Toyota's Marketing Strategy in China - Essay Example

Toyota’s Marketing Strategy in China Introduction The Toyota motor company was requested by the Chinese government to make investments in China in the early 1980s, but it ignored those requests and focused its attention on entering, exploiting and penetrating the United States market instead. At the time the United States auto market was dominated by big names like General Motors and Ford and Toyota took the challenge to break into this market instead of breaking into the Chinese market. However in the 1990s with China’s growing economy and ensuing economic boom, Toyota saw the need to expand its operations aggressively into the Chinese market. With that one goal in mind the organization set up operations and looked at further penetrating and increasing its market share in China. Toyota was very optimistic that it would succeed in the Chinese market without a problem (Bremner & Roberts, 2006). But there in lay the problem. Toyota used the same marketing strategies that it had used in Japan to capture the Chinese market, which in the end did not work out so well for Toyota in China. In retrospect Toyota decided to then use the strategy it had used when entering and marketing in the United States and found that it had more success than it had when using the same strategies that it used in the Japanese market. There are quite a few reasons why the strategies used in Japan failed and why the strategies used in the United States worked well for the organization when entering, marketing and penetrating the Chinese market. In this document the author will look at the marketing strategies used by Toyota in the Japanese and United States markets. Then compare and contrast the two different strategies, analyze what worked in the China and what didn’t work and finally conclude why the strategy used in the United States worked for Toyota in China but the strategy used in Japan didn’t work for it. Toyota’s Marketing Strategy in Japan The Toyota auto company was founded during the World War II era in Aichi, Japan and since then has been a leader in the automotive industry in the country. During the war years the organization is known to have manufactured trucks to keep the war effort in the country going. Being a homespun company the organization had no difficulty in marketing, competing and penetrating the Japanese market and used many traditional methods of marketing at the inception and even today it uses a conventional marketing strategy when marketing in Japan in comparison to what it uses in the United States. For one thing the organization has always positioned its products as small, economical and of high quality in the market. Further the organization is a local organization and did not have to battle with other international brands in a foreign country when marketing in its own country but marketed the product as one that was manufactured at home and created brand loyalty in that manner. The organization sells its products through its dealerships that are manned by 40 – 50 year olds and emphasizes on innovation and technology that is now becoming more and more green friendly. The high-end models like the Lexus are positioned as high end luxury vehicles and don’t need to be aggressively marketed because they don’t face tough competition from the likes BMW or Mercedes Benz (Pollack, 1996). Further the organization has been in existence as long as its chief competitor Honda and has overtaken the market in fuel efficiency thanks to some of its models like the Toyota Prius, which has been touted for its excellence in the hybrid car market, which has led only to the increase in customer confidence and loyalty for the Toyota brand in the Japanese car market with every passing decade. Toyota’s Marketing Strategy in the United States In the late 70s and early 80s, Toyota faced immense challenges when attempting to enter the American automotive market, which was then dominated by the great American brands such as General Motors, Ford, Chrysler, Daimler and the likes. Not only was the market at the time saturated by these brands but also the car manufacturers themselves did not go down easily when Toyota entered the market. They even went as far as to have advertising campaigns that said “Buy American”. Further at the time there were many anti-Japanese sentiments that didn’t help the marketing efforts put up by Toyota to enter and penetrate the market. Further the cars were believed to be of lower quality than the American brands and they were also believed to be smaller – which at the time when Toyota was attempting to break into the market was not such a good thing as the American population was used to bigger and cars and trucks and not the compact models that Toyota was promoting. In order to combat these perceptions related issues and also the wrong perception the country had about the low quality of its products the organization attempted joint ventures with the Ford motor company, which gave Toyota one of its biggest doorways into the market. Also the oil crisis that was faced in the United States at the time came at a time when Toyota was facing issues breaking into the market and it capitalized on this opportunity and marketed its product line as low cost, small and energy efficient when compared to the “gas guzzlers” that were being turned out by the American automotive industry. This was Toyota’s first headway into the American automotive industry and since then the organization has not looked back. In the United States the consumers are more concerned about quality and reliability and Toyota was able to deliver on that promise far and above most of the American car manufactures’ that were its main rivals at the time. Further the organization was able to manufacture and deliver the products to the consumer at a lower price and thus was able to emphasize on value for money in terms of quality and reliability. Next the organization increased its product line and was always looking for ways and means to improve and be innovative, which further helped it to gain more market share in America. Last but not least today the organization prides itself in being the leading brand that manufactures energy efficient cars and has its flagship model the Toyota Prius to thank for it. The organization capitalizes on this image of being innovative, of high quality, lower priced, reliable and