toyota avanza

003‐03‐07‐07

I N S T I T U T T E K N O L O G I B A N D U N G SCHOOL OF BUSINESS AND MANAGEMENT INDONESIA BUSINESS CASE CENTER (IBCC)

TOYOTA AVANZA THE ROLLOUT Harni Winara, the Head of Marketing Planning & Analysis Department of Toyota Astra Motor (TAM) Jakarta, Indonesia, identified a market opportunity in All Purposes Vehicle (APV) low 4x2 segment in Indonesia. The figure was compelling and she was convinced that TAM had the capability to capture the market. However, she ought to carefully lay out a marketing strategy that upheld the Toyota image and customer expectation. She only had a couple of months before meeting with the VP of Marketing in April 2003. Indonesian Automotive Industry Triggered by the 1997 economic crisis in Asia, most Indonesian industries at large were negatively impacted. As a whole, the Indonesian economy was directly affected by reductions in wages, high unemployment rate, and increase in inflation rate, resulting in a major decrease in the country’s nominal income and purchasing power. The annual rate of inflation, calculated from the customer price index (CPI) rose from an average 8.8 percent during 1990-1996 to 57.6 percent in 1998 in Indonesia. Real wage growth slumped from 6.6 percent in 1996 to -37.8 percent during 1998. The road to economic recovery had been an uphill climb for Indonesia since then. Automotive industry was inevitably impacted by the crisis since the drop in consumer purchasing power caused the price of vehicles to be far from affordable for the population. Automotive market was shrinking from 400,000 vehicles sold in 1996 to a low 75,000 in 19981. Nonetheless, according to Demand Forecasting, Indonesian automotive industry was expected to show a constant growth with monthly average units sold from more than 26,000 in 2002 to nearly 45,000 units in 2005, indicating a strong market trend. This case was written by Henri Suudi and Enjang D. Resi under the supervision Dr. Ir. Reza A. Nasution from School of Business and Management – Institut Teknologi Bandung. It was prepared solely to provide material for class discussion. The author does not intend to illustrate either effective or ineffective handling of a managerial situation. The author may have disguised certain names and other identifying information to protect confidentiality. IBCC prohibits any form of reproduction, storage or transmittal without its written permission. To order copies or request permission to reproduce materials, contact IBCC at School of Business and Management – ITB Bulding. Jl. Ganesha No. 10, Bandung. P. +6222-2531923 F. +6222-2504249 or e-mail to [email protected]

Copyright ©2007, Indonesia Business Case Center (IBCC) Version: 07-05-30

1 Astra group sales-The Herald Tribune

This case was written with the courtesy of Indonesiantower Rev.: 30/03/2009

INDONESIA BUSINESS CASE CENTER 003‐03‐07‐07

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As shown in Exhibit 1a, Indonesian automotive market showed a positive growth trend, indicating a recovering market after the economic crisis. The total volume of cars sold in the market was rising steadily. Composition of this growing market was depicted in Exhibit 1b, describing the Indonesian automotive market that was dominated by Japanese manufacturers such as Toyota, Mitsubishi, Suzuki, Daihatsu and Honda. In 2002, Toyota gained the most shares by 26.5 percent of total market followed by Mitsubishi (23.7%), Suzuki (20%), Isuzu (8.3%), Daihatsu (6.4%), and Honda (4%). Additionally, Exhibit 1b also shows that Toyota had managed to stay on top of the competition until 2002 with a progressive increase in its market share. The composition of the overall market had dynamically evolved in the past several years, specifically in the 4x2 class 2. Exhibit 2a depicts the significant growth in 4x2 class in the Indonesian automotive industry. During 2000-2002, 4x2 vehicles led the market share. Although the market share had dropped in 2001, the trend was projected to rise in the next several years. It was expected to reach 57.7percent in 2005, with a sales volume estimation of 174,000 units in 2002 and 219,000 units in 2005 (See Exhibit 2a). Generally, the 4x2 class was divided into three subclasses based on engine capacity. 4x2 high class had engine in range of 2000-3000cc, 4x2 medium in range of 1500-2500cc and 4x2 low in range of 1000-1600cc (for more detail, see exhibit 1c). Market for 4x2 class was then distributed among these three subclasses with their own respective market shares. The medium 4x2 segment started its dominance in 2002-2003. The demand for low 4x2 segment, however, was expected to grow significantly in 2004 and continued to grow in 2005. This growing taste for 4x2 class offering performance and comfort comparable to sedan but with a much higher flexibility in space and more suitable for most road conditions in Indonesia had reduced the demand for sedan (Exhibit 2a showed that demand for sedan had decreased during 2000-2002). In general, the data in Exhibits 2a & 2b described a promising future for 4x2 vehicles market, due to the vehicles’ suitability for Indonesian current market condition. Toyota did not initially manufacture any product in the low 4x2 segments, but instead it manufactured Kijang model in the medium 4x2 class. Kijang had been very popular and had captured a large market share in Indonesia ever since it was first introduced. The demand growth for low 4x2 segment caused Toyota to launch its first product in this segment. Given the high quality of products, Toyota quickly gained a large market share. Yet, the new market and the fierce competition in low 4x2 market with dominating old players like Suzuki brought considerable challenge for Toyota as a new industry player. For the above circumstance, Harni Winara was called upon top management exactly two months ago. As Indonesian partner of Toyota Motor Corporation, PT. Toyota-Astra Motor (TAM) intended to capture this emerging market by launching a new low 4x2 model not only to compete but also to conquer the market. However, launching a new car in a competitive market needed a lot of calculations. Those calculations had to be carefully prepared, analyzed, discussed, and presented to provide guidance for top management in making accurate decisions. The task was to be due within 5 weeks, and her boss was stressing deadline.

