Strategic Analysis of Mercedes Benz

Executive Summary

One of the most appreciated and innovative business sectors in the global market is the Automobile industry. There is increase competition in the automobile sector in the luxury segment in the recent years. The Japanese car makers have also come up with many luxury cars to compete with the European car manufacturers like Mercedes Benz, BMW, Audi etc. Toyota and Nissan are coming up with luxury cars not only in the Asian markets. The Japanese car makers have a strategy to establish themselves in the European and US markets.

The purpose of the paper is to critically analyze Daimler Benz by using the TOWS matrix and to develop strategies that integrate various strengths, weaknesses, threats and opportunities. One interesting question is how European carmakers will respond to the Japanese threat.

Daimler Benz is known for engineering excellence and is facing fierce competition from other luxury car manufacturers. It has also been undergoing critical changes to adjust itself to the present global scenario. It is also trying to enter into the aerospace and electronic gear markets. However the amin focus will be on the automobile business. Strategic planning model is also made use of TOWS matrix is used for suggesting alternative strategies that are needed to be implemented by Daimler Benz to become sustainable in the future.

Introduction

Automobile industry has evolved continuously over a period of years from the 18th century. It has moved from craft production to mass production and then to lean production. It has been a leader in terms of manufacturing and providing employment to the masses. The global automobile industry is dominated by Europe, US, Japan, China and India. These countries have a significant influence on economic development, FDI and other policies. The automobile market has been dominated by German car makers for many years. But the recent raw material price hikes and high labor costs are making the car makers to shift from Germany and diversify into other regions. EU accounts for around 25% of the world automobile production. UK is the EU region. The domestic demand in UK is increasing the rate of 25-3 . US is the largest automobile manufacturers in the world with the big car manufacturers as Ford, General Motors and Daimler. Toyota Motors is also one of the best car manufacturers in the world known for its quality. US is losing out to the Japanese car makers in the recent times. In this paper, Indian automobile industry (which is similar to the overall global auto industry) is dealt with in detail and strategies are suggested for Mercedes Benz to excel in the future not only in the Indian and asian Markets but also in other parts of the world.

Automobile industry is one of the fastest growing industries in India clocking a growth rate of around 1 (2010). After the 1991 reforms, the automobile sector has grown spectacularly at a rate of around 17% for the last few years. Around 17 Million automobiles are manufactured every year in India and nearly 2.3 million are exported. India is the 7th largest passenger car and commercial vehicle manufacturing industry in the world, with an annual production of more than 3.6 Million units (2010). India is also the 4th largest car exporter after Japan, South Korea and Thailand. The turnover from the industry are around USD 35 Billion. Passenger car segment accounts for around 10.22% of the total vehicles produced (2010 figures). There is sustained growth and increased competition in the sector in the recent times.

The demand for automobiles in India is based on the following factors

1. Vehicle Prices : depends on the wages, material and operational costs2. Exchange rates : Determines the price of import of automobiles for consumption in India3. Preference for a particular type of Automobile : Consumer Behavior4. Running costs : cost of running the vehicle; Fuel and maintenance costs5. Income : Affordability in terms of the income they earn

Demographic AnalysisThe following are the demographic factors which should be taken into consideration while analyzing the Automotive sector.

a. Population growth of India : India stands second in terms of the number of people in a country after China. Research reports state that India will be the most populous country in the world by 2025. More than 5 of the population is below 25 years and 65% is below 35. By 2020, the average age of the India will be around 29. Population is growing at the rate of 1.4%.

b. Rural Urban ratio : Around 72% of the population is based out of rural areas. But a greater proportion of the population is shifting to the urban areas from the rural areas.

c. The population age mix is as follows. 0–14 years age group is around 30.8% of the total population, 15–64 years age group is around 64.3% of the total population, 65+ age group forms around 4.9% of the total population.

d. Literacy Levels : Indian literacy rate is around 74.04% according to the 2011 estimates. Effective literacy rates for men and women are 82.14% and 65.46%.

