Final answer:
For years, Mercedes-Benz utilized a premium pricing strategy; however, this created an opportunity for Toyota to introduce its luxury Lexus line and undercut Mercedes.
Step-by-step explanation:
Mercedes-Benz historically adopted a premium pricing strategy, positioning itself as a luxury brand with higher price points, aiming to convey exclusivity and high quality. This strategy aimed at catering to a niche market of affluent customers willing to pay a premium for the brand's prestige, craftsmanship, and superior engineering. However, this premium pricing strategy also left a gap in the market, creating an opportunity for other competitors, like Toyota, to capitalize on this gap by introducing their own luxury line, Lexus.
Toyota recognized the potential to offer high-quality luxury vehicles at a more competitive price point compared to Mercedes-Benz. By introducing Lexus as a luxury brand with comparable quality but at a relatively lower price, Toyota aimed to attract customers who sought luxury but were more price-conscious.
This strategic move disrupted the market, challenging Mercedes-Benz's dominance and forcing it to reevaluate its pricing strategy to remain competitive in the luxury car segment.
In essence, while Mercedes-Benz's premium pricing strategy established its brand as a symbol of luxury and quality, it also paved the way for competitors like Toyota to introduce alternatives targeting similar demographics at more accessible price points, ultimately influencing the market dynamics within the luxury car industry.