2 Class of vehicle non sedan that has 2 wheel drive system, further divided by engine capacity and type (for

more detail, see Exhibit 1c)


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Harni Winara wondered how Toyota new product could be segmented, positioned and delivered into market. As the task had been given to her, it was in her hands and her team to bring future competition in low 4x2 markets, and of course her future credibility in the company. She gathered all her senior staff and analysts to appoint a task force team on the same day. She wanted a lifestyle survey (product preparation survey), i.e. a more specific market research in 4x2 market, specifically in low 4x2 market. The research would include the general and specific markets trends, growth, composition, competition, and buyer’s profiles including reasons for buying a car, demographic, actual users, and demand trend for the next 2 to 5 years. PT Toyota Astra Motor PT Toyota Astra Motor (TAM) was established on 12th April 1971 as a joint-venture company between Toyota Motor Corp. and PT Astra International with a distribution of shares of 49% and 51% respectively. The company was originally an importer for Toyota vehicles, and was transformed into a distributor company for the same brand vehicles a year later. On 31st December 1998, TAM merged with three other companies: PT Multi Astra (a manufacturing company), PT Toyota Mobilindo (body parts manufacturing company), PT Toyota Engine Indonesia (specializing in engine manufacturing) with the name of PT Toyota Astra Motor. The merger was carried out with the goal to improve efficiency, to meet increasing consumers’ demand for quality, and to effectively face current competition in automotive industry. PT TAM consisted of two major departments, the production and marketing departments. The production functional activities included casting, engine, stamping and assembling automobiles. Some components were directly supplied from Japan by Toyota Motor Corp and the remaining was supplied by local components suppliers. Meanwhile, the marketing division was divided into overseas and domestic markets. See Exhibit 3 for TAM organizational structure Product Portfolio The Toyota brand name had been well-known worldwide for its quality and durability. Since Toyota’s first entry into the Indonesian automotive market through TAM, Toyota had been known in the market through various car models. The earliest models introduced by TAM were Corona and Corolla. Corona, a mid-size family sedan, included the T-series, which periodically changed models in 1974, 1978 and every other four years until in 2000 when it was discontinued to undergo a name change. Corolla was also introduced in Indonesia in the early 1970s, and entered its third generation by 1975. This most-popular and most-sold-in-the-world compact sedan had captured the Indonesian market since then. Toyota had created a new trend in sedan design: small, compact, and with rear-end wheels. Both Corona and Corolla were highly accepted in the market during the early years. Later, other Toyota sedans entered the Indonesian market, such as: Starlet - a small hatchback, and was discontinued in 1999, Soluna - a medium-sized sedan, and Cressida - a large-sized sedan introduced in 1977 and discontinued in 1992, and Toyota Crown. Toyota, through TAM also manufactured cars in other segments. In 4x4 class, Toyota introduced Land Cruiser which initially produced in 1950 and entered the Indonesian


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market in mid 1970s. This popularly called “Toyota Hardtop” was a sport-utility vehicle highly reputable not only in Indonesia, but also in the world. This car was not only used for individual purposes, but also for industrial and military purposes. Specifically for commercial purposes, Toyota launched Toyota Dyna and Toyota Hiace; the latter was now discontinued. All of these models had been highly acceptable in the Indonesian market in the previous 26 years, but the story of Toyota’s real success in Indonesia started in 1977 when the first Kijang was launched in Jakarta. This multi-utility car was known for its easy and low-cost maintenance and was later become a legend in the Indonesian automotive market. The first generation of Kijang sold only 1.168 units during 1977, but a year later drastically increased to 4.629 units, four times than before. The number continued to rise during the next several years. The second generation was launched in 1981 with a production volume of 19.323 units in 1985. The third generation was later introduced in 1986 and sold 82.687 units in 1987, the largest sale ever in Kijang’s history. Half of million Kijang had been sold in Indonesia until 1995. In 2003, it was expected to reach the first million. No car had previously been as successful as Kijang in Indonesian market before. However, the impact of economic crisis leading to a higher price of an average car, and the entrance of many lower 4x2 models threatened Kijang’s sales performance. Kijang as a medium 4x2 vehicles had greater performance than low 4x2 vehicles, and was priced higher than its counterpart. Potential market for Kijang and Toyota in general could easily be lost to low 4x2 if the opportunity was not seized by Toyota, and thus TAM. TAM must realized the potential of the low 4x2 segment and seized it by introducing a new car for this market while sustaining Kijang existence by improving its quality and marketing areas. Facilities With the intention of establishing an integrated plant, TAM established a new manufacturing plant together with by parts and engine manufacturing plants. Currently, TAM was supported by two centers of production (Sunter and Karawang) and one parts center, the largest in Indonesia, which had been computerized since 1982 and was directly on line with Toyota’s parts center in Haruhi, Japan. The Sunter plant was designed for the productions of commercial vehicles (Kijang and Dyna) while the one in Karawang was specialized in producing sedans (Corolla, Soluna and Camry). Factory in Karawang (first operated in 1998 with total investment Rp 462.2 million) was considered to be one of the most advanced in Indonesia, built in 100 acres land with a test course and modern installation for environmental safety purposes. Main Dealers TAM had built a vast network of sales dealers and after-sales services throughout Indonesia. The company had networks of 5 main dealers operating 142 sales outlets and 101 after sales outlets. TAM also supported by 126 highly and modern equipped registered repair stations which diverse throughout Indonesia. With this wide network, TAM was succeeded in gaining the most number of sales in automotive industry for the last few years. For an example, in the year 2000, TAM sold 90,148 units, with an increase of market shares from 28.8% to 30.2% from the preceding year. There were five main dealers with their respective geographical areas: • Auto 2000, main dealer for Toyota in Jakarta, West Java, East Java, East Nusa Tenggara,

Bali, Kalimantan and some parts of Sumatera. • PT New Ratna Motor, main dealer for Toyota in Central Java and Yogyakarta.


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• NV Hadji Kalla Trd Co, main dealer for Toyota in South Sulawesi and South-East Sulawesi.

• PT Hasjrat Abadi, main dealer for Toyota in North Sulawesi, Central Sulawesi, Gorontalo, Maluku, Ternate and Papua.