e. Changing Income levels : There has been a rapid rise in the income levels after the 1991 reforms. Also the distribution of income has changed significantly.

f. Changing Family Structure : The family is one of the main elements which influences an individual in terms of development. As India is growing, there has been a change in the structure of the family. Small nuclear families are the trend rather and large joint families

Economic Analysis : Automotive sector has been facing a difficult time since the past one year. The industry is slowing down because of slow down in the economy due to recession, increase in fuel prices, exchange rate effects etc. The contribution of automobile industry to GDP of India has been very significant. India has become a significant player in the global automobile manufacturing nations. Passenger car segment grew at the rate of around 13% (2010 estimates) although it has gone down recently. Maruti Udyog is the largest manufacturer of cars in India with a market share of close to 46%.

Recession

All the major automotive majors had a healthy growth till 2008. Then there has beena slowdown due to the recession. Global recession had an adverse effect on the automobile industry in 2008. Although India is a very strong and regulated economy, the impact of the recession is still continuing on the economy.

Sales of passenger vehicles fell by over 13.86% during December 2008 compared to December 2007. The growth of two wheelers from April to December 2008 is around 1.85 % which is very minor.However the overall production of passenger vehicles, commercial vehicles, two wheelers and three wheelers has increased to 11.17 Million from 10.85 Million, the previous year. There was a marginal increase in the number of passenger vehicles from 1.77 Mn to 1.83 Mn While two-wheelers has registerd an increase from 8.02 to 8.41 million. 9.72 million as compared to 9.65 million were the total number of vehicles sold in 2008 compared to 2007.

Foreign InvestmentsIndian automobile industry has also been contributing to the GDP in terms of the cross border M&A deals taking place. A number of M&A deals are still on hold because of the mismatch in prices quoted by the seller and the buyer . Buyers fear that the valuations are too high even in the period of recession and might fall further after the deal is done while the sellers feel that it may rise after they are done with the deal. The sector saw M&A deals worth around 30 billion USD last year although the overall transaction value in 2009 was nearly 40 Billion USD. Also the number of deals came down from 532 to 521.

Some of the recent transactions which had taken place in the last 2-3 years are

1. Tata bought the Jaguar and Land rover from Ford for 1.5 Billion Pounds in 2008.2. Mahindra and Mahindra acquired 7 of Ssangyong motors for $463 Million in January 2011. 3. Tata Motors has opened a new plant in South Africa at an estimated cost of 16.5 Million USD.

InflationInflation in India is hovering at around 8.5% which is quite high. Inflation rate is the general rise in prices. Inflation brings around a negative effect on sales of the car market. The industry comes to a standstill when the inflation rises to an extent not supported by the economy. The effect of inflation is mainly associated with the manufacturing and production of cars in the country because of the price hikes. The automobile industry’s growth has slowed down due to the rate hikes in steel and fuel.Inflation has hindered the growth of the Automobile sector in a very significant way because of its effects on the manufacturing which mainly involves steel and other raw materials.

There wasn’t much effect on the Indian automobile industry during the last year even thought the crude oil prices have increased drastically to around $130 per barrel. Two major factors which affect the automobile sector are oil price hike and higher interest rates. But these factors didn’t influence the sales very much during the last few years..However inflation is one factor which affects almost every sector and Automobile sector is no different. The fuel price hikes and inflation have led to a decrease in sales of the vehicles. There has been a hike in the prices of automobiles by 3-4% to meet the rise in prices of raw materials. There has been a fall in the car industry by around 8% because of the price hikes.

FDI10 FDI has been allowed under the automatic route to the automobile sector. The turnovers are around 12 Billion USD and 3 Billion USD in the automobile and auto components segments. There is a cost advantage w.r.t manufacturing activities and labor in India compared to its western counterparts. Manufacturing costs are lower by 20-3 in India. FDI inflows have been increasing right from the economic liberalization reforms.

