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The Luxury Vehicle Division Of Japanese Automaker Toyota Marketing Essay

During the late 1980s, Lexus vehicles have been consistently produced in Japan with manufacturing centered in the Chubu and Kyushu regions and in particular at Toyota's Tahara, Aichi, Chubu and Miyata, Fukuoka, Kyushu plants by Toyota Motor Corporation from the start of the operation. Toyota created Lexus as a new brand and division in order to position Toyota to enter the luxury auto segment. Toyota had no experience in producing such high-end vehicles, with their related increase in quality requirements. In order to balance weight in a front-wheel drive vehicle, the engine is aligned east to west rather than north to south as in rear-wheel drive vehicles. Such an east-west or transverse axis engine design required an extremely narrow and short gearbox for the automatic transmission.

With no experience producing automatic transmissions at the time in late 1980s and early, Toyota lacked the internal expertise to produce such a complex and unusual design in time to meet its product launch deadlines. Instead, Toyota contracted the gearbox design to an outside supplier, Aisin Seiki. As part of the contract, Aisin Seiki maintained resident staff at Toyota to meet daily with body and engine designers as changes were being made. Not only was initial product performance successful but over time Toyota was able to take over key functions through learning.

Toyota best known secret weapon is its brilliant and unorthodox system of manufacturing, which it pioneered during the middle of twentieth century as an alternative to traditional mass production. In 1989, Lexus was widely praised for its quietness, well-appointed and ergonomic interior, engine performance, build quality, aerodynamics, fuel economy, and value although it was criticized by some automobile columnists for derivative styling and a suspension regarded as too compromising of handling for ride comfort. The Toyota Production System (TPS) has enabled the manufacture of high-quality, reliable cars at a lower production cost. This system also has made Toyota nimble in response to fluctuating market demand and able to produce cars fast to match the orders coming in from dealers.

The initial design was extremely expensive for Toyota to produce, particularly given that Toyota was concerned about maintaining a reasonable quality level and realizing a high quality rating. To achieve these objectives, Toyota’s design relied on the use of a large number of separate parts for reinforcement and here were very few outside suppliers who could have completed the job for Toyota at a lower cost. To facilitate learning and stability, Toyota maintained a single project manager over the first two Lexus product development projects. Over time, Toyota realized significant reductions in cost alongside continuing quality improvements in terms of design and part simplicity.

Standardisation / maturity stage

Assembly of the first Lexus built outside the country, the Ontario, Canada produced Lexus RX 330, began in 2003. Following a corporate reorganization from 2001 to 2005, Lexus operates its own design, engineering, and manufacturing centers, solely responsible for the division's vehicles. In 2005, Lexus completed a full organizational separation from parent company Toyota, with dedicated design, engineering, training, and manufacturing centers working exclusively for the division. This effort coincided with Lexus launch in its home market of Japan and an expanded global launch of the brand in major world largest sales markets to North America, Europe and Asia.

Toyota renowned logistics management system has also been a significant operational advantage for the company, enabling it to monitor inventory levels for parts and raw materials as well as finished products, and keep those levels low. This optimization of resources in the production of cars allows Toyota to maintain a strong cash flow position. In combination, these systems keep Toyota competitive in their operational costs for market penetration as Toyota takes substantially less time to introduce a new car compared with many of its global competitors, it can respond more effectively to changes in customer needs for higher demand in Lexus production.

Barriers to Trade

Most of the country in nationwide would ever choose to use a quota as a barriers for trading in automobile industry when a tariff has the added advantage of raising revenue. Tariff is a tax on imports, which is collected by the federal government and which raises the price of the good to the consumer. Also known as duties or import duties, tariffs usually aim first to limit imports and second to raise revenue. The major reason is that quotas allow the nation that uses them to decide the quantity to be imported and let the price go where it will. A tariff adjusts the price, but leaves the post-tariff quantity to market forces. Therefore, it is less predictable and precise than a quota.

The effect of tariffs and quotas is the same which is to limit imports and protect domestic producers from foreign competition. A tariff raises the price of the foreign good beyond the market equilibrium price which decreases the demand for and eventually the supply of the foreign good. A quota limits the supply to a certain quantity, which raises the price beyond the market equilibrium level and thus decreases demand.

Tariffs come in different forms, mostly depending on the motivation, or rather the stated motivation. For instance, a tariff may be levied in order to bring the price of the imported good up to the level of the domestically produced good. This so-called scientific tariff which to an economist is anything but has the stated goal of equalizing the price between foreign and domestic producers. In this game, the consumer loses.

For example, the “Buy Japanese” mentality has minimize the import of foreign product through tariff in order to support domestic producer from foreign automobiles competition resulting in the preconceived notion that most foreign products are inferior in quality of producing.


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