Does Upward Product Line Extension Hurt or Benefit a Firm’s Competitive Advantage? The Case of Honda’s Acura, Nissan’s Infiniti, and Toyota’s Lexus Brands

Abstract

When a company extends its product line (and brand name) upwards to premium products, it hurts its overall demand, market share and competitive advantage (Caldieraro et al. 2015). However, the three most successful line extensions in the luxury segment of the auto industry, Honda’s Acura, Toyota’s Lexus, and Nissan’s Infiniti contradict their findings. This study proposes that if a company pursues upward or downward line extension, it can gain competitive advantage only if the marketing mix is consistent with its target market, i.e., a completely new brand name, product, pricing, distribution, and promotion.