Foreign ExchangeAfter China and Russia India holds the largest stock of reserves. The composition of balance of payments and liquidity risks has changed significantly over the past few years because of different types of flows and other requirements. This can clearly be seen in the FOREX policy India.

India’s foreign exchange reserves grew at a fairly good rate and is consistent with the growth of the economy and the foreign investments Also it is in line with the capital flows ahicha re risk adjusted and the share of foreign investments.

ExportsIndia’s exports in the automobile sector have grown significantly over the past few years. It has reached a figure of $ 4.5 Billion. Uk is the country from which maximum revenues come due to export of vehicles. India’s exports are estimated to cross 12 Billion USD by 2014.

The main factors which led to expansion of manufacturing facilities of several automobile majors are

1. Strong engineering expertise 2. Low-cost

3. Manufacturing of fuel-efficient cars

In the past few years, India has established itself as a centre for manufacture of small carsThe biggest exporter from the country is Hyndai Motors which exports nearly 250000 cars. Maruti Suzuki also exports a large number of cars to Suzuki motors in Japan and Nissan motors in Europe. Nissan also started exporting cars manufactured in India. Tata Motors supplies vehicles to Asian and African markets and is trying to enter into the European automobile sector. It is also planning to launch its Nano into European market with an electric version. Mahindra and Mahindra is also trying to launch trucks and other commercial vehicles business in the US market. Bajaj Auto is working with Renault to launch a low cost car. Although there are quite a number of possibilities, there are challenges also which have to be handled by the car companies to ensure they are not affected adversely.

TechnologyEvery industry is affected by the advent of the Internet. Automobile industry is no different and is affected by the internet. A research report shows that nearly 65% of the potential buyers do secondary research by searching about the products they are going to purchase over the internet. Out of these 65%, around 9 actually went to the auto websites before a test drive. B2B marketing has become a very important phenomenon in the recent times and the auto industry is utilizing this by providing more and more information on the internet. This also leads to reduction of costs of advertising and more efficiency.

Ford, GM, and Daimler had created a global online exchange for suppliers and manufacturers of original equipment which was called Convisint. They also started using a tool called Quote Manager to send request for quotes to suppliers through Covisint.

Automobile companies also started to develop alternate fuel vehicles keeping in mind the concerns regarding global warming. Although the costs of developing the new technology for alternate fuel cars are very high, new legislations forced the cars to look into this segment. Electric cars are being developed by the car companies because they are relatively cheaper compared to solar and other kind of technology based cars. These models were also not very popular because of slow speeds and low performance. Toyota and Honda began to develop new electric vehicles on retail scale from 2001.

Global Alliance of Automobile manufacturers was created by the General Motors, Ford Motor Company, Daimler Chrysler, BMW, Volkswagen, Volvo, Toyota, Mazda, and Nissan Motor Company as a new trade association which replaced the American Automobile Manufacturers Association in 2004. Their goals were to work together on policy matters which are of public interest, to provide quality data which is credible and set benchmark standards . There was also a trend of merging in the 1990’s. American firms had bought many foreign car companies and there were a large number of takeovers. In 1998, Daimler Chrysler was formed with the merger of Daimler and Chrysler although they discontinued their merger recently. Ford-Volvo and GM-Saab are other well known big mergers.

Sociocultural

Today people perceive the personality by the car one drives. Even though many people do not admit it, this is very much true. Manufacturers are aware of these facts and are trying to cash upon this issue by targeting these markets and ideas. Anyone who drives a Mercedes or BMW or Audi is assumed to be

wealthy because of the price of these vehicles. Similarly anyone driving a SUV is perceived to be very sporty. No one wants to be perceived as someone driving a junk item. They are worried about how the society looks at them. Also they feel better when they drive a vehicle of their choice.

Some people are environmentally conscious and so want to drive only fuel efficient cars. Companies are also trying to successfully establish cars with alternate fuels to target these segments. Also they are trying to promote green thinking among the other customers who go for gas guzzling cars.

