by BusinessEssy.net

A STRATEGIC ANALYSIS FOR MERCEDES-BENZ
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Introduction
In this article, a comprehensive company research will be performed for the Mercedes-Benz company. The article is arranged as follow. Firstly, the background of the Mercedes-Benz will be introduced. Then, relevant theoretical framework to analyze the company’s macroenvironment situation will be performed. Later, the automotive industry nature will be investigated. The article will then focus on the firm’s specific strategies and by using the SWOT framework, to deliver probable strategies for the company. The article end by providing several recommendations for the firm to achieve strong financial performance in the marketplace.

Background of Mercedes-Benz
Originated from a German car manufacturer, Mercedes-Benz is currently a manufacturer of various types of automotive, including buses, coaches, and trucks. Currently, Mercedes-Benz had become a division under its parent company, namely the Daimler AG group of companies. As early as 1901, the vehicles manufactured by Mercedes-Benz were marketed by Daimler Motoren Gesellschaft. Since then, the company has been introducing many technological advance and safety-oriented innovations that have become popular in the automotive industry. The company is a popular and branded one in the automotive industry – it is one of the most popularly known automobile company in the world, not to mention that it is also one of the world’s oldest automotive brand that are still in existence today (Bossink & Blauw, 2002).

Regarding its parent company, the Daimler AG group of companies is engaging in developing, manufacturing, distribution and sale of a variety of automotive related products – particularly in the passenger cars, trucks, vans and buses segments. There are five business segments under the parent company, namely: Mercedes-Benz Cars; Daimler Trucks; Daimler Buses; Mercedes-Benz Vans and Daimler Financial Services. Today, the company establishes its main operations and has significant market shares in the US, Germany, Western Europe, as well as Asia Pacific regions (Hessenberger et. al., 1997).

External Environment Analysis
PESTLE Framework for Macroenvironment Analysis of Mercedes-Benz
It is important for any analyst to carry out a comprehensive analysis on the macroenvironment before the various relevant and viable strategies can be formulated for Mercedes Benz. In order to analyze the macroenvironment the company is operating in, the PESTLE framework will be used. As the company is operating on a global scale, the relevant macroenvironment analysis will be focusing on a worldwide context. In the following paragraphs, the six factors to be discussed include: (a) political factors; (b) economic factors; (c) social and cultural factors; (d) technological factors; (e) legal factors; and (f) environmental factors.

Political factors. From a worldwide view, the political issues related to the automotive industry is complicated and complex. The political issues arising from the Western world is less of a concern for the leading car manufacturer because many of the leading car manufacturers are originated from the Western world. However, the political forces from the emerging countries are more complicated (Bossink & Blauw, 2002). Rules and regulations are generally set up to protect the car manufacturers from the emerging countries, to imposes extra taxes and tariffs against the car manufacturers from the other countries, and to demand the leading car manufacturers to shift their manufacturing plants and technologies to the emerging countries before these car manufacturers are allowed to penetrate the marketplace in the emerging markets (Apfelthaler et. al., 2002).

Economic factors. Currently, the entire world is seemingly entering into an economic era of turbulent and volatility. After the housing and financial crises happening in the United States as well as the Europe, the world had entered into a temporary recession. Although many of the emerging countries able to recover in a satisfactory pace, the economic picture and prospect of the world in the future will still be turbulent. This will definitely affect and impact the operations and marketing strategies of the leading automotive manufacturers around the world. Besides, it is also worthy to mention that the automotive industry has a huge multiplier effects on the economy of a particular country. In fact, there are researches indicating that the automotive industry is one of the major industry that consume a large volume of computer chips, steel, iron, copper, textiles, plastics, rubber and etc. It is even argued that in every one workers being employed in the automotive industry, there are seven other jobs being created in the other industries.

Social and Cultural factors. It cannot be denied that in every part of the world, people do have their respective social and cultural practices and beliefs. For example, the culture in the East and the West is significantly different. The cultural differences are something not to be neglected by the automotive manufacturer. Nonetheless, due to the globalization effects, the culture and consumers behaviors are seemingly becoming similar around the world. Be it in the developed or the emerging country, people nowadays are judging others based on the types of car that they are driving. Anyone who able to drive a high class vehicle is often considered as wealthy, noble and powerful (Jackson, 2001). In fact, consumers may simply feel better and become more confident when driving a good and nice car. Nobody in fact just want to be seen driving in a piece of junk metal. However, the consumers’ preferences on the style of car and the design of the vehicles may differ across the globe.