• PT Agung Automall, main dealer for Toyota in Bali, Riau, Jambi, Bengkulu and Batam. Toyota Way Toyota Way was a management philosophy 3 adopted by the Toyota corporation that included the Toyota Production System. The four main ideas with 14 principles guided Toyota to become a high quality organization of the future, by learning how to think long term, to have a process for solving problems, to add value to the organization by developing its people, and to recognize that continuously solving root problems drives organizational learning. In the first principle of thinking long term, decisions must be based upon long-term philosophy, even at the expense of short-term financial goals. Second idea was to have a process for solving problems that basically based upon philosophy that a right process will produce the right result. This idea was implied in seven principles: “creating a continuous process flow to bring problems to the surface, using a pull system to avoid overproduction, leveling out the workload, building a culture of stopping to fix problems and getting quality right the first time, and standardizing tasks and processes, are the foundation for continuous improvement and employee empowerment, using visual control so no problems are hidden, and using only reliable and thoroughly tested technology that serves people and processes”. Third idea was to add value to the organization by developing people was mainly designed to improve human resources quality. This idea was implied through three principles: “to grow leaders who thoroughly understand the work, live the philosophy and teach it to others, and to develop exceptional people and teams who follow your company’s philosophy. Lastly, “to respect your extended network or partners and suppliers by challenging them and helping them improve. “Fourth idea was to continuously solving root problems drives organizational learning was intended a learning oriented organization. This would be achieved by implementing three principles, “go and see for yourself to thoroughly understand the situation (where managers are expected to “go-and-see” operations). Make decisions slowly by consensus, thoroughly considering all options and implement decisions rapidly. Become a learning organization through relentless reflection and continuous improvement.”4 Marketing Research When four weeks had passed, Harni Winara held a meeting with her senior officers in the department. They thought long and hard about the results of the marketing survey. Generic market data and 4x2 market data were enclosed in the reports. In general, the growth of the market had attracted the car makers to develop new products and win the market, or at the least gain considerable market shares - A condition considered as challenging opportunity for TAM and Toyota. As a market leader in the market, PT TAM wanted to capture the most potential segments and provided them with the best car offered in the market. The task was clear for Mr. Basuki and his team: To target the chosen segment, analyze and understand

3 The Toyota Way – Wikipedia, the free encyclopedia 4 The Toyota Way – 14 Management Principles from the World’s Greatest Manufacturer


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their characteristics and needs, and provide them with the best product available in the market. These decisions would be based upon the marketing reports in their hands. 4x2 Market Growths and Composition 4x2 vehicle was a two-wheel-drive vehicle, either using rear-end or front-end wheels. The low 4x2 had 1000cc engine for mini class and priced below IDR 105 million, while Multi Purpose Vehicles (MPV) and Sport Utility Vehicles (SUV) types had 1300 -1500cc engines (MPV and SUV were differentiate by models) and priced between IDR 105 – 200 million. As for the medium 4x2, the mini class had ≤1500cc engine, while the MPV and SUV types had 1500 – 2000cc engines. As stated earlier, the 1998 economic crisis had caused cars’ prices to soar. Prices for medium 4x2 vehicles jumped beyond reach for the majority of working class. For that reason, people inclined to purchase the lowest class or the low 4x2 segment. Although, the price of low 4x2 segment increased as well, it was still affordable by most customers. Low 4x2 segment naturally attracted buyers who were in the medium 4x2 potential markets, because low 4x2 provided similar characteristics as medium 4x2 but with considerably lower price. Market for high 4x2 did not change much as it targeted a higher-end consumer market. The marketing reports showed a consistent data as above discussion. The market was composed of high 4x2, medium 4x2 and low 4x2 with the medium one carried out the most sales (78% in 2000), but this composition had slightly changed in 2001 and 2002 and would continue change in coming years, where demand for low 4x2 were rising and firmly took more portion in market share, pressed down the share that used to be belonged to medium 4x2. Market forecast also indicated that in 2005, while the medium class still the market leader, low 4x2 share had significantly growth with just 18.3% in 2000 to reach 37.4% in 2005, predicted to push down medium class’s share to just 57%. Market for high 4x2 was not very much changed, as it had a specific own market, the forecast also predicted that the share would unlikely to significantly change in the future. Situation above clearly showed that the automotive industry, especially for low 4x2 market were grew in line with economic recovery as working class of people strongly growth in Indonesia (See Exhibit 4a). The low 4x2 private market composition was consisted of private usage with 70 % and public transportation usage with normal condition of 30 %. In public transportation market, low 4x2 was represented by chassis type of low 4x2 MPV (Carry & T 120) (See Exhibit 4c). 4x2 Market Distribution Geographically, 35% of low 4x2 users domiciled in Jakarta and surrounding areas and 65 % were living outside Jakarta, of which 51.5% were in other parts of Java, and the remaining were living in Sumatera (7.4%), Kalimantan (1.7%) and Sulawesi (2.5%). It was evident that Java market was central to low 4x2 segment contributing almost 90% of national sales. In Java, Jakarta was still the largest market, followed by West Java (29.4%) and East Java (14.2%) (See Exhibit 5a). For the medium 4x2 regional market, 37.7% of market was inside Jakarta areas with the remaining 62.3 % comprised of 39.4% in other parts of Java, and the remaining in Sumatera (12%), Kalimantan (3.8%) and Sulawesi (4.3%). Likewise, Java was also vital for medium 4x2 segment contributing nearly 80% of national sales. Jakarta was still the largest market, followed by West Java (19.9%) and East Java (13.1%) (See Exhibit 5b).


