THE TOYOTA WAY : A Case Study
The success of any organization is attributed to the health of its stakeholders associated with it directly or indirectly. When an organization measures the quantum of its success, it studies the growth of its stakeholders- BUT there is one particular parameter that is still neglected by most of the major organizations- THE ENVIRONMENT.
Environmental health and environmental sustainability are some of the significant stakeholders in today’s global scenario. Companies have started brainstorming in this direction and think out of the box to include the environment as their significant stakeholder and to make it a “corporate culture.” Some companies focus on eliminating plastic bags, while others focus on a greener supply chain. There are multiple ways to measure the health of the newest stakeholder and let it prosper along with organizational prosperity.
When we think about environmental sustainability, AUTOMOBILE SECTOR is one of the few sectors that impact ecological health directly or indirectly. Automobiles have always been talked about in terms of pollution, CO2 emissions, etc.. yet it remains to be a vital part of human lives. Various steps have been taken from time to time by different automobile companies to cut down on pollution levels, but a large area remains unexplored.
Companies like BMW and TOYOTA MOTORS have taken significant steps to include the environment as a part of their business strategy and have scaled unprecedented heights……it remains to be seen how these companies fair in the decades to come.
Having mentioned the automobile sector, there is this one Company that has made environmental sustainability; it’s the way of working and call it “THE TOYOTA WAY.”
So what’s “The Toyota Way”??
Let’s explore…
ABOUT TOYOTA
In 2016, TOYOTA was named as the number 1 Green Brand… Ecofriendly not only in terms of products but also has planet friendly manufacturing practices.
The above success has been a result of adopting the environment and its care and protection as a part of business strategy. This has been a result of hard work that the Company has put in since in inception.
Headquartered in the city of Toyota in Aichi, Japan, Toyota Motor Corporation is a multinational automobile manufacturing company that has been ranked amongst the largest automakers in the world. A leader in automotive production, Toyota was founded as an automobile division of a large textile business house, Toyoda Automatic Loom Works, Japan, in 1933. Kiichiro Toyoda-founder of Toyota was a brilliant innovator of is time got his inspiration for stepping into automobiles from his business trips to Europe and the USA. These trips introduced him to the world of the automobile industry in the 1920s. In the year 1935, Toyota’s first cars A1 and G1 built, and within a couple of years, “Toyota Motor Corporation” came into being in the year 1937.
Acquiring the 40% market share in the domestic automobile car market and establishing its dominance in Japan, Toyota went international and started exploring the unexplored automobile markets in the late 1950s. Toyota began its global journey in the year 1957, where it introduced its Crown range to the US market. The US market proved to be a successful stint for the manufacturer, encouraging the manufacturer to step further and enter the European market in the year 1963. By the mid-1960s, Toyota has gained a high status that helped a great deal to challenge domestic car manufacturers. Having delivered its 10th million cars to a buyer in Germany in the year 2000, the car major achieved a humongous target of 200 million cars of production by the year 2012. Presently, with its production and distribution network spread worldwide, Toyota ensures providing its customers with best-manufactured cars and services, boosting its global sales curve.
TOYOTA AND HYBRID CARS
Hybrid cars and its history that are like an overnight sensation stretch back over 100 years. It may seem that Hybrid cars as a recent phenomenon, the technology has been around ever since the creation of an automobile.
The first Hybrid car was built by an engineer Ferdinand Porsche in the year 1889. Being such an old phenomenon, the hybrid technology could not gain momentum due to high prices and the inability of the car manufacturer with the rechargeable points. The concept became gone forgotten phenomenon until the 1960s-1970s when the United States reinstated the importance of cleaner air and also due to the oil crisis occurrence. It was during this time that Toyota Motors took the cues from the vast opportunity available in front of them and came up with TOYOTA PRIUS is 1997 in Japan. With the enormous emphasis on environmental awareness, PRIUS became a huge success overnight. With the overwhelming success of PRIUS in the Japanese market, TOYOTA launched the car in Australia, the United States, Europe, and Asia, and in the year 2000 and TOYOTA could witness some encouraging success trends in these continents.
The Company launched various versions of the car in the subsequent years with improved technology, design, and efficiency levels.
In the years to come, TOYOTA managed to carve a niche for itself where a considerable number of celebrities were endorsing this new age phenomenon and were called the “PRIUS PATRIOTS.” A compact and lighter in weight car that can deliver better fuel economy reduced emissions and low costs that were manufactured and researched to fulfill the overall mission of contributing towards the environment and protecting the environment from carbon emissions made the success of Toyota PRIUS a story to be narrated in the years to come.
