Lexus: marketing strategy

A shift in customer preferences in the early 1990s towards luxury cars prompted many Japanese automakers to launch their own luxury brands. In 1989, Toyota launched Lexus, which quickly overtook American and European automakers to become the number one selling luxury brand in the US. To counter competition from Lexus, American and European automakers launched sportier and lower-cost versions of their cars. Lexus's market share began to fall and it launched sportier versions of its cars to stay in the game. It also launched the Lexus brand in Japan in September 2005. But Lexus was still trailing behind European automakers in the high-end luxury segment in the US. To establish itself in this segment, Lexus launched the LS 460 in 2006 and also decided to aggressively pursue European markets where it could not establish itself due to the strong presence of European automakers. But analysts are doubtful about its success, as the European automakers have already established themselves in the high-end luxury segment in American, European and Japanese markets.

To understand the evolution and the dynamics of the luxury car market.

To discuss the strategies adopted by Toyota in establishing Lexus as a luxury brand in the US.

To discuss the rationale behind Toyota's change in competitive focus to target the high-end luxury segment in the US, Europe and Japan.

To debate whether Toyota would be successful in establishing itself in the high-end luxury segment in the face of increasing competition from established names in the high-end luxury segment.

Goods and service design (product)

This operation management decision is about deciding what type of goods or service to provide to customers and also how to design these products and services to appeal to the targeted customers. Toyota Lexus has to come to a conclusion on the type of cars they should manufacture. For example, should the car be high end or affordable? They need to decide a focus point which is whether the brand Lexus should appeal to the normal working class or swinging bachelors or rich entrepreneurs. This important factor needs to be carefully pondered over as it will affect the rest of the production and the target marketing later on.

The second important decision made was how Toyota designed the Lexus car. They considered the distinguishing feature of the brand and the manner in which they should apply to the design of the car. Since the price range of Lexus is generally higher; hence, the furnishing and engineering of Toyota should be more luxurious and of higher quality. For example, the Lexus IS is targeted toward richer consumers as it is designed as a compact executive car made to compete with the luxury sport sedans of other leading European brands.

Quality

Toyota as an automobile manufacturer definitely has to have quality control, and it has to be objective, measured against an accepted standard. Toyota’s way of measuring quality is continuous improvement or in Japanese term, Kaizen. Toyota quality management is also tightly related to their Just-in-time system.

As the focus is on Toyota Lexus, there is quality differentiation between Lexus and other brands. Lexus is a higher end range of Toyota cars and it is more expensive than other range of Toyota cars