Porters five Forces for the Automotive Industry

Threat of New Entrants

Automobile industry is in a very developed phase right now and so it is very difficult to enter into this segment now. Hence the threat of new entrants is low. Also there is economies of scale and achieving economies of scale for a new entrant is very difficult. There is a huge amount of capital which needs to be tied up to achieve economies of scale. Mass production is the only way by which a company can achieve economies of scale. A large amount of capital is also needed for the research and development as companies need to innovate frequently to have a sustainable strategy. Distribution is another barrier entry as dealerships are very limited and a dealer cannot deal with multiple brands of cars.

Bargaining Power of Suppliers

Since there are a large number of suppliers in the automotive industry, their power is very limited and can’t exert pressure on the car manufacturers. Manufacturers have the power to switch to other suppliers whenever a particular supplier is not conforming to the demands of the car manufacturers. So the car manufacturers have an advantage over the suppliers in terms of exerting pressure over one another.

Bargaining Power of Buyers

Buyers have significant amount of power in the automobile industry. The car manufacturers rely on the buyers to consume their products. It is from the buyers that the car manufacturers get their revenues from. So, if the buyers are not happy with the car designed by the company or any other policy of the company, they just switch to another company’s car which is detrimental to the survival of the company. Buyers do not have complete power because the possibility to integrate backward and enter into the car manufacturing segment is very low

Threat of Substitute Products

Threat of substitutes is also quite low because of fewer substitute products. Mass transportation systems like trains, metro buses etc. are the main threats although they do not pose a massive threat to the car manufacturers. Threat of substitute products vary from geography to geography. A place where the metro or mass transportation systems are very well developed see a very high threat of substitute products while in other places there is no such issue.

Intensity of Rivalry among Competitors

Competition is very high in the automobile sector. There are quite a number of companies competing for the market share. Also they are all almost equal in terms of capabilities to develop highly efficient cars. There is not much differentiation involved in this sector. If there are differentiated products, that increases the cost of manufacturing which is not feasible for long term sustenance. Also consumers do an in depth research about the car they are going to purchase. They keep track of various companies offering cars similar to their needs. So it is very important for car manufacturers to keep track of their competitors on a regular basis. Also advertising plays a very important role in influencing consumer’s buying decisions.Competitor Analysis

Competitor Analysis

Toyota Motor Corporation SWOT Analysis

Toyota motor corporation which is one of the industry leaders in the automobile industry was incorporated in 1937. Being a very old company it has many strengths. The major brands of Toyota are Lexus, Toyot and Scion. Through these brands it reaches many sectors of the market. It has been the most preferred vehicle for many customers for many years. Toyota targets specific regions of the world based on the consumer profile and the costs involved. It has also been a leader in Total Quality Management. The Japanese word kaizen had emerged from Toyota’s way of continuous improvement. Toyota also came up with a hybrid car Prius in 2003. Ever increasing fuel prices is a major driver for Toyota to enter into these segments.

Some of the features of Toyota which are considered as weaknesses are that the brand is not considered to be prestigious. Although it is one of the top companies in terms of sales its performance in terms of paying dividends and stock performance is not up to the mark. Although Lexus brand’s sales are quite good in general, the sales are quite low compared to BMW in the global scenario in Europe because of the lack of the diesel version of the Lexus. Also since there are subsidies on diesel in some European countries, its sales are lower.

There are a huge number of opportunities for Toyota. Toyota is the second largest auto manufacturer in the world after GM. It gave a fight to GM in replacing it as the top automobile manufacturer in January although GM fought back and replaced Toyota in august 2011. Toyota has also made significant changes in the product line to suit the customers in the US better since a majority of its sales come from the US. It has also entered in to the hybrid car segment to offer its products to the eco crazy sections of the society. It has also got money to spend on R&D to enter new segments and improve up on the existing product line. Also the opening up of markets in the EU nations is a very significant opportunity for Toyota to put their luxury line in this market in competition to BMW and Mercedes Benz. It is also trying to launch pick up trucks into the US market in competition to Ford and GM.

