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Competitive Strategies Case Study

Case Title:

Toyota's Lexus: The Changing Competitive Focus

Publication Year : 2006

Authors: Vasanthi Vara, Souvik Dhar

Industry: Automobiles


Case Code: COM0233

Teaching Note: Available

Structured Assignment: Not Available

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A shift in customer preferences in the early 1990s towards luxury cars prompted many Japanese automakers to launch their own luxury brands. In 1989, Toyota launched Lexus, which quickly overtook American and European automakers to become the number one selling luxury brand in the US. To counter competition from Lexus, American and European automakers launched sportier and lower-cost versions of their cars. Lexus's market share began to fall and it launched sportier versions of its cars to stay in the game. It also launched the Lexus brand in Japan in September 2005. But Lexus was still trailing behind European automakers in the high-end luxury segment in the US. To establish itself in this segment, Lexus launched the LS 460 in 2006 and also decided to aggressively pursue European markets where it could not establish itself due to the strong presence of European automakers. But analysts are doubtful about its success, as the European automakers have already established themselves in the high-end luxury segment in American, European and Japanese markets.

Pedagogical Objectives:

  • To understand the evolution and the dynamics of the luxury car market.
  • To discuss the strategies adopted by Toyota in establishing Lexus as a luxury brand in the US.
  • To discuss the rationale behind Toyota's change in competitive focus to target the high-end luxury segment in the US, Europe and Japan.
  • To debate whether Toyota would be successful in establishing itself in the high-end luxury segment in the face of increasing competition from established names in the high-end luxury segment.

Keywords : Toyota; Lexus; LS 460; Competitive Strategies Case Study; Luxury cars; Stand-alone brand; Customer service; BMW; Mercedes-Benz; Competitive focus; Price competitiveness

Contents : 
US Luxury Car Market
Luxury Car Sales in the US
Toyota’s Lexus
The Changing Competitive Focus

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