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Data further showed that the markets for low 4x2 and medium 4x2 were increasing in all areas, and were concentrated in Jakarta, followed by West Java and East Java. Economic growth in some parts of Indonesia also triggered the explosion of working class population. This circumstance served as incubation for the lower-price car market for potential expansion. On the other hand, the booming of low 4x2 new models between 2000 – 2001 had shrunk the medium 4x2 market composition where they had been overtaken by low 4x2 segment. However, the medium market was stable in 2002 as market was already adjusting back to early composition. Markets of 4x2 high and Premium were in considerably stable condition, with an average range of 3 - 7% in all areas except for Jakarta with more than 10%. 4x2 Market Competition A further analysis of the 4x2 market competition did not end Mr. Basuki’s analysis on a high note. Even when it was evident that low 4x2 had a constant growth for the past several years and was showing an increasing future trend, yet, the prospect of low 4x2 market had attracted numerous brands to compete in the market. Furthermore, the pressure also came from upper class segment (medium 4x2) anxiously attempting to take back its portion of market that had previously been taken by low 4x2 during the past several years. Therefore, tight market competition was projected for low 4x2 in the near future. Challenge for future Toyota’s new low 4x2 car in market would come from direct competitor of Suzuki, the incumbent market leader. Competition in low 4x2 markets had been strongly controlled by Suzuki over the years. With its two models, Carry and Karimun, Suzuki had been dominating the market. In low 4x2 MPV market, Carry succeeded in maintaining its leadership with market share exceeding 80%. Market intelligence estimated that Carry Futura would have a new model in 2004 but still with the existing cab-over model with three-row seating. However, the entries of many new city car models in 4x2 low market had negatively impacted Suzuki’s share. Specifically in city car market, Suzuki had also dominated the market through its Katana model, but it had significantly lost its domination since many new models entered this segment. Katana which led the market in 1998 with almost 90 % of market shares, currently was experiencing a slump to 13.1 % in 2002, ranking as one of the lowest in market share among others such as Atoz and Visio. Many of the new comers in city car models were Korean made. Fortunately for Suzuki, the arrival of another Suzuki model called Katana with its city car model was a big success defending Suzuki’s domination in the market. Suzuki had secured its leadership in the market since they launched Karimun that remained a market leader until 2002 in spite of a highly competitive market. The market competition concluded that Suzuki was dominant in both 4x2 city car model and 4x2 MPV (See Exhibit 6a). In the regional market, Suzuki dominated the low 4x2 market for all regions during the period of 2000-2002, both in city car market and low 4x2 private/MPV market with Carry and Karimun being on the first and second place respectively. In Jakarta, Suzuki captured 70% of total low 4x2 market, while in the rest of Java, Suzuki acquired an average of 62% of the market. Similar depiction occurred in Sumatera and Sulawesi by an average of 61% of the market. The data also showed that, despite a market share decline in a few provinces during particular period, Suzuki’s share had grown larger in most provinces. The remaining shares were distributed among Visto, Atoz, Katana, Zebra, and T-120 respectively (See Exhibit 6b). Competitors Data Low 4x2 vehicles came in a variety of models. One of them was a city car model. This model featured an advance-style, better engine performance with economic fuel, modest size, more


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utilities, fairly-good maneuverability, and safety features including child protection. City car model captured 29% of low 4x2‘s targeted segment with a slightly high percentage of women users and families with children, and trend-conscious customers. Such cars included Karimun (positioning itself as “The real city car”), Visto, and Atoz. Karimun was preferred mostly for economic, family use, performance, brand credibility, price, and parts availability reasons. Visto (with tagline “Style over mind”) was known mostly for up-to-date model, driving convenience and ease, brand credibility, price, small size, and trendy style. Additionally Atoz (with tagline “Perfect car, all needs can be fulfilled”) was fancied for up-to-date model, performance, brand credibility, and for exterior appearance. The second model was the MPV model including Carry, Zebra, and T-120. Consumers prefer Carry (“The real van”) for economic, family use, performance, brand credibility, price, and parts availability reasons. Zebra (“As sophisticated as Sedan”) was purchased mostly for the same reasons as Carry, while with T-120, they mainly purchased the car for maintenance cost reason. As mentioned above, pressures for low 4x2 segment came from the upper class model. One of the strongest competitors came from medium 4x2 used such as Toyota Kijang and Kuda (although they were priced higher). These models had better durability, more stylish, with child protection feature, fairly large capacity with better maneuverability, fuel-efficient with good engine performance and less trouble. These cars were mostly owned by people with family, trend-conscious, and those concerned with economic fuel efficiency and road performance. Kijang (“The most trusted family car”) was chosen for economic, family use, performance and brand credibility purposes and for price/parts availability and resale value reasons. Kuda was preferred for its trendy model, complete equipment and luxurious purposes, and parts availability and styling as well as passenger capacity reasons. For the new medium 4x2, survey reported that Kijang would have a new model launch in the second semester of 2004, but standard model would be pulled from the market. Mitsubishi Kuda was also predicted to launch its new model in the middle of 2004 (See Exhibit 7). Low 4x2 Buyers Profile Based on 2001 survey on previously-owned car market on Minicab and Kijang, it was found that most of the customers inclined to purchase a bonnet minivan due to the safety image and model. This model has similar utility to Kijang in terms of passenger capacity and loading. Customers also preferred to have performance car (PC) like driving, comfort, and the current new Kijang was out of their price range. As low 4x2 cars were priced between IDR 70 – 110 million (approx.US$7,700-12,200), potential customers of low 4x2 were those willing to purchase cars in that range. Demographically, they were married men from working class Social Economic Status (SES) with income of IDR 4-8 million/month (US$450-900/month), fairly young (median age of 32.5 years old) with higher education degree (university). Specifically for low MPV users, they had same percentage of university & senior high school, and most of them small business owner & staff. In psychographic profile, 4x2 low users were mostly those who value relationship with others, enjoyment and future goals with lifestyle activities, more individual-oriented activities such as reading, watching TV, computer, etc. In purchasing cars, they demanded functional benefits of economical (i.e., economic fuel consumption) and road performance (i.e., convenience in driving). For emotional reasons, they preferred benefits such as luxurious (i.e., credible brand) and socially oriented (demand a family car type). Their car ownership profiles showed that generally, they were identified as first-time car purchaser, only having one car in the household and were intending to purchase Kijang as their second


