Toyota Prius: A Case in New Product Development

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Case Details:

Case Code : MKTG118
Case Length : 27 Pages
Period : 1997 - 2005
Pub Date : 2006
Teaching Note :Not Available
Organization : Toyota Motor Corporation
Industry : Automobile
Countries : USA

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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"The Prius is solid evidence that the ponderous development process that produces new automobiles is finally on the brink of a genuine technological breakthrough."¹

- Popular Science Magazine, July 1997.

"We believe that clearing environmental hurdles and offering an attractive driving experience are critical for cars to thrive in the 21st century."²

- Hiroyuki Watanabe, Senior Managing Director, Toyota in 2003.

Introduction

In December 1997, Toyota Motor Corporation (Toyota) of Japan launched its hybrid vehicle Prius in the Japanese market. This was one of the first mass-produced hybrid vehicles in the world. It used the Toyota Hybrid System (THS), which combined an internal combustion engine fueled by gasoline with an electric motor.

Prius achieved a balance between high mileage and low emissions and was the upshot of the company's initiative to produce environment-friendly automobiles and its goal of manufacturing the 'Ultimate Eco Car'(Refer Exhibit I for the Ultimate Eco Car goal of Toyota). The Prius generated a lot of enthusiasm in the industry as it was both efficient and stylish.

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It was also a safe car. The car conformed to Japanese regulations and standards pertaining to environmental pollution. Having sold more than 100,000 units worldwide by 2002, it was the best selling hybrid car model in the world.

The company introduced further refined models in 2000 and 2003. Toyota introduced Prius in the US market in 2000. Before entering, Toyota conducted a research study of the US market and consumer preferences there. It developed various strategies specifically for this market based on its research findings. The price of the new improved Prius was unchanged from that of the original Prius.

These initiatives helped Prius to break successfully into the tough US market even though it was based on a new concept of a hybrid car. In 2001, the Automotive Engineering International³ recognized rius as the 'world's best engineered passenger car.'

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1] Annual Report, 1998, www.toyota.co.jp

2] Yuri Kageyama, “Toyota Unveils Beefed-Up Hybrid,” www.cbsnews.com, April 17, 2003.

3] Automotive Engineering International is a magazine published by the Society of Automotive Engineers. The magazine contains latest information about the technology, and the products manufactured.