In terms of competition, main threat to Toyota is Hyundai. Hyundai provides better products in terms of higher horse power and less costs compared to Toyota in the same segment. In the luxury segment, BMW is still number one and Toyota is far off from BMW. Technology is a major driver for sales of automobiles and Toyota has to try to keep up its technology to sustain in the longer term otherwise it

would lose its market share in the next few years. The latest trend is the hybrid vehicles. Toyota is competing with Honda in this particular segment. Gm and Daimler Chrysler have also been trying to come up with hybrid cars. Thios would become an opportunity if Toyota can gain market share before the other big competitors. Toyota has also drastically changed the way they manufacture cars to reduce costs further. They are trying to create a new manufacturing strategy which is more flexible than the earlier systems. More customized cars will be made in the hybrid car segment and the new plants which will be set up will save around 1 Billion dollars.

Toyota can also be very badly impacted incase the hybrid car category fails to impress the customers in the coming few years. They may lose their credibility in designing high quality high performance cars among the customers.

Honda Motor Company SWOT Analysis

Honda Motors started its journey as a motor cycle manufacturer initially and then entered into the car manufacturing. Later on it became one of the most dominant car manufacturers in Japan and also in the world. The quality of products manufactured by Honda is unparalleled. It is very well known for its high quality products all over the world. They are also the largest manufacturers of motor cycles in the world. It has won many awards for maintaining excellent quality standards in its products as well as in its plants. Honda’s cars are generally high on performance and very fuel efficient compared to other automobiles. It is also one of the most innovative companies and designs robots and motor sports programs that are advertised to the consumers to gain their loyalty. Honda has also won the motosports GP manufacturers title and is second in the F1 constructor’s championship.

Honda, since it operates on the F1 races and other circuits and races, it can better design its products because of the fact that it experiences all kinds of situations during these races. They were also pioneers in low emission internal combustion engines. They also came up with the hybrid vehicle concept and are leaders in the field. It is one of the very few manufacturers who have ventured into segments other than the car manufacturing.

Honda also has weaknesses. It’s products are very routine and are bad in terms of styling. The prices are also higher in the non luxury segment compared to cars of other manufacturers. They are also considered to be underpowered. The opportunities consist of expanding into the truck business and compete with other manufacturers. It can also progress into the low emission car segment and alternative fuel technology to gain competitive advantage in the future. Although they are trying to enter into the alternative fuel segment, their technology is relatively highly priced which might be a deterrent for its success in the future. Also infrastructural problems still exist. Expanding into China and India is another very big opportunity for Honda as these markets are huge and the GDP growth rates are higher. Also the disposable income is increasing in these nations which stands as an advantage for Honda. Honda’s success has been imitated by many of its competitors which makes Honda stand on par with its competitors and not in an advantageous position. This is not a very good situation for Honda to be in as other competitors catching up means Honda going down.

Honda has mainly focused on creating value through sales and innovation and expenditure in R&D. Honda believes in having plants in locations where the product is being sold. Hence manufacturing plants

are established in areas where sales increase. This is the reason why Honda has 100 manufacturing plants in 30 countries. It is also focused on environment and can be seen in its initiatives of low emissions vehicles and manufacturing plants which are eco friendly.

Honda is also trying to come up with the truck business. It would in fact be better if they come up with a different styling altogether as it will differentiate its product from other established products. R&D spending should also be increased to come up with more innovative products which can compete with other competitors. It’s diversification strategy should also be continued so that it doesn’t face risk of failure of a particular product which will affect the entire company. It should also try to expand into China and India and try to increase production these regions. As for the new low emission vehicles, some new products should be introduced into the market to establish itself as a market leader. It came up with the Accord to fill up the gaps but it wasn’t enough. More and more new products have to be brought about in the market to make sure that it has an advantage over other players in the market

The expansion strategy of Honda might put it in a very advantageous position in terms of market share and also revenues in the emerging markets. If they are able to put affordable cars into these markets, it will spread the image of Honda in these markets.