energy efficient and continues to grow in the American market. Comparison of the two marketing strategies There are quite a few differences and similarities that have to be considered when comparing and contrasting the two marketing strategies that are being used in Japan and America by Toyota. We will start by looking at the similarities and then move on to look at the differences. Both the United States and the Japanese market today are more and more concerned about innovation and energy efficiency and Toyota has gained immensely by tuning into this feature. Next both are very mature markets where purchase of vehicles for personal use has been in existence for decades. Last but not least in both countries the vehicles that are driven not only get the individual from one place to another but is also considered to be a sense of their self-image. In terms of differences of the marketing strategy being used in the United States from that of Japan. Toyota had to fight tooth and nail for every bit of market share it got in the United States when compared to Japan. In Japan, Toyota was a local brand where as in the United States it was a foreign brand that was looked upon suspiciously as one that held lower quality standards. Next the manner in which the product was sold was different. The dealerships in the United States had younger employees and they were compensated with high commissions and low fixed salaries, which was quite the opposite from what was happening in Japan. Further in Japan the consumers always looked for smaller, economical vehicles as opposed to the American consumers who were used to bigger, more expensive “gas guzzlers” and therefore Toyota was able to get a foot in the door only when the oil crisis hit the United States in the late 70s and early 80s. Last but not least in terms of manufacturing, Toyota had to get into joint ventures to start manufacturing in the United States instead of just opening up a manufacturing plant as it had done in Japan since its inception, this not only helped decreased the fears of low quality products but also helped increase the distribution channels that were available to the organization at the time. Why is China more responsive to the marketing strategy used in the United States than that used in Japan? Toyota has a 40% market share in the Japanese car market, 13% in the United States market and despite being in the Chinese market since the 1960s, in 2006 the organization still had only a 3.5% market share (Toyota in China: Full Speed Ahead, 2006). It is true that the organization has not really paid much attention to the Chinese market in comparison to the US market, which it has been aggressively marketing in, to increase its market share (Rowley, I. 2005). Further besides not paying much attention to the Chinese market until its economic boom in the 90s, the organization also used the same strategy it used in Japan when marketing in China, which has so far been a failure and the organization adopted the marketing strategy that has been adopted in the United States market, which seems to be more successful and has contributed to increased market share and more success for the organization (Toyota enters China auto market as a laggard, 2002). The reason that the marketing strategy that worked in the United States works so well in China instead of the one that worked in Japan is multi factorial. In the case of Toyota in Japan it did not have to battle with “anti-Japanese” sentiments, which is prevalent in China and was prevalent in the United States too at the initial stages. Therefore the marketing strategy adopted in the United States is more appropriate when breaking into the market in China rather than the one that was used in Japan. Next the Chinese auto market is very young and dealerships that are designed like the ones in United States are with younger sales people working on commissions rather than fixed salaries is more appropriate than the sales strategy that is used in Japan. Further like the United States in China too the personal touch of customer driven sales with the driving experience is more important in the sales process than it is in the Japanese market. Further getting into the market through joint ventures with the First Auto Workers like it did in the United States by working with Ford was another way to make headway into the Chinese market more effectively, since it was breaking into a market that was already flooded with other brands such as Hyundai and General Motors instead of just opening up manufacturing plants like it did in Japan. What Toyota should have remembered when it entered the Chinese market is that it is entering a foreign market and that even though it is geographically closer to Japan than to the United States the country is more open to the United States style of doing things than the Japanese way and therefore it is only logical that the marketing strategy that works in the United States would be the one that gives Toyota the edge in the Chinese market rather than the one that was adopted in Japan. Conclusion In conclusion it can be said Toyota is a foreign brand in China like it was in the United States when it first entered the market in the early 1980s and further the Chinese market today is more open to the United States and it is a younger market with many first time buyers and needs an innovative marketing strategy of an organization that is entering a foreign market, rather than one that is marketing in its own country. Therefore it is only logical that a marketing strategy that worked in the United States would be more successful in China than the one that was adopted over half a century ago in post world war II Japan. References Bremner, B, & Roberts, D (2006, March 9). A Billion Tough Sells. BusinessWeek. retrieved on February 8, 2008 from Pollack, A. (1996, November 22). For Both Car Makers and Consumers, a New Sales Factor. The New York Times. retrieved on February 8, 2008 from Rowley, I. (2005, December 21). Toyota: King of the Car World in ’06? BusinessWeek. retrieved on February 8, 2008 from Toyota enters China auto market as a laggard (2002, March 31). Asian Market Research News. retrieved on February 8, 2008 from Toyota in China: Full Speed Ahead (2006, March 8). BusinessWeek. retrieved on February 8, 2008 from Toyota Markets to China (2006, March 22). BusinessWeek. retrieved on February 8, 2008 from Read More