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car, mainly due to its economic value (price, economic fuel, low maintenance cost, resale value). For them, a car was purchased for basic transportation usage (i.e. for commuting to work and/or school) Research results also showed that Toyota’s brand image was strong among this 4x2 low segment, especially among low MPV and Kijang previously-owned users (in terms of trustworthy, after sales service guarantee, and resale value). However, among the city car users, Toyota was considered weak in fulfilling emotional benefit (especially aesthetic factor). Furthermore, the potential car buyers could be divided into three segments based on their life stages that differentiate their characteristics and also requirement/need towards cars. In the first group were young people who just started their career as staff or owned a small business (age median of 30 years old), married with a young family, mainly first car buyer with much concerned on economic, style, and road performance. In the second group, older people who were less likely to improve their social economic status in the near future, worked as staff/manager or owned a small business (age median 43 years old) with lower education, and family with kids age more than 6 years old. They usually bought car as replacement for the one they owned, much concerned in capacity and economic. Thirdly, young students from wealthier family where they still depended on (age median 23 years old), bought car as addition for the one they already had in the house, main concerned on styling and road performance. New Product Development As the market was being deeply reviewed, a joint task force in a new product development was assigned. The team was made up from marketing, research and development, design, production and other related departments. The team’s assignment was to create the new Toyota’s low 4x2 car. The product concept and design were directed to represent five key words, which were: advanced & modern styling, fun to drive & ride, economical, multipurpose car, and minivan body concept. After months of intensive work, a first Toyota low 4x2 car prototype was completed. This prototype was designed with new 3rd row seat car with bonnet type. This model was new in 4x2 class, had a compact size body with 3 row seats that can carry up to 7 adults comfortably and suitable for many kinds of user (bigger than low 4x2, acceptable roominess for former Kijang user). This model was hope to be the breakthrough model to bring Toyota to compete in the market since it had an advanced and stylish beyond its competitors. The product also prepared to have many advantages. Those were, engine performance and fuel economy that surpass competitors, passenger car-like driving performance, comfort level and accessibility. Drive ability and comfort ability beyond its competitors, also durability to cope with harsh usage and environment. The exterior design was advanced, modern and stylish styling, added by high class touch that offered the best styling in its class. The interior design was also advanced, modern, high quality and comfortable to drive and ride. In detailed: Size & Roominess Compact size but offer enough roominess to carry 7 adults comfortably. Suitable ground clearance for easiness to enter and exit the vehicle while still maintaining good capability to pass through bad road and flooded road confidently. High comfort level and drive ability


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due to long wheel base while still maintaining good maneuverability with minimum turning radius 4.7m (exceed both Taruna short & long and also Karimun). Chassis It uses adoption of Unitary Frame Chassis (semi monocoque like Carnival & Trajet) to achieve maximum strength and stability. Suspension Adoption of McPherson Strut for front suspension and 5 Link with Coil Spring for rear suspension to get better comfort ability and stability compare to competitors. It will be admirable driving experience. Engine Adoption of the most advanced engine compare to competitors 1.3L 4Cylin-line 16 valves Double Over Head Camshaft with Computerized Engine Management System that control both fuel and ignition system to achieve superb performance and good fuel economy. Has acceleration performance by good power to weight ratio. This engine had the best power output per liter displacement which means this engine is the most efficient one. Fuel economy level is the best among its competitors. Complete Exterior Features Multi reflector headlamp, fog lamps (GL), alloy wheel 14” for GL grade and steel wheel with wheel cap for DLX grade, electric outer mirror (GL), rear spoiler with high mount stop lamp (GL), rear wiper, multi reflector rear combination lamp, lift up type back door. Complete Interior Features Double air conditioning for GL and single air conditioning for DLX, 3 spokes urethane steering wheel, molded door trim, power window and power door lock, 1 DIN audio with 4 speakers (GL), stylish & modern meter combination design, 3 row seat with front face 3rd row seat, 3rd row seat can be folded to provide luggage space, abundant storage places. Complete Safety Features GOA (Global Outstanding Assessment) body as a Toyota high acclaimed standard of safety, side impact beam to reduce impact of side collision, safety belt for front and rear seat no.1 (GL), collapsible steering wheel for driver safety, child lock protector, 14” front disc and rear drum brake will provide superb breaking performance (See Exhibit 8). These all capabilities and advantages would produce a new value of global compact minivan. The Toyota low 4x2 car concept was designed to appeal working class and used car owners given its affordable price. Targeted price would be in the range of IDR 75 – 95 millions, well below the price range of all types of new Kijang, above Zebra and T-120 and around same price level with Carry Futura, Atoz, and Karimun. The new Toyota was to be the runner-up to Kijang in terms of sales volume in order for Toyota to maintain the number one position in Indonesian automotive market. Secondly, to grasp Kijang pre-crisis users that now could not afford to buy one. Thirdly, to absorb working class growth demand for low price car (IDR 70-110 mil) with multipurpose type. Marketing Challenge As all the above data was collected and analyzed by Harni Winara and her team, it was time to create a marketing plan for this new product. Furthermore, the top management had specifically set a high target. They wanted the new Toyota to be the market leader and to


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gain at least 30% market share. The above objective was to be accomplished by absorbing potential demand of city cars (Atoz, Visto, Kaarimun, and Katana), low 4x2 cab-over models (Carry, Zebra, and T-120) and medium 4x2 Standard (Taruna and Kijang) as well as by absorbing potential previously-owned car market (Kijang, Taruna. Kuda, and Panther) (See Exhibit 9). The new Toyota was to be named Avanza. It had to be properly packaged to gain competitive advantages in the market. Considering the tight competition in the low 4x2 markets and strong opponent like Suzuki with Carry and Karimun models leading the market, the new Toyota had to be carefully and effectively launched, while at all times avoiding any possible market failures. Therefore, the marketing plan had to be carefully prepared, taken consideration factors such as potential segments, target segments, and product positioning. Harni Winara and her team would now decide the marketing plan and strategy for the new Toyota. The package would include the product, price, place, and promotion activities.


