again,  painstaking  effort  was  applied  in designing the showrooms and in training mechanics. For the introduction of the car, reporters were flown to Germany, where they had the opportunity to compare the Lexus with Jaguar, BMW, and Mercedes cars on the autobahn, which has no speed limit. After six years in the making, the $500 million car was finally born. What will the future hold for the Lexus?

European  car  makers  are  naturally  concerned  about  the  coming  invasion  of  Japanese luxury cars. Mercedes and BMW not only have to compete in the U.S. market but also may face threats of a Japanese invasion on the Continent as the European Union moves toward a global automobile market.

Since its birth in the 1980s, Lexus has grown into a formidable competitor in the United States. Lexus cars are known for their quality, reliability, and smooth ride. Originally, the ES 250 model was based on the less expensive Toyota Camry, a fact that competitors used in their advertising. By 2002, however, the company offered an array of models, such as the five passenger cars LS 430 (starting at $54,800 in the United States), ES 300, GS 430, and IS 300. These cars are supplemented by the LX 470, which is an eight-passenger sport utility vehicle, and the five-passenger RX 300. Critics think of some Lexus cars as being comfortable but boxy luxury vehicles. But this image does not apply to the Lexus SC 430, which Is a hardtop convertible with an automatically retractable roof. Clearly, the model lineup may have overshadowed General Motors’ Cadillac line, which was held in high esteem in the past. On the other hand, German brands such as Mercedes-Benz, BMW, and Audi as well as the Japanese Infiniti compete for the same markets as Lexus does.

Toyota’s Lexus has been a successful luxury car in the U.S.-but not in Japan so far. Japanese luxury car buyers have been favoring German cars made by BMW, Mercedes, and Audi (made  by  Volkswagen).  With  Toyota’s  popularity  in  Japan,  there  was  little  need  to introduce the luxury Lexus. Now, however, Toyota realizes the opportunity to sell their luxury model, the Lexus, to sell to young professionals with money. But it may not be easy because they appreciate the German engineering.

Cars that have been sold similar to U.S. Lexus models have been sold in Japan with the Toyota label. It might be a tricky task for Japanese dealers to sell similar cars with the Lexus name plate. To prepare the introduction of the Lexus models in Japan (the LS 430 is planned for 2006), Toyota trains its dealers in what has been called the ‘’Lexus College’’ for comparing its cars with the German brands. If Toyota is successful, Japan’s Nissan and Honda may follow with the introduction of their luxury brands Infinity and Accord, both available in America, but not in Japan.

Questions:

1: Could U.S. manufacturers apply the same approach as Toyota to build such a car? Why or why not? What might be some obstacles?

2:  Do  you  think  that  the  Lexus  can  obtain an  image  similar to  that  of  the  BMW  and Mercedes cars?

3: Prepare a profile of the potential buyer of the Lexus.

4: What should Mercedes and BMW do to counteract the Japanese threat in the United States and Europe?

5: Why has the Lexus model been very successful in the U.S. but has not been marketed in Japan? (Suggestion: Review the frequency of repair records of luxury cars. Also talk to Lexus dealers or Lexus owners).

Why has the Lexus model been very successful in the U.S. but has not been marketed in Japan? (Suggestion: Review the frequency of repair records of luxury cars. Also talk to Lexus dealers or Lexus owners).

Why has the Lexus model been very successful in the U.S. but has not been marketed in Japan? (Suggestion: Review the frequency of repair records of luxury cars. Also talk to Lexus dealers or Lexus owners).

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