Technological factors. It is obvious that technological advancement is a critical and important element not to be ignored by the various automotive manufacturers. In fact, to capitalize on the newly discovered and designed technologies are the methods or strategies utilized by car manufacturers to achieve competitive advantages in the marketplace. Apart from that, another technological change that will affect the automotive industry seriously is the advancement of the internet. In fact, the internet is impacting various industries around the world. Such a trend is not something that can be ignored by the car manufacturers. For example, there are studies indicating that a total of 60% to 80% of the consumers visited the automotive web-portal before they go to the test driving session. From the other end, internet is changing the entire supply change management in the industry as well (Apfelthaler et. al., 2002).

Legal factors. In the automotive industry, the various relevant laws and government regulations have been affecting the entire industry since 1960s, particularly in the United States. The legal aspect of the automotive is stringent, as the consumers’ life is dependent on the quality and reliability of the vehicles. There are various standard required by the government authorities in handling the manufacturing of automotive. Nonetheless, this is less of a concern for the entire industry, as many of the leading car manufacturers are proactively improving the quality of their products to gain competitive advantages in the marketplace.

Environmental factors. Currently, there are huge concerns if the industries and businesses around the world is polluting and damaging the world natural environment. Environmental activists are becoming more active and aggressive. Besides, it is also discovered that consumers are seemingly becoming more environmental conscious, where they may even consider if the car manufactured by a particular company has the lowest CO2 emission (Bossink & Blauw, 2002).

Porter Five Forces for Industry Analysis of Mercedes-Benz
To investigate the industry structure the company is operating in, it is useful to adopt a famous and yet practical theoretical framework – the Porter Five Forces framework to analyze the industry structure as well as the competitive forces in the automobile industry. Specifically, five important competitive forces relevant to the analysis of the automobile industry landscape will be discussed as follow.

Rivalry among existing competitors. The rivalry among existing competitors in the automotive industry is very tough and aggressive. There are many powerful players around the world, such as General Motors, Ford Motor, BMW, Volkswagen, Toyota, Honda, Nissan, Kia, Volvo, and Mazda (Jackson, 2001). The challenging part is that all of these companies are powerful, ambitious, aggressive, and engage in continuously improvement to beat the competition. The competition is even worst in the developed countries, as the market for the automotive is becoming saturated in the recent years. Thus, to increase the market share, a particular car manufacturer must either drop the current selling price or to add value to it end products. However, there are also views commenting that the competition in the emerging countries is as competitive as those in the developed world. For example, China is a huge market and the potential customers buying a car are gigantic. However, the competition in the country is highly competitive. Overall, the rivalry among existing competitors is intense and will negatively affect the company. In the recent years, it is not hard to witness that there is significant market share variation in the automotive industry – a strong indication that the market players are fighting among each other in the marketplace (Hessenberger et. al., 1997).

Bargaining power of suppliers. It is a well-known fact that auto manufacturers often require various types of input materials, such as hardware parts, raw materials, and consultancy services from various parties. As the profit margin of the various auto makers are being squeeze by the ever competitive business landscape, any increases in the input prices can reduce the profitability of the auto makers seriously. From the other perspective, there are also many suppliers in the automotive industry. The analysis of the bargaining power of supplier in the automotive industry is complex matters. However, for those leading auto manufacturers such as General Motors, Ford Motors, Toyota or the Mercedes Benz, they have successfully built up a large network of suppliers in various countries around the world (Bogue, 2008). Overall, the bargaining power of supplier for the company is moderate.

Bargaining power of buyers. Bargaining power of buyers is referring to the ability of the consumers, or customers in negotiating the prices offered to them by the various car dealers. In the automotive industry, it is generally observed that most of the time, individual consumers have some degree of influence against the car dealers, but have little and indirect influence against the car manufacturers. However, that does not mean that the consumers cannot exert negative impacts towards a company performance in the automotive industry. In fact, consumers often play a significant role in determining the pricing and value added features designed on a car, as although the consumers have no direct influence on the pricing of a car maker, they can choose to switch to the competitor’s products. In the information era, this is becoming more prevalent, as consumers can perform direct pricing comparison on the internet in a few seconds (Apfelthaler et. al., 2002). Overall, it is pretty challenging for a manufacturer to maintain loyal customers and to simply increase the selling prices of a car. In a nutshell, the bargaining power of customers is high, and this is negative towards the various car manufacturers.

