Question:
Discuss about the Importance of Consumer Behavior in Automotive Industry.
Consumer behavior has become a key factor for the success of innumerous kinds of business across the globe. The automobile industry is not any exception. It is indeed much explored to customer responses. There are ample numbers of car manufacturing brands, which operate at the global platform. However, a global operation is attained after conducting an extensive business planning such as market planning. Such planning is a very vast topic, which challenges the strategic capabilities of reputed car brands across the globe (MacDuffie, 2013). This particular assignment is focused on one of such brands “Toyota”. It is one of such companies, which is continually focused on developing the future by using unmatched innovation capability. Whether it be interconnected safety & traffic management, substitute energy resources and human assisting robots, Toyota is continually focused on improving the future from good to better (CORPORATION., 2017). The main purpose of this assignment is to understand the importance of consumer behavior on the automobile industry. The study focuses on Toyota Singapore as a case study company to understand the purpose of this paper.
Core competencies
The core competency of the company is to produce quality products at best prices. The company beliefs in providing values to the money that customer spend on purchasing a car. It has maintained an utmost use of innovation, which has challenged the other brands in their respective period. The company has responded to the demand by putting an emphasis on the production of electric vehicles. Additionally, the use of human assisting robots and an interconnected safety system are the few examples of innovative capabilities (Nkomo, 2013).
Distinctive competency
The production system of Toyota known as “Toyota Production System (TPS)” is its distinctive competency. It is influenced by lean manufacturing strategies. The strategy includes many other practices like Just in Time, Six Sigma and Kaizen. The company has worked effortlessly over the years to generate such capabilities. It is an undeniable fact that the innovative capabilities of Toyota is unmatched by any other car brand in the world. It has become a sustainable brand and one of the market leaders as well (Nkomo, 2013).
Strengths
One of the biggest strengths of Toyota is its diverse product line, which suits the needs of diverse range of people. The low cost strategy is another strength that has produced much success to the company. The cost leadership strategy is attainable for the company through the use of lean manufacturing process, effective relationship with the suppliers, capable distribution process and low cost servicing for premium products (Hoque et al., 2013).
Weaknesses
The hierarchical organizational structure is one of the weaknesses of Toyota. Product recalls in recent years is another weakness that has challenged the innovative capability of the company. The secrecy in organizational culture is anther weakness that delays the response for a highlighted issue (Hoque et al., 2013).
Opportunities
Greenhouse gas emission is an opportunity for Toyota. They can switch over to a more reliable and an environmental friendly product to support the worldwide concern for greenhouse gas reduction from air. The company has already started investing on solar power, which is one of the cleanest options for renewable energy. The innovative capabilities that the Toyota has will provide it a comparatively better opportunity in the future (Hoque et al., 2013).
Threats
An incrementing competition in the automobile industry is a threat to Toyota. They need to be more flexible now with their different strategic capabilities. The volatile behavior of prices of different products such as rubber, glass, fuel and steel is another concern for their low cost strategy. There is a need to have a better strategy to cope with the volatile behavior of prices to remain cost effective in the market (Hoque et al., 2013).
Segmentation
The company uses two methods to reach to its target market. Following are the two segmentation methods that Toyota uses:
Demographic segmentation: In this segment, it targets the upper middle and high income groups. Land Cruiser and Parado are some of such cars, which have been targeted at the high income group and the upper middle class families (Ahmed, 2013).
Psychographic segmentation: This segment has targeted the high class income group who have sporty attitude. Examples of such cars are Toyota Fortuner and Toyota Altis Sport model (Ahmed, 2013).
Positioning
The company targets almost the entire groups who are capable of purchasing automobile. The positioning strategy of the company is both the differentiation and the low-cost strategy. The Toyota Wish is for upper middle and high income groups. On the other hand, Toyota Previa, Toyota Camry etc. are few examples of cars targeted at high income groups. They offer Sedans, MPVs, SUVs, Commercial and Hybrids. Such a wide range of different models just shows their differentiation strategy (Rahmani, Najafi & Delshad, 2016).
Differentiation
It has been quite a successful company in differentiating with the different products based on quality and design. The recalls problems have been quite efficiently handled by Toyota. This is another point that shows their differentiating strategy than to its competitors. They are differentiating in nature in relation to the use of technology. Toyota was the first successful company that introduced hybrid cars in the market. It had also allowed the company to gain a high market shares in the hybrid car market (Nortje & Snaddon, 2013).
Political:
A sudden political change in Singapore will have its impact on the profitability venture of Toyota in the country. The local government has already announced an annual cut on the number of cars from February, 2018 (Tong, 2017). The country is left with very fewer lands, which is why the government has felt the need of a better utilization of the remaining land area. This move will influence the annual sales figure of Toyota in coming years.
Economic:
There has been saturation in the Singapore market due to the limited land area. Additionally, the talk is more on switching over to the EVs cars. The diversity will be in the industry; however, the sales will remain constant. It means there is no further scope for automotive companies such as Toyota in Singapore. The scope is there with the different environmental friendly models; however, sales will remain constant (Sgc.org.sg, 2017).
