The Strategic Route of Lexus - Term Paper Example

The Strategic Route of Lexus Introduction In the year 1989 Lexus was launched with an endeavor to offer a luxurious experience to its owners. Lexus is the luxury vehicle segment of Toyota Motor Corporation. Lexus is sold globally and has achieved immense success in the world and is known as premium brand for its luxury offerings in the automobile sector. Lexus has been perceived as the premium brand offering unique luxury (Lexus, 2010). Lexus has been successfully launched in the global market and has gained acceptance because of its premium category that has been able to attract more consumers. There have been huge sales of Lexus brand in different categories like hybrid, mid size premium and others. There are several models of Lexus. The focus is upon Lexus GS model that is available in two variants: GS 300 and GS 460. These two are the premium products and have the capability to attract the consumers (Lexus, 2010). Situational Analysis Summary There is huge potential in the global market of the brand Lexus and the opportunity can be captured properly with an appropriate marketing strategy. The company needs to identify the primary and selected market for attaining more sales of Lexus. The brand Lexus GS model will be discussed in this paper regarding its potential in the United Arab Emirates (UAE) market. This research paper looks to determine the potential market of Lexus GS in the UAE market for the upcoming years (2011-2013). There are certain factors that have already been discussed and now it centers upon the marketing strategy for Lexus GS. Marketing strategy is the key factor for the business success. There are two approaches i.e. primary and selective marketing strategies for the Lexus brand in the UAE market. The basic discussion of the paper is related to the type of demand that will be stimulated for the next three years. Both primary demand and selective demand will be focused upon the UAE market and one will be selected as a marketing strategy for Lexus. Strategic Considerations for Determining the Strategic Route Market Measurement According to the BMI survey, vehicles in the UAE market are estimated to be around 1.4 million and it rises by 10% on an average annually (Dubai Chamber of Commerce & Industry, n.d.). The UAE’s real growth for 2011 is expected to be 6.7%, 7% in 2012 and 6.7% in 2013. The per capita expected in 2011 is $43,030, $47330 in 2012 and $52160 in 2013. There is huge potential for Toyota Lexus market with increase in real growth and per capita income (Government of Ras Al Khaimah, 2009). According to Dubai Roads and Transport Authority (RTA), there were more than 1021880 registrations of new vehicles in the UAE market. The potential of the UAE market is estimated to be approximately 1542000. The number of new vehicle owners estimated to be 1021880 in 2009. According to Lexus in the UAE market there has been 315000 of Lexus (RTA, 2011). Based upon the figures, the absolute market potential is 1542000. New vehicle users are 1021880. Lexus users are 315000. Consequently, the following are the primary and selective demand gap: Primary demand gap = 520120 (1542000 – 1021880) Selective demand gap = 706880 (1021880 – 315000) This implied that in up coming years there is a huge opportunity in the automobile industry in the UAE market. The selective demand gap is more than the primary demand gap. If the selective demand gap is focused by Lexus in the next three years they will be able to increase their sales of the brand. Market Share BMW, Mercedes Benz and Audi are conventionally considered as ‘premium brand car manufacturers’. From the early 1990s Japanese luxury brands Toyota's Lexus and Nissan's Infiniti have increased their market presence in the Middle East’s luxury car market. Lexus has been follower of BMW, Audi and Mercedes Benz in the luxury car market of the UAE. According to General Motors, BMI research, the market share in 2007 for the luxury brands were as Mercedes 24%, Lexus 18%, BMW 17%, GM 14% and others 27% in the UAE automobile market. The market leader for 2007 was Mercedes (Goliath, 2008). The sales of Lexus had increased by 32% by the end of 2009. It is expected that the sales will be more in the coming years. The company is endeavoring to increase the market share to 40% in the upcoming years (Sheikh, 2010). The raise in the market share of Lexus in the UAE market might make them the brand market leader in the upcoming years. Pioneering Advantage Lexus GS Hybrid is a luxury brand and has huge opportunity in the UAE market. The differential offering of the premium segment in this brand is worth the value of the vehicle. Due to the rising price of the fuel and environmental damage that can be caused by modern day vehicles carbon emission, there has been a desire from the side of the consumers to search for alternatives. They are also looking for options that can meet these demands. Lexus GS Hybrid is an environment friendly car with the ability to consume less gasoline. This segment of vehicles emits lower toxic emission as compared to other powered cars. It causes less pollution and emits