MBA800: Business Strategy Case
Toyota Motor Corporation – Launching the Prius

Executive Summary: Hiroshi Okuda, Toyota Motor Company is most recent appointed president, must decide whether to continue endorsing the project committee in charge of developing a fuel-efficient vehicle, the Prius. The project is made to be a shift for Toyota; yet developing the prototype has represented a large cost for the company since the technology needed to be created from scratch. Toyota has been recently criticized for producing non-innovative, look-alike models, not attractive for young new customers. Despite that Toyota Motor Company has registered an increase in its net sales; the profit margins have substantially fallen for the past 5 years. Toyota has seen its profit margin fall from 4.8% to 1.3%. Toyota needs to move fast to revert this tendency. Taking into account the bargaining power of customers and suppliers, the positioning of the different competitors and substitutes and the risk of new entrants, one could say that delaying the Prius would represent a potential loss for the company of establishing before its competitors a new market, different from the traditional automobile industry (Exhibit A). It is recommended that Toyota continue to pursue the development and production of a hybrid fuel-efficient vehicle to be put in the market as early as 1997.

Analysis: The automotive industry is facing new challenges regarding customers being more environmentally concerned and sensitive towards fluctuations in the prices of gas. This potential market segment would be interested in a hybrid powertrain such as the one being developed by Toyota. The company has a longstanding history of producing efficient, reliable and valuable cars. Toyota Production System exemplifies the company’s commitment to learning; all of the employees of the organization are committed to