Tutorial class n°5: Course: Level: Tutor:

Operation function Principles of 1Bachelor(A+B) Amira Messaoud

management

Case study: Toyota developing a million new product ideas every year

Toyota is one of the car industry’s biggest success stories. Founded in 1918 as Toyota
Spinning and Weaving Company, it only started to produce automobiles in 1937, but since
then the company has continued to grow to become one of the most important car
manufacturers in the world.
The new product development strategy at Toyota is realized mainly in five distinct steps:

1. Creation of Concept. This step is defined by the collection of ideas, mainly from employees
but also from the general public through programs such as Ideas for Good. Major points taken
into consideration are customer profile and future car trends. Designer then create an initial
sketch.
2. Development of the Idea. After the initial sketches have been pencilled out, a team of
experienced designers create a complete 3D computer model with full details. Emphasis is on
the realism of the project (how close it is to the final product) as well as creativity and visual
appeal.
3. Colour Choice. Toyota takes great care with minor details, even colour. Every colour is
analysed based on its fit with the general product idea and concept. For example, red might fit
a sports car like the Toyota GTR but not a Toyota Off roader. Moreover, special attention is
given to how the colours of different car parts fit with each other.
4. Mock-Up. A realistic mock-up is created using clay, which the designers and engineers
analyse to fin errors.
5. Decision Hall. A few models are built and taken to a hall where they are analysed in
realistic environmental conditions. Light and rain are generated to see how the car looks in
these settings.
Toyota Creative Idea and Suggestion System

In 1951, the company developed the Toyota Creative Idea and Suggestion System (TCISS) to
allow every employee to offer feedback on any topic they could bring an improvement to. The
TCISS was put in place to empower every employee to make informed suggestions regarding
the production process, especially employees at the sharp end of production, arguably the
ones most likely to highlight potential issues. The company offers an individual annual award
for ideas submitted through the TCISS, for which employees can earn gold, silver, or bronze
medals. Since the TCISS was set up, the company has expanded its ideas creation process to
include people from outside. It organized multiple idea contests and has received a growing
number of creative submissions: in 1974, it exceeded a million; by 1984,
10 million; by 1988, 20 million; and by 2011, 40 million ideas and the number continue to
rise. In 2007, as an extension to the TCISS, the company launched an Innovation Fair where
teams from the sales, financial, and IT departments compete in an idea-based tournament. It
was at the 2007 Fair that hydrogen-powered vehicles were presented, and at the 2014 Fair,

1
Bluetooth low-energy beacons to help dealers get better inventory management information
were debuted and won funding.
The Toyota Prius
Toyota’s product life cycle is shaped by the launch of numerous generations of the same
model. This strategy can extend the growth and maturity phases of the cycle by decades and
involve multiple product generations. Consider the Toyota Prius, arguably its most successful
model. Here, each phase of the product life cycle corresponds to a generation of the Prius.
1. Introduction Phase: The first generation of Toyota Prius was launched in 1997, after five
years of design. As one of the world’s first commercial hybrid vehicles, it was revolutionary;
in fact, the design proved so successful that it has been maintained in all Toyota models since.
The car was an immediate success in Japan, selling 40,000 units by the year 2000. Although it
initially had slow external sales, by the end of 2003, when the first-generation production
ended, the model had sold more than 123,000 units in all markets.
2. Growth Phase: This phase is represented by the second generation Toyota Prius, which had
more electrical features and a new hybrid motor that could achieve peak performance based
only on the electrical part of the engine. The car was larger and fuel performance was
improved by 15 percent. It was an immediate commercial success: by 2004, it had already
sold more than the previous model over its entire lifespan. By 2012, when production stopped,
worldwide sales had reached over 1,190,000 units.
3. Maturity Phase: This phase is represented by the third generation Prius, which had
incremental improvements: CO2 emissions decreased by 14 percent, engine power increased
by 22 percent, and fuel efficiency increased by 10 percent. This model also broke internal
sales records, with a total of 3,360,000 units sold by 2014.
4. Decline Phase: This is what we can consider the current phase of the Prius. In 2016, the
number of Priuses sold in the U.S. was half the number in 2012. The reasons range from
lower gasoline prices to the emergence of full electric vehicles like Tesla.

1- Provide a short explanation for each of the five steps of the product development strategy
that Toyota follows.
2- How ideas at Toyota are gathered and managed?
3- What kind of production system Toyota work with?
4- Explain the strategies during each stage of the product life cycle for the Toyota Prius.

2
1- Provide a short explanation for each of the five steps of the product development
strategy that Toyota follows.

The first step Toyota product development strategy is creation of the concept (idea
generation+ idea screening).

Toyota uses internal and external sources of ideas. In this stage, ideas are collected from
employees. It includes also, ideas from the general public (programs ideas for good). Main
points are taken into consideration such as: consumer profile and future car trends.

Second step is development of the idea: 3D computer models are created in details. The aim is
to show the realism of the project (concept development).

Third step is, Colour choice (concept development) includes the choice of colours that fit
every model.

Mock-up: clay mock up that engineers analyse to fin errors (product development).

Decision hall: (test marketing): models are tested in realistic environment.

2- How ideas at Toyota are gathered and managed.

At Toyota ideas are gathered within the company (Internal) and outside the company
(external).internal idea sources are gathered from the employees. Employ the TICSS give
the possibility to employees to make suggestions regarding the product process. The company
reward every year employees for their ideas. Toyota also includes external sources of ideas. It
includes people from outside. Organise contests. Innovation fair where employees compete in
an idea based tournament.

3- Explain the strategies during each stage of the product life cycle for the Toyota Prius.

Introduction phase: slow sales growth: initially had slow external sales.

Growth phase: Product extensions, services.

Product extensions, services: More electrical features and a new hybrid motor that could
achieve peak performance.

Advertising: mass market engagement: It was an immediate commercial success.

Maturity phase: Products diversity brands/ advertising: show brand differences.

3
Incremental improvements: CO2 emissions decreased by 14 percent, engine power increased
by 22 percent, and fuel efficiency increased by 10 percent.

Decline Phase: This is what we can consider the current phase of the Prius. In 2016, the
number of Priuses sold in the U.S. was half the number in 2012. The reasons range from
lower gasoline prices to the emergence of full electric vehicles like Tesla.