Threats of substitute products. While the Porter 5 Forces framework does not explicitly investigating the consumers demand in the marketplace, the framework does take the potential of substitutes or complementary products into account when investigating the various competitive forces affecting a particular industry. In the context of car manufacturer, the potential substitute is the public transportation services. To explain: when the public transportation services becoming highly efficient, people may choose to take bus and rapid transit instead of buying a new car (Apfelthaler et. al., 2002). However, it is observed that the public transport is not a direct substitute for buying a car, because to travel from a destination to another may not be the only reason for people to purchase a car. On the issues of complementary products, the relevant issues related to the automotive industry include: gasoline prices, batteries, tires and etc. For example, the rising petrol prices and gasoline prices around the world often have negative effects against the demand of new cars. In fact, there are studies discovering that rising petrol prices have the most significant effect against the big three’s performance in US and Europe, namely, the General Motors, Ford Motor and Daimler AG, as their car design is less fuel efficient (Bossink & Blauw, 2002). Overall, the threats of substitute products in the industry are weak, while the changes in complementary products to the demand of new cars are moderate.

Threats of new entry. Any new player entering the automotive industry will definitely force the prices down, which will impact the profit margin of the other car manufacturers negatively. Nonetheless, there are significant barriers to entry in the industry. Firstly, the capital investment outlay can be very huge (in order to achieve economies of scale and to turn profitable in a short time frame is highly unlikely), and secondly, the already competitive business environment in the industry is deterring any potential entry into the market in a large scale. Not only that, the new market player will have to fight aggressively for market share, and unless the new brand able to become popular and respectable in a short time frame, it is likely that the new market player will need to suffer some degree of operating losses before the company able to turnaround. Thus, it is reasonable to expect that the barriers for new entrance can be relatively high in the industry. In the other words, the threats of new entrance to the automotive industry are relatively low.

Company Resources Audit for Mercedes Benz
Mercedes-Benz’s Assets
As a famous car manufacturing company, Mercedes Benz is a firm with attractive and powerful assets. In fact, the key asset of the company is not merely about the car manufacturing plants available around the world, but rather is the corporate culture, the reputable brand name, and the human capital available in the company. In this section, these assets of the company will be discussed in details.

The manufacturing plants and machineries. It cannot be denied that as the top five auto makers in the world, the physical assets of the company are valuable and huge. In fact, the company has several manufacturing related plants and equipment across the United States, Europe and Asia Pacific. However, it is also important to point out that the hardware is not the key success assets possessed by the company (Bossink & Blauw, 2002).

The corporate culture that uphold the high quality and perfection in manufacturing process. Mercedes Benz is a corporation with strong focus on the quality of its products. The organization, undoubtedly, strive for perfection, a typical German-style manufacturing company (Bossink & Blauw, 2002). That is the core competencies of the company, where precision engineering, attention to details, and the spirit to strive for perfection is the leading success factors in the marketplace.

The popular and yet admired brand name. Perhaps, it is even agreed by many of the consumers in the marketplace around the world that Mercedes Benz primary and key assets is the reputable and yet respectable brand the company possess. The noble brand of Mercedes Benz is often associated and is being positioned as a symbol of luxury, status and comfort. The brand name is already more than 100 years, and yet, it is still a brand favored by young and elder professional and businessmen, all around the world. To replicate such a brand equity possessed by Mercedes Benz is very hard, and require huge capital investment as well as a long time frame (Jackson, 2001).

Core Competencies of Mercedes-Benz
Without significant core competencies, it is unlikely, it not impossible, for the firm to rise to such a powerful and respectable position in the car manufacturing industry. In fact, purely based on the highly favorable consumers’ perceptions on the car manufactured by Mercedes Benz, it is not hard to speculate that the company possesses several powerful and distinguishing core competencies in the marketplace (Bossink & Blauw, 2002). It is found that the company possesses several core competencies as follow.

Innovation. One of the core competencies possessed by Mercedes Benz to rise to such a famous and respectable position in the automotive industry is due to its ability to innovate. For examples, the internal combustion engine automobile was introduced by the company in 1886; the company spearheaded the replacement of fuel injection with float carburetor, the company innovation of the first automotive with four brakes on all of the four wheels, the invention of the safety cell concept, and first to market on the Electronic Stability Programme (ESO) brake assist system, and many others (Apfelthaler et. al., 2002).

Quality. It is widely known that Mercedes Benz has been able to maintain a reputation of high quality and durability in the marketplace. In fact, the quality of the cars produced by the company success to achieve various rewards in the industry. For example, under the J. D. Power’s Initial Quality Study in the year of 2007, the company achieves the 5th place, exceeding the quality leader Toyota for some of its car models. Not only had that, later in 2008, the company also received the Platinum Plant Quality Award for its assembly plant in German (Bogue, 2008).

Marketing and branding. As discussed before, ability to market and to build highly reputable brand in the marketplace is one of the core competencies possessed by Mercedes Benz. With in-depth understanding on the customers wants and needs the company able to craft a noble brand in the marketplace – an achievement envied by many of the other auto manufacturers (Jackson, 2001).