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Exhibit 1a Forecast of Total Market Volume

(In Average Unit/ Month)

26,48429,543

40,274

44,494

2002 2003 2004 2005

YEAR

Units

in T

hous

ands

Exhibit 1b Total Market Shares

19.3 17.8 15.6 13.5 12.7

8.3 5.6 4.9 4.7 5.2

4.1 6.1 9.6 10.1 9.4

6.4 6.1 9.9 9.1 10.4

20.0 19.817.0 16.3 14.0

23.7 21.7 18.516.7

14.7

26.5 28.5 29.4 34.2 38.8

2002 2003 2004 2005 2006

YEAR

Perc

enta

ge

TOYOTA

MITSUBISHI

SUZUKI

DAIHATSU

HONDA

ISUZU

Others


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Exhibit 1c Segmentation of Indonesian Automotive

Type Class Toyota’s Product Other’s Product

Sedan

Mini Vios Suzuki Baleno, Hyundai Accent, Honda City

Small Corolla Honda Civic, Mitsubishi Lancer

Medium Camry Honda Accord, Mercedes C-

Class, BMW 3 series, Jaguar X-Type

Luxury Crown Audi A6, Mercedes E-Class, BMW 5 series, Jaguar S-Type

Premium - Audi A8, Mercedes S-Class, BMW 7 series, Jaguar XJ

Coupe - Mercedes CLK Sports - BMW Z-Class

4x2 (2 Powered Wheels)

Low

Mini ≤ 1000cc Starlet Suzuki Karimun, Atoz, Visto MPV 1300 – 1600cc

- Suzuki Carry, T-120, Hi-Jet

SUV 1300 – 1600cc

- Suzuki Katana

Medium

Mini ≤ 1500cc - MPV 1500 – 2500cc

Kijang Isuzu Panther, Mitsubishi Kuda, Mitsubishi L-300, Aerio, Stream

SUV 1500 – 2500cc

- Suzuki Escudo/Vitara

High

Mini ≤ 1800cc - VW Golf MPV 2000 – 3000cc

-

SUV 2000 – 3000cc

- Honda CRV, Nissan X-Trail

Premium - VW Caravell, Previa

4x4 (4 Powered Wheels)

Low - KIA Sportage

Medium - Ford Escape/Everest, Daihatsu Taft/Rocky

High - Land Rover, Cheerokee Premium Land Cruiser Range Rover

2 Ton (Commercial) Dyna Benz MB, Elf, Dutro


14

Exhibit 2a Total Market Composition & Forecast of Sedan, 4x2, 4x4 and Commercial Vehicles

24.533.2 36.4 35.5 34.3 33.4

0.5

0.70.4 0.4 0.5 0.5

59.3

54.454.8 55.6 56.8 57.7

15.8 11.7 8.4 8.5 8.5 8.4

2000 2001 2002 2003 2004 2005

YEAR

Perc

enta

geSedan

4x2

4x4

Commercial

Exhibit 2b Total Market Composition & Forecast of 4x2 and All Other Types

2.2 1.9 1.8 1.7 2.0

14.6 14.8 13.3 10.7 10.4

19.6 19.7 20.119.5 18.2

3.4 5.8 4.64.6 3.3

34.3 31.525.8 28.9

27.8

17.1 15.1 25.7 27.7 32.4

8.4 11.0 8.4 6.6 5.5

2002 2003 2004 2005 2006YEAR

Perc

enta

ge

Sedan

4x2 LOW

4x2 MED

4x2 Hi+Pr

4x4

2 TON

5 TON


15

Exhibit 3 ORGANIZATIONAL STRUCTURE AND ITS BUSINESS FUNCTION OF EACH UNIT COMPANY’S SCHEME

Toyota Motor Corporation PT. Astra International, Tbk.

49% 51%

Toyota Astra Motor

Production Group

Engine PlantCasting Plant Stamping Plant

Assembly Plant

Marketing Group

Domestic MarketOverseas Market

CustomersVehicle (Brunei, PNG)Engine (Malaysia, Taiwan, Philippines)Cylinder Block (Japan)

CKD ComponentsFrom Japan

Supplier of Locally Manufactured Components

Export Dealers

Scraps

CBUs

Note:FinanceComponentsCBUs


16

Exhibit 4a

Total Market Composition & Forecast of 4x2 Vehicles

3.7 6.3 5.8 5.7 5.7

78.0 65.8 62.4 63.1 59.1 57.0

18.327.3 31.3 31.1 35.2 37.4

6.9

2000 2001 2002 2003 2004 2005

YEAR

Perc

enta

ge

4x2 Low

4x2 Medium

4x2 High+ Premium

Exhibit 4b Comparison and Forecast in Total Market Volumes

(Total Volumes/ year)

301 300318 325

355380

179164 174 181

202219

32 45 55 56 71 82

2000 2001 2002 2003 2004 2005

YEAR

Units

in T

hous

ands

Total Volume(Sedan, 4x2, 4x4,Commercial)

4x2 Total Volume

4x2 Low Volume


17

Exhibit 4c

4x2 Low Private versus Public Compositions

2812 9

1829

7288 91

8271

1998 1999 2000 2001 2002

YEAR

Perc

enta

ge

Private

PublicTransportation

Exhibit 5a Contribution of Each Area in Low 4x2 Private Market In 2002

4x2 Low Private Market

DKI West Java

Central Java

East Java Sumatera Kalimantan Sulawesi National

1998 1,342 1,785 1,140 1,333 796 290 306 7,999 1999 2,160 1,587 831 1,236 498 209 349 7,774 2000 8,035 5,271 2,204 3,341 1,876 317 405 22,253 2001 9,978 8,010 2,890 4,523 2,130 578 886 30,037 2002 10,948 9,387 2,514 4,538 2,351 530 802 31,950

Contribution 34,0 29,4 7,9 14,2 7,4 1,7 2,5 100,0

Contribution

DKI, 34.30%

West Java, 29.40%

Central Java, 0.00%

East Java, 14.20%

Sumatera, 7.40%

Kalimantan, 1.70%Sulawesi, 2.50%

DKIWest JavaCentral JavaEast JavaSumateraKalimantanSulawesi


18

Exhibit 5b Contribution of Each Area in Medium 4x2 Market In 2002

4x2 Medium

DKI West Java

Central Java

East Java Sumatera Kalimantan Sulawesi National

1998 11,441 4,291 2,221 5,094 3,926 1,228 2,226 32,690 1999 17,968 6,112 3,080 5,342 4,732 1,132 1,536 42,151 2000 51,993 20,880 9,174 16,990 14,782 3,443 4,444 124,762 2001 40,925 19,463 7,014 14,730 12,685 3,967 3,957 106,157 2002 38,113 20,102 6,442 13,230 12,172 3,868 4,330 101,214