less carbon dioxide. This kind of vehicles is even supported by the governments and is expected to acquire huge consumer market on a global basis. The advantage of the car is that it is able to save gas. The new technology embedded in Lexus GS Hybrid allows the vehicle to save approximately 30 miles a gallon. The technology of automation in shutting off the engine when the car stops and starts when accelerator pedal is hit helps in reducing the fuel consumption (Toyota (GB) PLC - Lexus Division, 2010). Lexus GS Hybrid is the world’s only range of premium hybrid car that has wisely united petrol and electric power to provide outstanding performance with improved fuel economy and reduced emissions. This is the only hybrid that offers specialized offerings with luxury. This variant is unique and has increasing potential in the market of the UAE. The pioneering advantages are the key determinants of the Lexus brand to achieve greater success in the UAE market and help in capturing more market share. The opportunity in the UAE market is more as the predicted economic growth will help in increasing the sales of the automobile industry. In this segment of Hybrid category, Lexus with its GS Hybrid product has exclusive features. Due to its uniqueness it has the huge potential to capture more market (Toyota (GB) PLC - Lexus Division, 2010). Recommended Strategic Route Recommended Marketing Strategies for Primary Demand Primary demand is generally referred to the demand of the entire industry for a specified product category. It is difficult to determine the exact size of the market or how large the market is. The primary demand strategy helps in increasing the number of users through increasing the willingness and ability to buy (University of Manitoba, n.d.). This is done through representing the advantages of Lexis GS Hybrid and the benefits of the car. The ability to opt for Lexus GS Hybrid can be provided through discount offering or credit providing facility and also by making the car available with the aim that the consumers can get the delivery of it as and when they wanted. The base market price of Lexus GS Hybrid is $57950 in the UAE market (Lexus, 2010). The other option is to increase the rate of purchase from the existing buyers of car. This is possible through the increase of level of consumption, increase in the rate of replacement and broadening the usage events for Lexus GS Hybrid (Lexus, 2010). Recommended Marketing Strategies for Selective Demand The strategy is developed to retain the current consumers and acquire new consumers. Lexus needs to maintain consumer satisfaction, meet competitor’s offering and develop relationship marketing to retain consumer. Through head-to-head positioning, superior quality, differential positioning and price/cost leadership will help Lexus to acquire new consumers. This is possible with awareness in the brand leverage, product-line extension and brand expansion. Recommending For Selective Demand Strategy Primary and Selective marketing strategies focus upon two different perspectives of marketing fundamentals. For the UAE market, the best suitable strategy would be the selective demand marketing strategy. This will help in retention of the consumers and will increase new consumers of Lexus GS Hybrid. There is expectation of growth in the economic condition of the UAE market and this will help the brand Lexus to attract new consumers and retain the old consumers. Reasons for Applying Selective Demand Strategy The tools and techniques that are used in this strategy focus upon the retention of the existing consumers and try to generate additional consumers. Thus, it extends the market segment to wider category of new and existing consumers. The strategy also follows the relationship marketing concept that is important in recent competitive environment. The techniques used like head-to-head positioning, superior quality maintaining, price /cost leadership and differential positioning will help Lexus brand to gain competitive advantage in the UAE market. The market segment gets widened with increase in the target consumers that might turn out to be the potential consumers for Lexus. Retaining the existing consumers will provide better opportunity to market the new Lexus GS Hybrid. Strategies Retaining and expanding the consumer demand with the current and new consumer base will provide competitive advantage for Lexus. High Level of Consumer Satisfaction Lexus needs to provide higher level of satisfaction to the consumers through their service and product offerings that will increase the brand loyalty of the consumers. The loyalty will be generated only when the consumers are extremely satisfied. To sustain the level of satisfaction for the next three years, Lexus needs to extend the brand and the service offerings. The successful brand extension will help in generating loyalty. The process of brand extension needs to be evaluated in the coming three years. The level of achievement must be divided in the years for the actual achievement of the objectives. The relationship marketing will enhance the satisfaction level. Building a relationship with