Extreme Toyota: Radical Contradictions That Drive Success at the World's Best Manufacturer

2.5. Six Forces in Action: Case of the Lexus

In this section, we examine the six forces in action in the case of its luxury brand Lexus. Initially developed for the U.S. market, the Lexus has become the new benchmark there in the luxury car market, consistently rating highly in customer and dealer satisfaction since its 1989 launch and now selling in Europe, Africa, the Middle East, South America, Japan, Asia, and Oceania.

So what convinced customers to purchase the LS400 when it was launched in 1989? Was it technical achievement or the relentless pursuit of perfection in marketing? The most likely answer lies in the tailoring of the car to the specific demands and desires of the U.S. luxury car consumer, guided by the founders' philosophy of putting the customer first and the nerve system that effectively disseminated customer needs. It was also the emphasis on local customization that delivered an unforgettable experience at Lexus dealerships, from sales to service.

It was the 1980s, and facing a political backlash in the United States to rising Japanese imports, Toyota was adhering to voluntary import restrictions. This created a dilemma. How could it increase revenue from the United States with limits there on imports? One answer was to start manufacturing locally. But there was another, more radical possibility: enter the luxury segment and increase the average revenue and profit on each vehicle sold.

The problem was that outside the Japanese market, Toyota did not have a ...