Contribution 37,7 19,9 6,4 13,1 12,0 3,8 4,3 100,0

Contribution

DKI, 37.70%

West Java, 19.90%Central Java, 6.40%

East Java, 13.10%

Sumatera, 12.00%

Kalimantan, 3.80%Sulawesi, 4.30%DKIWest JavaCentral JavaEast JavaSumateraKalimantanSulawesi


19

Exhibit 6a Market Shares Competition & Growth of 4x2 Low

1 2 2

2516 10 12

6

15

67

6

7

1215

10

12

13

2

11

22

13

16

5867

4738

42

1998 1999 2000 2001 2002

YEAR

Perc

enta

ge

Carry

Karimun

Visto

Atoz

Katana

Zebra

T120

Exhibit 6b Contribution of Medium 4x2 Market In Each Area

DKI Jakarta (30%)

8 12 11

78 69 65

13 20 24

2000 2001 2002year

perc

enta

ge

4x2 Low

4x2 Medium

4x2 High &Premium


20

2000 2001 2002 Carry 37% 45% 49% Karimun 23% 13% 16% Visto 6% 13% 12% Atoz 13% 14% 10% Katana 9% 5% 5% Zebra 10% 8% 5% T-120 2% 2% 2%

West Java (19%)

2 5 4

73 59 50

24 37 46

2000 2001 2002year

perc

enta

ge

4x2 Low

4x2 Medium

4x2 High &Premium


East Java (9%)

3 7 8

80 70 68

16 23 25

2000 2001 2002year

perc

enta

ge

4x2 Low

4x2 Medium

4x2 High &Premium


21


Central Java (5%)

1 6 6

79 66 64

19 28 30

2000 2001 2002year

perc

enta

ge

4x2 Low

4x2 Medium

4x2 High &Premium


Sumatera (10%)

1 3 4

84 75 67

14 22 29

2000 2001 2002year

perc

enta

ge

4x2 Low

4x2 Medium

4x2 High &Premium


22


Sulawesi (3%)

2 4 5

89 65 66

931 29

2000 2001 2002year

perc

enta

ge

4x2 Low

4x2 Medium

4x2 High &Premium



23

Exhibit 7a Specification Comparison with Competitors

Avanza Taruna "C/F Carry 1.5 Zebra 1.5 Atoz/Visto Karimun Kijang Short Overall Length 4,070 4.175/4.425 3,875 3,835 3,495 3,410 4,270 Overall Width 1,630 1,620 1,570 1,560 1,495 1,575 1,670 Overall Height 1,680 1,710 1,915 1,860 1,615 1,705 1,770 Wheel Base 2,655 2.500/2.750 1,970 2,080 2,380 2,335 2,400 Ground Clearance 170 195 187 187 160 160 185 Min. Turning Radius 4.7 4.9/5.3 4.2 4.2 4.4 4.8 4.9 Curb Weigth (Kg) 1,091 1,140 1,050 1,050 820 865 1,300 Displacement (L) 1.3 1.5 1.5 1.5 1.0 1.0 1.8 Engine Type 16V DOHC 16V SOHC 8V SOHC 16V SOHC 12V SOHC 8V SOHC 8V OHC Fuel System EFI EFI Carb. EFI EFI Carb. EFI Max. Output (PS) 84 86.1 77 86.1 55 55 84 Max. Torque (kgm) 11.8 11.8 11.2 11.8 8.4 10.2 14.6 Power to weight Ratio (kg/PS) 13.0 13.2 13.6 12.2 14.9 15.7 15.5 Power / Liter / E/G Displacement 64.6 57.4 51.3 57.4 55.0 55.0 46.7 Fr. Suspension MacPherson strut Fr. Spring Coil Rr. Suspension 5 Link Rigid Axle Torsion beam Isolated Trailing Link Rr. Spring Coil Leaf Coil Chassis Unitary frame Monocoque Chassis Chassis Monocoque Monocoque Fuel Consumption ratio (km/L) 12 9.8 9.2 Grade Engine Trans Comp.'04 GL 1.3 L AT* 7% MT 59% DLX 34% * will be introduced 6 months after M/T launch


24

Exhibit 7b Competitor’s Buyers Profile

USED KIJANG

ATOZ VISTO KARIMUN ZEBRA CARRY T 120 KUDA TARUNA

MARITAL STATUS/ AGE MEDIAN

Mostly married man (31.4yo)

Majority single male (28yo)

Same portion of male/female & single/married (30.9yo)

Married male (34.4yo)






OCCUPATION Mostly entrepreneur

Mostly student/ entrepreneur & staff

Mostly entrepreneur & student

Mostly entrepreneur

Mostly entrepreneur

Mostly entrepreneur

Mostly entrepreneur



MEDIAN INCOME/ IDR (1US$ = IDR9400 in September 2007)

4.5 million /month

6 million /month

6.88 million /month

4.74 million /month

6.25 million /month

4.74 million /month

5.6 million /month

7.5 million /month

8.4 million /month

EDUCATION Mostly have university education

Mostly have university education

Mostly have university education

Have senior high school education

Well educated people (university)

Mostly have senior high school education

Almost same portion university & senior high school education

Mostly have university education background

Mostly have university education background

REASON TO BUY

Parts availability & resale value

Exterior style, fuel economy & price

Style, small size & price

Price, parts availability & resale value

Parts availability & price

Price, parts availability & resale value

Parts availability & maintenance cost

Parts availability & styling while also need passenger capacity

Parts availability & price

PREFERENCE E/G performance, resale value, credible brand & family car

E/G performance, quality & credible brand

Up to date model, convenient to drive, credible brand & easy to drive

Economic fuel, family car, E/G performance & credible brand



Economic fuel, E/G performance, credible brand, family car & good quality

Style, complete equipment & luxurious

Styling, E/G performance & young


25

Exhibit 7c 4 X 2 Models Comparisons

4 x 2 Med Used (45%) 4 x 2 Med Std (17%) Low Cab Over (9%) City Car (29%) Characteristics Selling Point Characteristics Selling Point Characteristics Selling Point Characteristics Selling Point 22.30% 8.40% 4.50% 14.40%