Social:
People are now much aware of greenhouse gas emission and its consequences. The awareness is much higher in Singapore as well. EVs have picked up in demand. Additionally, there is an automotive industry has been constant in Singapore. There is no further scope of growth for one kind of car due to a cut down announcement made by the local government of Singapore. The changed social behavior and a changed political-economic background will affect the sales of Toyota. It will still have a god market for EVs cars (Flynn et al., 2016).
Technology:
Singapore is still developing in terms of technology. There are space for technologies such as artificial intelligence (AI), cyber security, Internet of things (IoT) and much other. The development of such technology will only smooth the manufacturing of cars. Toyota will also be benefitted from such growth (Som et al., 2012).
Environmental:
The change in this sector will benefit Toyota in future. People and the local government have now more concerns for renewable energy resources. This has fueled the necessity of EVs in Singapore. Toyota has already started investing in the solar power. They are actually running up with the paced demand (Som et al., 2012).
Legal:
Buying vehicle is very expensive in Singapore. This is due to additional expenses on Certificate of Entitlement (COE), road usage charges and high custom duties. These all make purchasing a challenging task. This fact will also challenge Toyota because it will influence its strategy to produce cost-effective cars (Som et al., 2012).
Competitors
It has stiff competition from Honda, which is currently at top in Singapore in terms of sales. Honda has experienced a significant appreciation in its sales in Singapore. On the other hand, Toyota is on a declining graph. The other competitors are Mazda, Mercedes, Nissan and BMW. Mazda is also climbing up quickly to reach in close to Toyota (The New Paper, 2017).
Toyota uses two strategies such as Market-oriented pricing and Value-based pricing to construct its target market. The Market-oriented pricing helps the company to be cost-effective with the different types of cars such as SUVs. However, value-based pricing encourages the differentiation strategy that Toyota uses to give values to the customer’s money. Through this strategy Toyota actually attracts the high income group and the upper middle class families. The target market thus can be divided into two sections such as high income group and high income group & upper middle class families (Rahmani, Najafi & Delshad, 2016).
The decision making process happens in two stages that includes considering the demographic and the psychographic factors. This is the two strategies that Toyota uses to reach to a particular segment of market. Through demographic factor, it has targeted the upper middle class families to high income groups. On the other hand, the psychographic factor helps to target the high income group only (Rahmani, Najafi & Delshad, 2016).
The study has helped to analyze the two social factors, which influence the buying behavior. One of such factors is the rising pollution in air. This has produced the urgency to switch over to EVs in future. This awareness has also encouraged the business behavior of Toyota. The company has already considered investing on the solar power. This is a response against the identified urgency of switching to a renewable energy resource (Flynn et al., 2016). Market trend is another factor that influences the buying behavior. Toyota has also introduced cars according to the trends. Toyota has introduced every type of cars that ranges from luxury to spotty cars. However, the paper has already highlighted a saturated market for such cars. The Singapore government will cut down on car manufacturing due to the saturation in the market. The saturation is due to the availability of limited land. There is no further scope for growth of such cars. However, EVs cars will pick up in demand (SHIM, 2013).
Attitude is one of the psychological factors that influence the buying behavior of customers. This has also influenced the buying behavior of customers in Singapore. This is due to the fact Toyota has introduced irrespective types of cars from luxury cars to spotty cars. The attitude is changing in Singapore, which is why the demand for EVs has picked up in the country. Motivation is the other factor, which influence the buying behavior. It does so by letting the customers feel the needs of buying a car. Toyota has done it before in Singapore. It is doing it now also. However, the trend is shifting from non-EVs to EVs cars. There is expected a constant graph of sales of the other types of cars. There is indeed a need to invest more on generating non-renewable energy resources to accelerate the production of EVs (Boztepe, 2012).
Income is one of the personal factors that influence the buying behavior. Buying a car in Singapore is very costlier because of extra expenses needed to spend on Certificate of Entitlement (COE), road usage charges etc. On the other hand, the economy has come down to the saturation level. This means that the buying capability will remain the same. Moreover, the different types of cars will fall into a constant graph and will have no further progress. EVs will instead pick up the speed. Age is the other personal factor that influences the buying behavior. For example, baby boomers will not head for spotty cars. They will probably look for traditional favorites. On the other hand, Millennials will look for either luxury or spotty cars (Kaufmann, Panni & Orphanidou, 2012).
The future car in the form of EVs needs a superior support of marketing strategies to grab the attention of Singaporean customers. The political-economic background has already prepared platform for EVs. Now, there is a need to use efficient marketing stuffs to grab the attention of customers. Following are some recommendations for marketing strategies necessary for Toyota in Singapore:
Explaining its advantages
There is a need to explain the benefits that the EVs will supply to the surrounding environment and to the customers using those. Many customers are still unaware of the facts related to EVs. They generally have misconception about it such as it runs on batteries; hence, this will be challenging to get the charging stations available when needed. This is indeed not true because infrastructure development is still under process. Prospect is there for compatibility with the EVs as the local government of Singapore will also support such vehicles to reduce the greenhouse gas emission from air. Moreover, the government has already announced a cut down on the annual production of non-EVs cars.
