Interpret Market Trends and Developments Company: Lexus MACRO – ECONOMIC ENVIRONMENT ‘Secondary Data’ Market Attractiveness Decreased Wealth Spending: A decrease in consumer wealth as a result of higher prices for consumer goods and lower stock market and housing prices. In the third quarter of 2006, household wealth rose to a record $54. 1trillion, meanwhile household savings hit record lows. Over the last 5years, leftover gross income has decreased by more than 6%. Interpretation: Lower wealth will cause consumers to spend based on their income rather than their net worth.

Evaluation: As a vehicle intended to sell to the wealthy as opposed to those with high incomes, this market trend is a moderate threat. Statistics: •Hybrid sales in the first 7months of 2007 were up 49% •All new vehicles sold in first 5months of 2007, 2. 1% were hybrid vehicles •Japanese brands accounted for 96% of the hybrid vehicles registered •1. 83% US market are hybrid sales •By 2015 hybrid sales in US market analysed to be 30-35% Lexus is gaining momentum as consumers gain confidence that the economy is slowly recovering.

The introduction of new models and the willingness of consumers to make more expensive purchases have begun to satisfy the pent-up-demand of premium vehicles created during the recession. China’s growth rate for third quarter of 2010 was 9. 1%, this coincided with September’s unemployment rate in the U. S; also 9. 1%. Supporters contend that China’s policy of managing the Yuan’s value against the dollar is a cause of America’s unemployment woes. An undervalued currency makes a country’s goods more competitive and attracts manufacturers seeking lower production costs.

While the market in general is beginning to slow down, Lexus sales are not shrinking as much as others. This indicates their strong presence in the premium market and our continued ability to grow market share and volume through product and brand awareness going forward. Product: Full Hybrid GS 450H Due to the shift in secondary cultural values towards clean living with the environment; Lexus has moved into the Hybrid market. Now that there is more coverage on Global Warming more people have pledged to take their part in keeping our world clean and reducing their carbon emissions.

Lexus noticed the shift in its customer’s cultural values and decided to react to not only keep their customers but also create delight and goodwill in developing a product that is safer for the world. 43% of people say they will be ‘Extremely Green’ within the next 5 years. Lexus decided to appeal to customers who fall into both categories of desiring luxury vehicles while still sustaining the environment. Lexus built a line of hybrids at varying price points to capture various levels of consumers, Lexus is demonstrating product line stretching within one line.

Even with their reaction to changing cultural values and product line stretching, Lexus has still maintained their positioning as a high end, luxury vehicle offering both exceptional performance and quality. The Lexus brand and reputation tells the customer that they are still receiving a luxury vehicle yet with the added bonus of environmental sustainability. The petrol – electric hybrid; the GS 450H is faster, more fuel efficient GS variant in the Lexus range. There is 18% better fuel economy with a combined fuel consumption of 6. L per 100km and the C02 emissions have been reduced to 145g/km. There is an energy saving air conditioning system with a luggage capacity of 465L (55% increase). Comparison: •BMW 535D – 6. 1L/100km, 162g/km •Mercedes Benz E359 CDI – 6. 3L/100km, 165g/km Place: City – Efficient Features •Shutting down the engine during traffic stops or while coasting or during idle periods •Using low rolling resistance tyres •Noise emissions reduced Target Market Analysis – Product and Place:

Classy, refined, wealthy, image conscious buyers, middle aged to elderly Strengths: •Lexus No. 1 luxury car in America since 2000 •Brand – household name Weaknesses: •World market condition – over supply; manufacturers need to make sure their model is what consumers want. •Exposure to fluctuating economic and political conditions Opportunities: •Oil prices increase; sales of hybrid vehicles increase Threats: •Product recalls •Competitive rivalry; competition increase daily •Company exposed to movement in price of raw materials eg. Rubber, steel and fuel