TOYOTA TURNAROUND: From Humdrum Motor Brand to Technological Innovator - How Toyota Became the Car in Front

Article excerpt

In 1992, Toyota unveiled the tagline 'The car in front is a Toyota'.

The first model the strapline was used to advertise was the uninspiring Carina E, making the idea seem rather hopeful for the car's equally characterless manufacturer.

Little more than a decade later, Toyota is living up to its 'in front' reputation and, with highly aggressive sales, is the brand to watch in the European car market. Since 1992, it has nearly tripled its UK sales, jumping from 48,000 to 134,000 units and almost doubling its market share to 4.7% in 2003. Posting 11 years of consecutive growth in a flat market is no mean feat.

In the US, it is doing even better, recently overtaking Chrysler and now mounting a serious challenge to Ford for market leadership. The surge in US sales is helping Toyota overtake Ford globally, becoming the world's second-biggest car maker behind General Motors.

According to automotive analyst Global Insight, Toyota Group's global sales will rise from 6.6 million in 2002 to 6.7 million for 2003, while Ford Group's will fall from 6.7 million to 6.3 million.

In Europe, Toyota is performing so well that it recently said it would sell 800,000 cars this year - hitting its 2005 target two years early.

Its share in Europe, now 5%, is set to hit 6.5% by 2010, taking it from ninth in the market to sixth. And the marque is audaciously increasing European production. Global Insight predicts Toyota will increase European production by 247% between 2000 and 2008, compared with 20% for Ford and 16% for Peugeot.

Unlike some of its financially wobbling rivals, particularly Ford, Toyota can afford this increase in production capacity. It may not yet be the world's biggest car maker, but it is the richest, with net income last year of pounds 3.7bn (up 35%). It has a cash pile of pounds 7.9bn and a market capitalisation of pounds 64.7bn - more than DaimlerChrysler, Ford and General Motors combined.

Dave Sargent, partner of automotive research company JD Power, says: 'There is no limit to what Toyota can achieve. Compared with some of the European and US manufacturers who are very focused on short returns, it has patience and an awful lot of money to invest.'

Europe's car giants will also be glancing nervously at Toyota in their rear-view mirrors as it puts diesel at the centre of its strategy. The launch last month of a campaign for its D-4D diesel model that positions Toyota as 'Tomorrow's diesel today' capitalises on the manufacturer making the first production diesel engine to comply fully with the Euro IV emissions standards.

Toyota is right to be setting out its stall in this market, challenging the traditional area of strength for Volkswagen and Peugeot. In the UK, overall diesel sales are growing by 16%, but Toyota's diesel sales are outperforming the market, with 40% growth.

Changing appeal

The diesel strategy is a good illustration of how Toyota has achieved such a dramatic turnaround in the past decade, shifting perceptions of the brand from reliable and boring to engineering quality and emotional appeal.

It also reflects the emphasis placed on marketing, especially in the UK, under the leadership of a triumvirate of senior marketers: Graham Smith, Mike Moran and Paul Philpott.

The transformation of Toyota from a sales-led to a marketing-led company began with the arrival from Ford of Smith in 1993. He went on to become marketing director in 1994, and then managing director a year later. In 1996, he appointed another former Ford man, Mike Moran, to head the marketing department.

Yet another Ford marketer, Paul Philpott, joined in 1998, at which point Smith set about merging the sales and marketing departments into a single commercial division, headed by Moran.

According to Moran, who left Toyota earlier this year for Thames Water, this is key to Toyota's recent success. …