However, Toyota’s success in the automobile sector has been unimaginable, its ability to make the use of an opportunity that was once forgotten has been a ladder that many still need to step on. The hybrid car has been a result of the Company’s hard work, its unique ability to convert its manufacturing processes greener and eco-friendly, and its dedication to delivering on its corporate social responsibility, which they proudly call as “The Toyota Way.”
So, what is this Toyota way and how it works deep within the organization that makes it a green company with a global vision of being the pioneer……..
Let’s discuss these in detail…
TOYOTA: CORPORATE SOCIAL RESPONSIBILITY
Being the leading car manufacturing Company in the world, TOYOTA continuously aims at maintaining its position amongst its competitors, and continue to lead with the current pace, the Company follows Corporate Social Responsibility which it calls “Contribution towards Sustainable Development.”
Since in today’s system, consumers are increasingly becoming aware of the environment and environmental protection activities. Today, a consumer wants to associate itself with the brands that are eco-friendly and aims at making ecological control as a part of its business strategy. It is this thought that made Toyota not only work hard towards maintaining its green system around its manufacturing units and but also do a lot of research and development in areas that help minimize the pollution by its cars and its manufacturing processes. Thus, the concept of sustainable development made Toyota strategize its policies at every level so that the environment can be protected at the maximum possible level.
Hybrid cars made Toyota a front runner in achieving its objective of the sustainable environment, and this has been one of the most successful Corporate Social Responsibility initiatives by the Company. The launch of Prius in 1997 in Japan revolutionized car manufacturing in the world. It is viewed as the most fuel-efficient and environment-friendly car by consumers across the globe. This high level of reputation has to lead the Company to attain high levels of production and profitability. The Company holds the record of selling the most number of Hybrid cars in the world and stands unbeatable till date with 67% of the market share in its kitty and accounting for nearly 14% revenues coming from an initiative that is an environmental pro and at the same time extremely profitable.
THE INITIATIVES
The launch of Toyota PRIUS has brought a significant amount of success for the Company and was labeled as the flag bearer of alternate energies car. But, the Company has been subjected to criticism for its usage of batteries in these hybrid cars. These batteries contained in the nickel-metal hydride (Prius Outdoes Hummer in Environmental Damage 2007) that was particularly harmful at the assembly line itself. The use of particular metal uses to cause damage to the environment. To minimize the impact of the same, the company R&D a species of flower called “Merchant” in 2009. This plant species is the offset from the CO2 that is released during the assembly operations of the Prius car itself. These flowers were derived from the “Cheery Sage” and “Gardenia,” which helps to absorb nitrogen oxide to reduce the heat from the atmosphere. These two flowers are particularly helpful in performing specific functions of absorbing the harmful gases (Cherry Sage) and also by reducing the temperatures of the surroundings by creating water vapor in the air (Gardenia). The invention helped the Company to focus on the production of the car since it could find a greener way to reduce the emissions at its assembly line process.
To further make a sustainable environment a part of its business strategy and adopt the concept at the lowest level itself…..the Company used the idea of reducing, reuse, and recycle at its manufacturing levels. In achieving this, the Company involves both its consumers and dealers and ensures that it uses the recyclable products that further can be reused multiple times. This can be explained like:
It is a well-known fact that cars are manufactured from plastics, and these plastics don’t get recycled easily. To solve this significant problem….the Company created a unique plastic called “Super Olefin Polymer” to manufacture the bumper and other parts. This plastic can be recycled many times and can be used for making various parts of the car.
Further, to add to its commitment to all its stakeholders in creating a greener society and achieving sustainable development for the Company, it involved both its consumers and dealers in reusing these recyclable plastics. For this, the Company heavily promoted a green strategy: in this, each battery has a phone number that ensures that the battery goes back to the Company itself. To further ensure that this practice is followed strictly, it started paying its dealers $200 for each returned battery.
A clean and green environment is achieved when every aspect is taken care of by any manufacturing unit. One such issue is waste management…. and in this regard, the Company created a waste collection system ensuring all the used parts of the cars are being collected from various parts of the countries and are being sent back for the recycling process. This particular process has been hugely successful in the European markets.
At the manufacturing level itself…, the water is recycled and reused after it is once used for washing purposes (since the water used on the cars is of premium quality and is away from any dirt and pollutants). For this, large water treatment plants are installed at the units and water after washing the car is re-treated and is used across all these manufacturing units. This helps in the usage of water at the maximum level and conserving it at the same time.
