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Management Consulting/International Case : Global Car Industry


International Case : Global Car Industry
How the Lexus Was Born-and Continued Its Success in the United States, but will Lexus Succeed in Japan?
One of the best examples of global competition is in the car industry. As the Japanese gained market share in
America, U.S. car makers required the Japanese to self-impose quotas on cars exported to the United States.
This encouraged Japanese firms not only to establish their plants in the United States but also to build bigger
and more luxurious cars to compete against the higher-priced U.S. cars- and the expensive European cars such
as the Mercedes and the BMW.
One such Japanese car is the Lexus, by Toyota. This car is aimed at customers who would like to buy a
Mercedes or BMW but cannot afford either. With a sticker price of $35,000, the Lexus is substantially less
expensive than comparable European imports. In 1983, Toyota set out to develop the best car in the worldmeasured
against the Mercedes and the BMW. The aim was to produce a quiet, comfortable, and safe car that
could travel at 150 miles per hour and still avoid the gas guzzler tax imposed on cars getting less than 22.5
miles per gallon. This seemed to be an idea of conflicting goals: cars being fast seemed irreconcilable with
cars being at the same time fuel-efficient. To meet these conflicting goals, each subsystem of the car had to be
carefully scrutinized, improved whenever possible, and integrated with the total design. The first version of the
32-valve V-8 engine did not meet the fuel economy requirement. The engineers applied a problem-solving
technique called "thoroughgoing countermeasures at the source." This means an attempt to improve every
component until the design objectives are achieved. Not only the engine but also the transmission and other
parts underwent close scrutiny to make the car meet U.S. fuel requirements.
Toyota's approach to achieving quality is different from that of German car manufacturers. The latter use
relatively labor-intensive production processes. In contrast, Toyota's advanced manufacturing technology aims
at high quality through automation requiring only a fraction of the work force used by German car makers.
Indeed, this strategy, if successful, may be the secret weapon to gain market share in the luxury car market.
1) Prepare a profile of the potential buyer of the Lexus.
2) What should Mercedes and BMW do to counteract the Japanese threat in the United States and Europe?
3) Why has the Lexus model been very successful in the U.S. but has not been marketed in Japan?
(Suggestion: Review the frequency of repair records of luxury cars. Also talk to Lexus dealers or Lexus
4) Do you think Lexus will succeed in Japan? Why or why not?

1)  Prepare a profile of the potential buyer of the Lexus.

Target Customer Description
The target customer with Lexusʼ flagship hybrid design is seeking to present a bold image to
others. Price is therefore a secondary factor to the message their car portrays in their purchasing
decisions. Potential customers are born within ten years of the “baby boomer” generation aged
forty-five and up. As a wealthy and image-conscious person he/she can spend money freely,
taking up hobbies and living a visibly envious life. He/she purchases this car for its “green” status
to benefit his/her self-image. They choose to purchase hybrids either because they are
environmentally conscious, or they wish to appear to be. They combine extravagance and excess
with environmental care by purchasing a car that is both “green,” and also features top-of-the-line
technology, performance, and luxury.

2)  What should Mercedes and BMW do to counteract the Japanese threat in the United States and Europe?


3)  Why has the Lexus model been very successful in the U.S.  but has not been marketed in Japan?  (Suggestion:  Review the frequency of repair records of luxury cars.  Also talk to Lexus dealers or Lexus owners).


4)  Do you think Lexus will succeed in Japan?  Why or why not?



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Leo Lingham


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18 years working managerial experience covering business planning, strategic planning, corporate planning, management service, organization development, marketing, sales management etc


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