the consumers within the next three years should be through the professional approach and techniques in relationship building. The old consumers are required to be well communicated along with new consumers that will help in establishing the relationship in a positive manner and increase the brand loyalty towards Lexus. If Lexus is able to achieve extreme satisfaction level and loyalty of the consumers, then it will help Lexus in creating a new market with the existing and new consumers. The existing consumers can be converted into new prospect consumers of the new product offering of Lexus in the upcoming three years. The process might be slow but the possibility is huge. Brand Extension & High Quality Brand Stretch The new consumers can be attracted through brand extension and high quality brand stretch. Lexus in the Hybrid category has provided multifarious options with differential pricing strategy that have increased the Lexus brand extension. Lexus GS Hybrid in known for its environmental friendly vehicle in the premium segment (World Press, 2010). Lexus GS 450 Hybrid luxury entered in the year 2010 with changes in its exterior and by making it more stylish. Quality was focused and enhanced through several exclusive design features, advanced technology and high performance. Lexus GS 450 Hybrid features high level of standard luxury components. According to the Lexus Brand, “10-way power-adjustable heated and ventilated front seats, rain-sensing automatic windshield wipers, rear back-up camera and headlamp washers. Controls are simple and intuitive, avoiding needless complexity” (Car Show, 2010). The strategy of brand extension and high quality of brand stretch will make Lexus attract more consumers in the UAE market over the next three years (Car Show, 2010). In the three year plan, the brand needs to utilize the brand extension strategy and provide high quality cars to make the existing consumers procure the new Lexus GS Hybrid. The UAE market has the potential and the existing consumers can be converted into potential buyers. In the first year, the brand needs to focus upon the new consumers and in the second year they should concentrate upon new as well as existing consumers. The transformation will take time in conversation. It can occur that a set of consumers become convinced in buying the new car in the third year. In the third year, the focus should be more on attracting the existing consumers and less upon the new consumers. In this year, the export of the brand should be focused. There is huge market for export as market of the UAE is expected to increase in terms of automobile export. Acquire Competitors’ Customers In order to acquire consumers from competitor brands, Lexus needs to provide consumers a unique product like Lexus GS Hybrid that is unavailable with their competitors. This can be achieved in the upcoming three years through Head to Head positioning and Differentiated positioning (Marlin Group, n.d.). Head to Head Positioning This strategy is applicable as Lexus GS Hybrid has superior performance characteristics. Lexus has superior performing capability in terms of luxury, performance, safety and technology. The brand embracing such features will provide competition to other brands in the UAE market. The top competitors of the UAE market are ‘Nissan, Mitsubishi, Mercedes, BMW, Volkswagen, Jaguar, Land Rover, Ford and General Motors’. The strategy to position the Lexus brand with its unique characteristics will be able to attract many new consumers and consumers possessing other brand. In the upcoming three year, brand Lexus needs to focus upon the market of the competitors through strong characteristics of Lexus in attracting the consumers of other brands like BMW, Volkswagen, Nissan and others (Pride & Ferrell, 2008). Differentiated Positioning The positioning of the Lexus needs to be rectified in accordance with other brand’s positioning strategies in the UAE market for three years. The brand position of competitors needs to be observed and predicted for by Lexus for 2011 to 2013. Depending upon the probability of the brand positioning, Lexus needs to develop its marketing strategy. The competitiveness of Lexus brand needs to be developed to increase the level of sales in the upcoming years (University of Dayton, n.d.). Due to its unique features and performance of Lexus GS Hybrid, it will stimulate differential position for itself in the market and have a competitive advantage over other brands. To provide a differential offering the brand has been developed in such a way that the features and offerings make the brand gain more advantage than other brands. Especially for the UAE market, it will gain more sells due to its unique featuring and performance. Recommendations to Increase Selective Demand Product Toyota Lexus have found out that consumers are more interested in high technology with affordable price, quality, comfort, safety, convenient design and clean operation. According to the company’s research reports, they have invested in R&D and developed Lexus GS Hybrid that offers high technology with all the features that have been mentioned above. The