Subject: Toyota Motor Corporation: Launching Prius Case Analysis
Hiroshi Okuda, the new president of Toyota Motor Corporation (TMC), deliberated about whether or not he should accelerate the launch of the hybrid car, Prius. His engineers proposed that the car be introduced in 1998. However, there were still significant technical problems with the car’s powertrain and mass production. In addition, Okuda believed that TMC needed a radical change of image and the Prius was the solution.
The case poses several issues. Should Okuda push for the Prius to be launched earlier? Should he give more time to the engineers to work out the problems for a “smoother” launch? What value is created for the buyer with the Prius as it is? Why is this launch so important? Is the automobile industry attractive? And does the hybrid technology make the industry more or less attractive?
The automobile industry for already established companies seems to be attractive. There is high competition, but not many competitors, 12 according to the case. Barriers to entry are high due to an intensive capital requirement. Indeed, according to the case, the cost to develop a new car falls between $750,000 and $3 billion, excluding marketing costs. In addition, when compared with other industries, bargaining power from customers is not as high. However, the buyer power can be expected to rise due to the increased oil prices that will trigger customers demand for fuel-efficient cars. The threat of substitution is high based on the aggressive competition. However, the hybrid technology and segment did not exist practically before 1994, creating a whole new market for automakers to pursue. The threat of substitution and competition would be low, providing TMC with a competitive advantage if it dominates the hybrid segment. However, new entrants from known competitors are expected, as well as bargaining power from suppliers due to the key components like the batteries needed to build the...