March 26, 2007

A former journalist who worked in Japan for m ore than a decade visited Lyon College to give an inside look into one of the most ambitious – and successful – business strategies executed in the past 20 years.

Chester C. Dawson III (speaking at right), author of "Lexus: The Relentless Pursuit," detailed how Toyota developed and launched its Lexus brand, climbing from a zero share to a 25 share of the luxury car market in the space of only 10 years.

The event was part of the Japan Lecture Series 2006-2007.

Dawson is vice-president at SPARX Investment & Research Inc., the New York-based office of Japanese hedge fund SPARX Asset Management Co.

Prior to that, he worked as International Finance Editor at BusinessWeek magazine. He spent more than 10 years in Tokyo covering Japan Inc.’s "lost decade" for BusinessWeek, Dow Jones & Co.’s Far Eastern Economic Review, The Associated Press and Bloomberg News.

Dawson said when Toyota executives conceived the Lexus brand, they knew perceptions among car buyers were biased against them.

"The idea of a Japanese luxury car wasn’t taken as a serious threat by Mercedes, BMW and the other established luxury car brands," he said.

Toyota wasn’t the first Japanese car company to create a luxury brand however. Nissan had already launched its Infinity line before the first Lexus rolled off the assembly line, and Honda’s entry into the market, Acura, wasn’t far behind.

Toyota dedicated over more than 1,400 engineers, six years and almost $1 billion developing the first Lexus model, the LS 400. They did so partly because U.S. sanctions on foreign imports limited the numbers of cars Toyota could send over. Faced with selling a set number of cars, they opted to sell higher priced cars to keep profits climbing.

"Lexus sold more than 300,000 cars in the U.S. last year," Dawson said. "That’s only been done four times in history. Twice by Lexus and twice by Cadillac, way back in the '80s."

To achieve that success, the company differentiated themselves from other luxury brands by identifying an underserved niche in the market.

"Cars like Mercedes and BMW have built-in perceptions that go with them," Dawson said. "It’s acknowledged that if you drive a Mercedes, you’re saying you have the money to spend, look at this. Their image is flashy."

The typical Lexus owner is different, he added.

"Lexus targeted the ‘bobos’," he said. "Bourgeois bohemians."

Bobos are a combination of free-spirited, artistic rebels who have some of the material ambitions of their bourgeois counterparts in the corporate world.

Only one thing is missing from the Lexus lineup, and that’s a "halo car," Dawson said.

"They don’t have a top of the line, high performance sports car, but they’re developing one now," he said.

That car, the 500-horsepower LF-A Concept is currently under development and could be unveiled as soon as the next industry trade show in New York City.

Now driving at the front of the luxury car pack in the U.S. market, Lexus is a car brand that doesn’t even exist in Japan, Dawson said.

"In Japan, a Lexus is a high-end Toyota," he said. "They’ll sell you a $50,000 Toyota and a cheap little $30 kit to put the Lexus name on it."

Lyon College is one of only four colleges/universities in the state to offer Japanese studies and Lyon’s Japan Studies Program, established in 2002, is the only one in the eastern half of the state that provides advanced courses so students can learn about the culture as well as the language of Japan.

The Japan Lecture Series is made possible by the grant from the Freeman Foundation.

For more information on the Japanese program at Lyon College, contact Mieko Peek, instructor of Japanese language and literature at: mpeek@lyon.edu.