Toyota’s initiatives extend to the level of its supply chain management, where it ensures that suppliers are adopting the greenways of producing their products and also encouraging their vendors to take greener ways to procure/provide raw materials thus, guaranteeing a tier-2 clean environment reality and making it a success.
Other than these initiatives, there are numerous ways in which the Company ensures its involvement in social welfare activities like planting trees and conserving them, blood donations, traffic management, girl child development, etc. etc. These initiatives not only involve society at large but also builds up to an image of an organization that believes in environmental preservation (in all forms). We shall discuss how Toyota has managed to communicate about its eco-friendly Company in the coming paragraph…
An important point to be taken into account is that the Company makes an attempt to involve not only its employees in these initiatives but their other stakeholders like customers, dealers, etc. thus, creating an overall impact on the entire eco-system.
THE CORPORATE COMMUNICATIONS
The hybrid technology gave a head-start to the Company across the globe. Toyota had the edge over its competitors in terms of technology, production, and assembly lines. The Company cemented its success on the global platform with the communication strategy that it adopted, keeping in mind the audience and the economies of the counties. Adding to this, the Company wisely used the concept of image, identity, culture, and vision in its corporate communication strategy to achieve its global vision. TOYOTA wanted to be perceived as a “caring citizen” or, in other words, as a “globally responsible” company that is focused on developing a better society through its products and services. Also, it possessed an in-depth Information technology focus that helped the organization in monitoring a safer and healthier environment.
Keeping in mind its global vision of a cleaner and greener environment, Toyota launched “PRIUS” in 1997. Toyota has a unique strategy in mind for communicating its car, and instead of the same, the Company adopted different policies for both internal and external stakeholders. For its employees, the Company took a mix of old and new strategies. Communication mediums like bulletins and seminars were adopted that could help its employees understand what companies aim to achieve at, it, on the other hand, passed a new communication tool of screening movies- this was used to educate its employees about the initiatives that it had taken already and also the ones that it plans to initiate in the future. At a broader level… the Company participated in various environmental projects that got initiated either by the government or some NGO’s already associated with the cause. This helped them much in establishing themselves as a socially dynamic organization and communicated positively to society at large.
Another vital tool that Toyota used as a communication medium was called “Formula1,” where both the internal and the external stakeholders were present. The main intention was to make everyone give a common platform where they can exchange ideas and talk and watch the business strategy unfolding.
The above were some of the macro-level initiatives that Toyota had undertaken to communicate its vision to its stakeholders. There have been specific micro-level communication initiatives as well that were adopted. These partly were region-specific, i.e., the respective country’s political, social, economic view, and slightly were global strategies. I will discuss the region-specific communication mix in the paragraphs to come; as a part of a comprehensive communication strategy, the Company used a new communication tool called “themed messages.”
Themed messages were considered powerful tools because these messages helped the Company to position itself ahead of its competitors in terms of the message communicated. Another advantage that Toyota envisioned was the competitors were unable to copy the advertising strategy. Clearly, a smart move to stay ahead. Toyota used two different themed messages to communicate about their strategic moves. First was the preemptive message, which emphasized its global vision of the Company is an environmentally friendly company. The second was the symbolic message: “the car leaf logo.” The idea was to demonstrate the Company’s efforts to reduce the impact of its products and services on the environment.
As mentioned in the previous paragraph,…..the preemptive communication message suggested superiority amongst the competitors and ensured that they could not copy it. This effort mainly made them “leader in Green Manufacturing.” The characteristic style of communication helped in creating brand association through image-making, thus, ensuring that the consumers could associate themselves with a brand that equals to clean and green environment and also emphatic towards society.
All these were the efforts to structure the communication strategy in one direction. However, the Company revamped its corporate communication efforts from time to time. It combined its advertising and public relations department into one integrated group. Also, it decentralized its communication department. It now functions according to geographically separated subsidiaries and is directly linked to the company HQ. These made it easier to communicate as per the regions, yet keeping the global image intact.
Till now, I have talked about how climate change has influenced the functioning of any organization. Instead of the same, I studied how a car manufacturer took advantage of an unexplored opportunity and became a world leader with its efforts and various structural changes. I wanted to know how these efforts influenced its sales numbers. So, I am taking the launch of PRIUS in the UK market and how it’s a success story in an already very competitive market.