Explaining the relations between the hybrid cars and the EVs-
Hybrid cars and EVs are same in one respect that both the cars run on batteries. The hybrid cars of Toyota are already popular in Singapore. The company should explain the interrelationship of the two different types of cars. This will help them connect to the EVs.
Going social
This is very necessary because EVs are still a new concept to many. Educated customers only buy the EVs. It provides a good opportunity to Toyota to prepare such a social platform that it educates customers on social sites. Professionals are required who could make videos explaining the entire prospects of EVs. Such videos will be needed to upload on various social sites. This will not only help to catch a mass view but this will also educate them on the prospects of EVs.
Emphasizing the innovation
Almost all vehicles be it of any type provides more or less the same experience. It is undeniable that there are identified differences between the spotty and the luxury cars. However, such differences do not give a refreshing feeling. Toyota must consider an explanation of refreshment that the EVs offer. Electric Vehicles define a new economy with new sensation. There is ample number of innovation in EVs such as the use of battery and a CO2 free emission. Toyota must publicize the innovation, which EVs have.
Conclusion
Consumer behavior will be a vital factor for an incrementing growth of Toyota in Singapore. The market for non-EVs cars specially the spotty & luxury cars will find a constant progress. The local government of Singapore has already announced a cut down on car manufacturing. This is because the country is now left with limited land areas. There is not much scope left for such cars. Additionally, a growing concern for greenhouse gas emission is a welcome note for EVs in Singapore. However, Toyota needs to work on marketing strategies to educate customers. This will help the company to grab the available opportunity.
References
Ahmed, R. (2013). Business Perspective Brand Tracking of Toyota Corolla Case Study for Pakistan. International Journal of Asian Social Science, 3(4), 930-938.
Boztepe, A. (2012). Green marketing and its impact on consumer buying behavior. European Journal of Economic & Political Studies, 5(1).
CORPORATION., T. (2017). Toyota Global Site | Innovation. [online] Toyota Motor Corporation Global Website. Available at: https://www.toyota-global.com/innovation/ [Accessed 23 Nov. 2017].
Flynn, A., Yu, L., Feindt, P., & Chen, C. (2016). Eco-cities, governance and sustainable lifestyles: The case of the Sino-Singapore Tianjin Eco-City. Habitat International, 53, 78-86.
Hoque, I., Faruque, M. O., Shahid, E. M., Pasha, S. H. A., & Rahman, S. O. (2013). Analysis of Toyota’s marketing strategy in the UK market.
Kaufmann, H. R., Panni, M. F. A. K., & Orphanidou, Y. (2012). FACTORS AFFECTING CONSUMERS’GREEN PURCHASING BEHAVIOR: AN INTEGRATED CONCEPTUAL FRAMEWORK. Amfiteatru Economic, 14(31), 50.
MacDuffie, J. P. (2013). Modularity?as?property, modularization?as?process, and ‘modularity’?as?frame: Lessons from product architecture initiatives in the global automotive industry. Global Strategy Journal, 3(1), 8-40.
Nkomo, T. (2013). Analysis of Toyota Motor Corporation.
Nortje, F. D., & Snaddon, D. R. (2013). The Toyota production System’s fundamental nature at selected South African organisations-a learning perspective. South African Journal of Industrial Engineering, 24(1), 68-80.
Rahmani, M., Najafi, E., & Delshad, A. H. (2016). Assessment the effect of the marketing mix on increase the imported car sales (Case Study: Toyota Company). International Journal of Humanities and Cultural Studies (IJHCS)? ISSN 2356-5926, 1(1).
Sgc.org.sg (2017). Singapore- Automotive Industry. [online] Sgc.org.sg. Available at: https://www.sgc.org.sg/fileadmin/ahk_singapur/DEinternational/IR/diffIR/Singapore_Automotive_Industry_final.pdf [Accessed 23 Nov. 2017].
SHIM, K. J. (2013). After Broadband Infrastructure Saturation: The Impact of Public Investment on Rural Social Capital. International Journal of Communication, 7, 26.
Som, H. M., Nam, R. Y. T., Wahab, S. A., Nordin, R., & Mashkuri, A. H. (2012). The implementation of learning organization elements and their impact towards organizational performance amongst NPOs in Singapore. International Journal of Business and Management, 7(12), 2.
The New Paper. (2017). Honda top brand in 2016 as new cars hit the road. [online] Available at: https://www.tnp.sg/news/singapore/honda-top-brand-2016-new-cars-hit-road [Accessed 23 Nov. 2017].
Tong, M. (2017). Singapore Will Stop Increasing Car Numbers From February 2018. [online] Bloomberg.com. Available at: https://www.bloomberg.com/news/articles/2017-10-23/singapore-to-stop-adding-cars-on-its-roads-from-february-2018 [Accessed 23 Nov. 2017].
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