Strategic Analysis for Mercedes-Benz
In this section, various strategic related issues and analysis related to Mercedes Benz will be performed. Firstly, after a review on the macroenvironment, the industry structure the company is operating in as well as the available resources the company is having, the SWOT analysis will be carried out, to investigate the opportunities or threats relevant to the company. Besides, some of the corporate and business unit strategies currently employed by the firm will also be investigated. The analysis will extend further to incorporate an analysis on the company’s global business strategic approaches in the recent years. All these are highly important before relevant strategies can be recommended to the firm.

SWOT Analysis of Mercedes-Benz
Under the SWOT analysis framework, the strengths and weaknesses and the firm will be analyzed, and then the relevant opportunities and threats in the industry will be ferreted. In order to make the analysis more readable, the SWOT analysis will be presented in a table form as follow.



Strengths:
1.      Quality, reliability and durability

2.      Safety & precision engineering capabilities

3.      Noble, respectable and high class reputation

4.      Strong financial capabilities

5.      Successfully attain significant economies of scale around the globe

6.      Strong corporate culture

Weaknesses:
1.      Cars designed are less fuel efficient compared to the Japanese cars

2.      Relatively slow to introduce fuel efficient concept cars

3.      Compete only in one of the niche market (i.e., in contrast, competitor such as Toyota has market share in several market segments)

Opportunities:
1.      Able to capitalize on its brand name to tap into the other market segments.

2.      The engineering and technological capabilities of the firm enable it to innovate and spearhead the revolution in the automotive industry

3.      The strong corporate culture enable the firm to implement any strategic changes or direction easily

4.      Huge profit potential from outsourcing operational activities to emerging countries, while tapping into the growing market size in the emerging countries

Threats:
1.      The rise of environmentally-conscious consumers

2.      The turbulent economic and financial system around the world

3.      The saturation of market in the developed world

4.      The intense competition in the industry

5.      The ever demanding consumers preferences and demands

6.      Protectionalism measures implemented by some of the governments in the emerging countries

Current Corporate and Business Unit Strategies Employed by Mercedes-Benz
Currently, there are various strategies formulated by the management of Mercedes Benz in continuously thriving in the challenging business environment. It is stated that the company will still continue to try hard in delivering the world best high-end automobiles. This will be achieved by maintaining the firm’s leadership in technology and design around the world (Bogue, 2008). New design concepts are being introduced. Some of these concepts include: (a) increasing the fuel efficiency of the company with a slight decrease in the end products’ recyclability, (b) design for robust and repair-ability as well as to (c) preserve technological edge in terms of design and development of automotive. It is thus obvious that the company is striving to maximize the company profitability while at the similar time to deliver benefits to the consumers, while not neglecting the concerns on preserving a better environment around the world (Jackson, 2001).

Recommendations for Mercedes-Benz
Judging from the many analysis frameworks applied in this article, several possible measures can be implemented by the company.

Firstly, the company should incorporate more concerns of environmental issues into its car design. The reason is that consumers are becoming more demanding and thus, any new concept car that able to deliver value to the environment will be favored. Currently, this is still the weak points for the company.

Secondly, the company should also strive to incorporate the concept of fuel efficiency into its design. As the petrol and gasoline prices are expected to be riding on an increasing trend, it is management imperative for the company to understand such an issue and take preventive actions to avoid the existing market share being taken by the other competitors.

Thirdly, the company can choose to form strategic alliances with other automotive manufacturers. The rationale is that today, the competition is intense, and to combine forces to compete effectively and successfully in the global market place is truly important. In order to penetrate to the emerging market, it is also important for the company to form partnerships with local parties from the emerging countries, as these local parties usually has more knowledge on the local market.

Lastly, the management should also consider developing a new brand to cater for the middle market. This can be done by forming strategic partners with some of the smaller scale manufacturers in the Asia Pacific regions. Many of these companies are suffering because they do not have the necessary technological edge to competitive with other large auto makers. Thus, Mercedes Benz can take over such an opportunity to link with these partners and provide technological assistance in return for a share in these companies income.

Conclusion
In short, the article has analyzed the macroenvironment, industry context and the firm specific issues related to Mercedes Benz in a comprehensive manner. As an overview, the automotive industry is highly competitive. The positive side of the story is that the Mercedes is one of the leading auto makers, enabling the company to achieve significant economies of scale. Besides, the company has a strong and respectable brand name. What is left for the company to pursue is to adapt to the changes in the market and to capitalize on the trend of globalization and information technology in the next decades.

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