THE UK MARKET
The UK car market was almost owned by foreign-dominated players. The market has matured and has reached a new peak in terms of value and volume of cars sold. The market was dominated by foreign players and a single car dealership. To enter such a market, the Company hired “Oakly & Oakley” to prepare a communication plan for 3 years. It also assigned a budget of £9 million for the same.
The strategy was to differentiate between individual consumers and corporate customers. Despite the success in the Japanese and the US market, the Company wanted to carefully enter the European market. To maximize its reach, the Company segregated the target audience into two broad groups. The first one was of the consumers (or the individual buyers); the other segment was those of the customers (companies that bought for rentals or fleets). The customers or, in other words, the B2B part was a little lucrative because of intense competition, and thus, the focus on the private car segment (or the B2C segment) became a center of attention.
Being the first of its kind in the car segment, Prius was placed as a family small or middle segment car and had very little competition with Honda Insight, which was positioned as a sports car. Having analyzed the customer base, the Company worked on its marketing and communication strategy to design the campaign that can attract the maximum number of the consumer base. The details are as follows:
Demographic details: Educated well-informed adults that fall in the age bracket of 30-50 years. These adults can be married with responsibilities holding occupations in medium or higher managerial levels. However, the ethnicity of these individuals was not much important; these decision-makers so possess higher disposable income.
Psychographic details: With the given demographics, the population was divided into three categories:
- The Early Adopters: those who are keen on the latest technologies. The communication medium chosen for such were a group of people was the car magazines, trade press, weird, sky TV, BBC Three, and Discovery Chanel. These are heavy internet users with high-level cinema-goer and little radio understanding.
- Environmental Friendly: These are people that environmentally conscious and understand the impact of mechanization. These are a set of people who are socially aware but are more hesitant to try any new technology. The media channels used for such group Quality Daily Newspapers, National Geographic Channels. These are internet users and watch channels like BBC one/two etc.
- The Value-Conscious: this is a set of people that are looking for an ideal combination of high fuel economy and low maintenance. These are occasional internet users watch channels like BBC One/Two, Hunter, etc.
The three groups have been exposed to almost similar kind of outdoor activities and mostly need one or two motivational factors to make a purchase.
Geographic details: the target buyer more likely is to come from the urban parts of the country where problems like pollution and congestion were dominating already.
Understanding the basics of the target audience, Prius was heavily promoted in the UK market. It was advertised and assisted with the key theme of “fuel economy.” This ensured that a powerful message was sent to the audience aimed at stirring the sentiments of the viewers. Television ads were created where the theme was about a car that sleek, cool, hi-tech, smart cars that, at the same time, are environment friendly and affordable (Arens 2002). Newspaper advertisements were created where along with the super cool and sleek car performance, efficiency, and safety were the essential elements that were created (Fletch & Harper 2009). In addition to this, email advertising was also created as it was cost-effective and also was full of graphics and vibrant color slogans. (Belch, 2001).
Toyota Prius was a revolutionary product with unique features and a new technology that was unknown to the UK market. Therefore, an ingenious market communication campaign was designed to develop high levels of perception and awareness about hybrid technology. Fuel economy and efficiency, along with smart design, were central in the marketing campaign. Sales offers were provided to consumers to boost sales. A multifaceted and multidirectional strategy was designed, and advertising, direct marketing, and public relations were decided as the crucial tools for communication. Advertisements were run on television, radio, and newspapers (leading newspapers like Guardian & Telegraph were selected). Free briefs were conducted to create awareness. Educational seminars were also heavily promoted to educate the audience about hybrid technology. Test drives were made a part of the marketing campaign, and testimonies were made public to enlist the benefits. Direct marketing was also done through emails that were collected at the market analysis stage, and emails sent to individual customers so that they can understand the technology and its benefits.
Also, a specific website was dedicated to Toyota Prius to update the customers about the prices, seminars, and the marketing campaign.
With such a sophisticated yet direct marketing campaign, Prius sales zoomed and reached unprecedented levels of success. However, certain initial hick-ups happened with Toyota, and it had to recall all of its cars. Still, within 3 months, Toyota could resolve the issue and create an advertising campaign that focused on assuring the new, improved solutions. This helped in sales that were record high with 7,895 units in 2004 in comparison to 779 units in 2003.
There are many examples of such unprecedented success stories where companies made the environment a part of their business strategy and communicated the same to the highest and lowest levels of its stakeholders. I chose Toyota, as the automobile sector has always been subjected to criticism in terms of environmental pollution. But, the way the Company incorporated the environment as a significant stakeholder and devised a business strategy to fulfill its responsibility towards the same is commendable.