Launching Prius

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Executive Summary
Hiroshi Okuda should push its team to make Prius ready by the end of 1998 or earlier. Prius is fuel efficient and eco-friendly car for consumers and will create a new consumer segment into the market place. Hybrid Technology will be a huge attraction for both manufacturers and buyers. Toyota is known for its Toyota Production System, production efficiency, and marketing prowess which can be leveraged further for the success of Prius. In addition, reliability, pricing, consumers’ perceptions of Hybrid Technology and correct demand estimates are important for Prius’ success.

Production cost
Hybrid Technology is expensive. During the first few years, Toyota might incur a loss on every unit it produced because of high production costs of the battery, insulated gate bipolar transistors (IGBTs), and regenerating braking system.

These are important components for the success of Prius so Toyota should not compromise on them. Toyota needs the best technology to be successful and competitive. Toyota should consider moving its Prius production plants to the United States which is the biggest market for Toyota. This will reduce the shipping cost and might be cheaper due to a strong Yen. Toyota should also outsource other production areas such as IGBT to electronic companies as recommended by engineers. This will help Toyota in 2 ways:

* Better product
* Better focus on other important production areas

Pricing & Demand
Higher price and low demand can kill the product at early stage. This is another big concern for Toyota.

Toyota should do extensive market research before introducing Prius. It should first introduce Prius in Japan and other countries where the early failure of Prius will not cause a major impact to the company’s brand. This strategy will allow Toyota to understand the consumers’ responses, and adjust Prius’ price and technology accordingly before moving globally and to its biggest market – the United States....
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