Why Toyota chose to keep the Lexus brand separate

Why Toyota chose to keep the Lexus brand separate

Toyota Company introduced separate Lexus Company in 1989 in order to produce luxury cars. It aimed at introducing an elegant luxury car in the world that offers good speed, safety, comfort, elegance, dignity, and beauty. Lexus cars had to be precedential in customer service. Many customers do not want to buy high-end items from low-end firms. In the auto industry, many people prefer purchasing locomotives from big firms (Mukai & Hagiwara, 2012). To combat this, Toyota Company initiated the Lexus nameplate. Besides, Toyota had experienced poor sales of Cressida in the United States. This was due to the United States’ view on Japanese cars as inexpensive and useless. In response to poor sales, Toyota made Lexus enable them to sell their vehicles in the United States against its competitors such as Honda, Nissan. Also, Toyota cars were seen as disreputable and could not compete in Europe. Toyota, therefore, created a separate wing to create top-notch cars that could attract more buyers.

Advantages of Toyota having separate Lexus Company

Diversifying the Lexus brand enables Toyota Company to have a strong position and brand recognition in the market. Toyota has gained a strong market position in different geographical places in the world across the entire continent. It has improved market share in Japan, approximately 45.5% in 2012, 12.2% in North America, 13.4% in Asia, and 4.3% in Europe (Mukai & Hagiwara, 2012). These have made Toyota gain a significant competitive advantage and to expand in international trade, making it register an increase in domestic and international sales.

Diversification enables Toyota Company to have an extensive production and distribution network. Toyota has expanded its product portfolio, and the company’s image has been restored through creation of quality, safer and environment friendly automobiles. The existing Toyota products have been improved and modified to enhance their capabilities (Mukai & Hagiwara, 2012). Besides, Toyota has a broader distribution network that provides a broader market, thus boost its revenues.

Disadvantages of diversification

Toyota Company has suffered financial risk by diversifying into Lexus Company. Toyota has employed many people to work in their firms whom they pay. Recurrent expenditure such as employees’ wages and salaries have made the company to face substantial financial loses.

Toyota has conducted product recalls that have affected the brand’s image and overall sales. In 2011, Toyota Company recalled Toyota and Lexus car models totaling 110,000. This was due to the substrate and potential shutdown of the hybrid system (Mukai & Hagiwara, 2012). Besides, some Lexus vehicles have been recalled due to noise and oil leakage that pollutes the environment. These make the company to accrue a lot of losses and destroy the company’s image.

Q2. Why do some innovations seem to take only a few months to be widely accepted while others tend to take years, even though there are good reasons to accept the new product? (Think LED lights bulbs vs. electric cars)

The acceptance of innovation depends on the taste of the people, trialability, and compatibility of the innovation to the people. The way people talk about innovation influence other people to accept the item. Besides, mass media have an impact on the acceptance of an innovation. LED lights had a perceived relative advantage in the market hence took a short period to be widely accepted. LED lights were convincing because they tend to be cheaper and save energy thus the full acceptance by people. On the other hand, electric cars are expensive and people have the negative perception that it is prone to accidents. This makes few people to buy it whereas some people do not understand how it operates; thus its taking years to be widely accepted, besides, the perceived cost of changing to electric cars is high, making few people try having an electric car. It is easy to try out some innovations if work and are environmentally friendly than other products. For example, it is easy to test LED lights as compared to electric lights; thus, the broader acceptance in a short period compared to electric cars.

Reference

Mukai, A., & Hagiwara, Y. (2012). Lexus distances itself from Toyota as it seeks to regain luxury crown. Retrieved 9 April 2020, from https://www.autonews.com/article/20120506/OEM04/120509915/lexus-distances-itself-from-toyota-as-it-seeks-to-regain-luxury-crown