product of Toyota Lexus is strong and has differential offerings in terms of quality, luxury, performance and is environment friendly. In the UAE market, there is no product like Lexus GS Hybrid that offers the dual mode of transmission. It is the only brand that offers such unique facility. The product is of high quality and has variety of offerings in terms of different accessories that enhances the product. Price The pricing policy of Lexus in this category has been kept at the range that can be affordable. There are many hybrid vehicles that are very costly due to their unique hybrid quality. But Toyota Lexus has developed the production system effectively and due to the reduced cost in the production of the vehicle, the Lexus is affordable. The Base MSRP (Manufacturer Suggested Retail Price) price is $579550. There are different options and accessories that come with additional charges. In the UAE market, there is huge growth for the automobile industry and there is every possibility for the Lexus to be sold in huge quantity with such pricing policy (Lexus, 2010). Promotion The Lexus GS Hybrid is known for its emerging category of new green luxurious car. This category is new and yet there are many competitors who have not yet entered in the segment. Lexus with its features provides the company opportunities to demonstrate its capabilities through promotional activities. The feature of the green luxury car promotes the vehicle. The combined feature of gasoline and electric provides Lexus a unique position. Since the category is new, for the awareness and knowledge spreading the Lexus GS Hybrid should be promoted through advertisement, road shows and car shows on television. This will help in generating the awareness of the vehicle and gain more business (Ansel, 2010). For the promotional activity in generating awareness of Lexus GS Hybrid there should be ‘drive program’ based upon fuel economy, pollutant emission, luxury and value for money. In this way, consumer will learn about the product and word-of-mouth advertisement will also be generated. This will provide an experience to the consumer and create awareness of the brand. The information about the brand will generate the potential market for Lexus. The selective demand market is huge enough to attract through the promotional activities that has been discussed above. Place For the distribution of Lexus and to promote and to sell in the UAE market, the AL-Futtaim Motors has been chosen. The AL-Futtaim Motor is the member of AL-Futtaim Group and is known for the largest distribution channel in the automobile industry of the UAE market. Al-Futtaim Motors has been able to continue as the market leader in the UAE automobile industry by maintaining rapidity not only with the quick progression of the UAE, but also with the technological advances and phenomenal expansion of Toyota / Lexus in Japan (Al-Futtaim Motors, 2010). This will help Toyota Lexus in terms of providing them a strong distribution channel and help them to gain competitive advantage in the UAE market. Summary The UAE market has huge potential for the automobile industry. The marketing for Lexus GS Hybrid in the UAE market can be best captured through selective demand marketing strategy. Providing higher level of satisfaction to the consumers with differential offerings and extensions in the brand and high quality brand stretch will create competitive advantage for the Lexus in the UAE market. The differential positioning with acquiring the competitors’ consumers will help in reduction of cost for developing consumer base and gain in competitive marketing environment in the automobile sector of the UAE market. The marketing mix fundamentals of product, price, promotion and place blended suitably according to the market environment of the UAE will benefit Lexus to be the market leader. The product is exclusive with affordable price and with a substantial increase of promotional activities; it is expected to generate demand for the green luxury car as the UAE automobile market is expected to grow in the upcoming years. References Ansel, T., (2010). The Infiniti M Hybrid Driving Experience. Gulf News. Retrieved Online on December 24, 2010 from http://gulfnews.com/life-style/motoring/the-infiniti-m-hybrid-driving-experience-1.676183 Al-Futtaim Motors, (2010). Lexus in the UAE. Lexus. Retrieved Online on December 24, 2010 from http://www.lexus.ae/ Car Show, (2010). Lexus GS 450h. Lexus. Retrieved Online on December 24, 2010 from http://www.netcarshow.com/lexus/2010-gs_450h/ Dubai Chamber of Commerce & Industry, (No Date). UAE Automotive Sector. DCCI. Retrieved Online on December 24, 2010 from http://www.dcci.gov.ae/content/Bulletin/Issue12/SectorMonEn_ISSUE12.pdf Government of Ras Al Khaimah, (2009). Investment Opportunities in Automotive Sector in RAK. A Sector Study on Automotive Sector in UAE with Regional Perspective. Retrieved Online on December 24, 2010 from http://www.rak-realestate.de/rak_pic/d03/d03i/Auto%20Survey%20report-12-1-10l.pdf Goliath, (2008). MEA Regional Case Study: Luxury Car Market. Market Share. 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