Toyota - Oh, What A Feeling! Lexus - Oh, What A Stealing?

Why cruise along in a $61 000 Lexus LS400 and not a $25 000 Toyota Camry? Are the cores of Lexuses "every bit a Toyota" as The Car Man claims onThe Auto Channel Discussion Board ? Why would Toyota/Lexus compete against themselves? Does this count as product cannibalism? Have we asked too many questions?

The claim is made that "the core of the vehicles of Lexus are every bit a Toyota". They have the same manufacturers, the same dealership locations, and (at least in 1999) the same 'TOYOTA' text imprinted on the window glass. There are no crossover products. Toyotas and Lexuses may not even be considered the same market. Lexus owners may be trying to buy something more than the car itself.

It is our view that they are not competing against themselves.

While opponents of The Car Man had previously argued that the fact that Toyota and Lexus do not have any crossover models illustrates that the two brands are indeed different, this author argues that the lack of crossover models indicates that the two are really just one brand.

This argument illustrates an interesting aspect of product cannibalism. "Product cannibalism occurs when one product category steals potential customers from another product category" according to an editorial from Penn State's Distance Education website.

In this light, the author's argument about crossover models makes sense – if Toyota/Lexus made crossover models, the company would be competing between their own models – they would be stealing potential customers from another product, but since this product would also be part of their company, it would be of no use to the company.

As The Car Man says (and Team Awesome begins to think of him as "Our Car Man"), "Why would [the company] want to spend double the money in resources and advertisement to try and attract buyers to compete amongst themselves?"

What Lexus is doing to Toyota may also be defined as competitive displacement by Soren Kaplan. While it may not be the radical product cannibalism of infinitely updating browsers, it seems slightly tinged with competitive displacement and market invention.

The situation illustrates competitive displacement in that luxury cars (Lexus) and more economical cars (Toyota) do not belong in the same market if you look at cross-price elasticities (as we did in class for the demand for cars) and market invention.

Lexus and Toyota are certainly price discriminators, if not product cannibals.

- Jon Carrier, Joyce Chang, Dexter Galozo, Vinu Ilakkuvan