Segment 1

1. Young Family

2. High Education

3. Mostly as first car

4. Income 4-8

mil/month

5. Just start work or

starts small business

6. Need : Value for

money, road

performance &

capacity

1. Better durability

2. More stylish

3. Safety : GOA,

child protection

4. Quite big capacity

5. Economic fuel

with good engine

performance

1. Profile almost

same with 4x2

med used only

different need

2. Need : Less

trouble & less

concerned with

complete

equipment

1. More value for

money (new car

with more

complete

equipment)

2. Safety : GOA,

child protection

3. Fairly large

capacity & better

maneuverability

4. Fairly good road

performance with

economical fuel

1. Young Family

2. Slightly lower

education

3. Mostly first

car buyers

4. Income IDR 4-

8 mil/month

5. Small

entrepreneur

& car used for

business

6. Lived at

remote area

7. Need :

economic &

capacity

1. Bonnet type

(safety & easy

maintenance)

2. Economic fuel

with better road

performance


& maneuverability

1. Mostly still single

2. A bit high

percentage of

women

3. High education

4. Bought as first car

5. Income 4-8

mil/month

6. Majority as staff

7. Need : young style

& practical

1. Advance styling

2. Better engine

performance with

economic fuel

3. Not too big & have

more utilities

4. Quite good

maneuverability


26

Exhibit 7c (Cont.) 4 X 2 Models Comparisons

4 x 2 Med Used (45%) 4 x 2 Med Std (17%) Low Cab Over (9%) City Car (29%) Characteristics Selling Point Characteristics Selling Point Characteristics Selling Point Characteristics Selling Point 15.30% 5.80% 3.00% 9.90%

Segment 2

1. Family with

child age 6–16

2. A bit lower

education

3. Mostly as

replacement

4. Income 4-8

mil/month

5. Work as staff or

manager

6. Need :

economic, style

& capacity

1. More stylish car

2. Less trouble

3. Fairly big capacity

with better

maneuverability

4. Economic fuel

consumption

with good

engine

performance

1. Family with

child age 6–16

2. A bit lower

education

3. As replacement

car

4. Income 4-

8mil/month

5. Work as staff or

manager

6. Need :

economic,

capacity & less

trouble

1. More stylish car

2. Less trouble/

new car

3. Quite big

capacity with

better

maneuverability

4. More economic

fuel

consumption

while still have

good engine

performance

1. Family with

child age 6–16

2. Slightly lower

education

3. Mostly as

replacement

4. Income 4-

8mil/month

5. Work as staff or

manager

6. Need :

economic, style

& capacity

1. More stylish car

2. Less trouble


with better

maneuverability

4. Economic fuel

consumption with

good engine

performance

1. Family with child age 6–

16

2. Slightly lower education

3. As replacement car

4. Income 4-8mil/month

5. Work as staff or

manager

6. Need : economic,

capacity & less trouble

1. More stylish car

2. Less trouble/ new car

3. Quite big capacity with

better maneuverability

1. More economic fuel

consumption while still

have good engine

performance


27

Exhibit 7c (Cont.) 4 X 2 Models Comparisons

4 x 2 Med Used (45%) 4 x 2 Med Std (17%) Low Cab Over (9%) City Car (29%) Characteristics Selling Point Characteristics Selling Point Selling Point Characteristics Selling Point Characteristics 7.40% 2.80% 1.50% 4.70%

Segment 3

1. Car bought by

parents

2. Additional car

3. Mostly student

or just start

working &

depend on

parents for car

purchase

4. A bit wealthier

family

5. Need : style,

capacity &

economic fuel

1. Advance styling

2. Less trouble

3. Economic fuel

consumption with

good engine

performance

4. Not too big but

can carry 7 adults

comfortably

1. Same profile

4x2 med used

2. Need : less

trouble,

capacity, style

& also

economic fuel

1. Advance styling

2. More economic

fuel consumption

while still have

good engine

performance

3. More value for

money (complete

equipment with

affordable price)

4. Not too big but

still have 3rd row

seat

1. Car bought by

parents

2. Additional car

3. Mostly student or

just start working

& depend on

parents for car

purchase

4. A bit wealthier

family

5. Need : style,

capacity &

economic fuel

1. Advance styling

2. Less trouble

3. Economic fuel

consumption

with good

engine

performance

4. Not too big but

can carry 7

adults

comfortably

1. Same profile 4x2

med used

2. Need : less trouble,

capacity, style &

also economic fuel

1. Advance styling

2. More economic fuel

consumption while

still have good engine

performance

3. More value for

money (complete

equipment with

affordable price)

3. Not too big but still

have 3rd row seat


28

Exhibit 8 Avanza Product Line

ITEM 1.3 DLX 1.3 GL Radiator Griller Colored Chromed List Fr Fog Lamp (Multi) W/O With Door Mirror Pivot, Colored Electric, Colored Wheel Full wheel cap + Steel Aluminum Rr Spoiler W/O With (With High Mounted Stop Lamp) Seat Upholstery Fabric A (Med) Fabric B (High) Head Rest Upholstery Fabric A (Med) Fabric B (High) Sun Visor With (D & P) With (D & P), With Mirror Audio W/O Radio Cassette + 4 speakers Rr Console Box W/O With Air Conditioner Single Double

Exhibit 9 Potential Demand

4x2 Med Used, 45%

City Car, 29%

4x2 Low MPV, 9%

4x2 Med Std, 17%

toyota avanza

Documents

indonesian automotive

market opportunity

recovering market

growing market

indonesian automotive

strong market trend

indonesian industries

indonesian economy