Toyotas Best-Cost Producer Strategy

152
| Thompson-Strickland-Gamble: 1. Concepts and

Crafting and Executing Techniques for Crafting Strategy: Concepts and Cases, 16th
Edition
5. The Five Generic Competitive Strategies: Which One to Employ?
© The McGraw-Hill Companies, 2008
kecuting Strategy
oleh titive Strategies
152
Part 1 Concepts and Techniques for Crafting and Executing Strategy
Illustration Capsule 5.3

Toyota's Best-Cost Producer Strategy for Its
Lexus Line
Toyota Motor Company is widely regarded as a low-cost . Using its relatively
lower manufacturing costs to producer among the world's motor vehicle
manufactur- underprice comparable Mercedes and BMW models. ers. Despite its
emphasis on product quality, Toyota has Toyota believed that with its cost
advantage it could achieved low-cost leadership because it has developed price
attractively equipped Lexus cars low enough to considerable skills in
efficient supply chain management
draw price-conscious buyers away from Mercedes and and low-cost assembly
capabilities, and because its mod- BMW and perhaps induce dissatisfied Lincoln and
els are positioned in the low-to-medium end of the price Cadillac owners to
switch to a Lexus. Lexus's pricing spectrum, where high production volumes are
conducive advantage over Mercedes and BMW was sometimes to low unit costs.
But when Toyota decided to introduce its
quite significant. For example, in 2006 the Lexus RX new Lexus models to
compete in the luxury-car market, it 330, a midsized SUV, carried a sticker
price in the employed a classic best-cost provider strategy. Toyota took $36,000-
$45,000 range (depending on how it was the following four steps in
crafting and implementing its
equipped), whereas variously equipped Mercedes M Lexus strategy
class SUVs had price tags in the $50,000-$65,000
• Designing an array of high-performance characteris- range and a BMW X5
SUV could range anywhere
tics and upscale features into the Lexus models so as from $42,000 to
$70,000, depending on the optional to make them comparable in performance and
luxury equipment chosen. to other high-end models and attractive to Mercedes,
Establishing a new network of Lexus dealers, separate BMW, Audi, Jaguar,
Cadillac, and Lincoln buyers.
from Toyota dealers, dedicated to providing a level of Transferring its
capabilities in making high-quality personalized, attentive customer service
unmatched in Toyota models at low cost to making premium- the
industry. quality Lexus models at costs below other luxury-car Lexus models
have consistently ranked first in the makers. Toyota's supply chain capabilities
and low-cost widely watched J. D. Power & Associates quality survey, assembly
know-how allowed it to incorporate high- and the prices of Lexus models are typically
several thou tech performance features and upscale quality into sand dollars
below those of comparable Mercedes and Lexus models at substantially less cost
than comparable BMW models-clear signals that Toyota has succeeded in
Mercedes and BMW models.
becoming a best-cost producer with its Lexus brand.
against Starbucks, Folger's, Maxwell House, and asserted specialty

coffee retailers. Community Coffee's geographic version of a focus strategy
has allowed it to capture sales in excess of $100 million annually by catering to the
tastes of coffee drinkers across an 11-state region. Examples of firms that
concentrate on a well-defined mar ket niche keyed to a particular product or buyer
segment include Animal Planet and the History Channel (in cable TV); Google
(in Internet search engines); Porsche (in sports cars); Cannondale (in top-of-
the-line mountain bikes); Domino's Pizza (in pizza delivery); Enterprise
Rent-a-Car (a specialist in providing rental cars to repair garage
customers); Bandag (a specialist in truck tire recapping that promotes its
recaps ag gressively at over 1,000 truck stops), CGA Inc. (a specialist in
providing insurance to cover the cost of lucrative hole-in-one prizes at golf
world's largest online dating service); and
tournaments); Match.com (the
Avid Technology (the world leader in digital technology products to
create 3D animation and to edit films, videos, TV broad casts, video games,
and audio recordings). Microbreweries, local bakeries, bed-and breakfast
inns, and local owner-managed retail boutiques are all good examples of
en terprises that have scaled their operations to serve narrow or local
customer segments.

Toyotas Best-Cost Producer Strategy

Uploaded by

Copyright:

Available Formats

Toyotas Best-Cost Producer Strategy

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Toyotas Best-Cost Producer Strategy

Uploaded by

Copyright:

Available Formats

152

| Thompson-Strickland-Gamble: 1. Concepts and

Illustration Capsule 5.3

against Starbucks, Folger's, Maxwell House, and asserted specialty

You might also like