Ford SWOT Analysis Ford is one of the oldest automobile manufacturers in the world. It has two businesses the automobile business and the financial services business. The automotive business mainly deals with the designand development of cars and trucks and other service parts. It divided its automobile business into two parts- Americas and International. Americas part deals with the sale of Ford and Lincoln Mercury brand vehicles in both North America and South America. The International part deals with the sale of ford vehicles outside North America and South America. It sells its automotive components throughout the world.

Vision of Ford: Build great products, strong business and a better world. It wants to become the World’s leading consumer company for automotive products and services .

Ford’s main focus has been to reduce costs to enjoy an advantageous position in terms of price of the cars over its competitors. Using standardized parts for different models of ford cars and cutting costs has saved more than a billion dollars for ford in the past years. It was also able to reduce inventory costs and the number of inventory parts as well.

Reverse engineering was used in their products. Taurus is an example of reverse engineering. It examined the parts of each car which best fitted the other competitor products. Since Taurus has the best parts among its competitors, it was seen as the best car among that particular segment. This tactic helped ford reach new heights above the other competitors.

Technology is also one of the strengths of Ford. It has been very aggressive in adopting new technologies and is a leader in using Computer assisted manufacturing systems which leads to increased efficiency in the auto industry. Another technology innovation is the use of online computer network. This network will be used to share ideas online and create designs. Also integrated versions of the car can also be prepared and tested by computer aided simulations.

Ford has also adopted Voip technology to reduce costs. Efficiency also improved because of shifting to Voip. Ford’s truck facility is also fully operational and trucks are being shipped to dealers from there. There is a flexible body shop, automatic material replenishment system, self adjusting platforms and software driven systems which makes the processes very efficient. It is also spending huge amounts on wireless infrastructure for inventory replenishment and vehicle tracking.

Ford is focusing on maintaining quality and reducing costs. It has been fairly successful in launching new products frequently into the market. It has also been redesigning products to launch in the Asia pacific region. Bill Ford has a different outlook for the automobile world. While all other car manufacturers are trying to focus on economies of scale, he wants to make huge profits by selling fewer cars.In the recent times Ford has been facing difficulties in terms of number of vehicles sold. The global economic conditions are hampering the growth of ford. It has been even said that only Ford financing makes money while the Ford automobile is a loss making company.

Ford needs to spend significantly on advertising campaigns to attract the customers to buy Ford vehicles. Also it needs to come up with products which suit to the lifestyles based on various geographies. Also it needs to continue reducing costs in development of products.

Ford must keep in mind the preferences of the consumers before designing its products and then launch these products in the market. The consumer wouldn’t care to try the product unless it is made for him. Utmost care must be taken in terms of appearance, price and performance. Enough surveys and testing should be conducted on the product before launching the product to make sure that the product is successful in the market after its launch.

Ford must start developing new ideas and be an innovative company rather than depend on reverse engineering for developing their products. Depending on innovation will be an opportunity for Ford to gain significant market share in the future. It also needs to diversify its portfolio by launching more and more cars in competition to other products from various car manufacturers. Huge amounts are being spent on designing and developing new products. So it needs to cover up these costs by communicating the feature of the product correctly to the customers and make them realize that they need the car. If there is no increase in the sales of the car, then it cannot meet its developmental costs which is detrimental to the overall financial health of the company. Although the initial cost of innovation is very high, the publicity of the innovation might help in increasing the sales. Also efficiency is increased. But if the innovation fails, the company loses a large amount of money and has to switch back to the old ways of doing things.

Hyundai Motors SWOT Analysis

Hyundai is one of the world’s largest car manufacturers and operates one of the world’s largest manufacturing facility. Hyundai is also known for its quality . Its owners experience very few problems than with any other care. Hyundai’s compact car, Santro is one of the best in the compact car segment. Their car is a favorite in terms of content, layout, performance and other parameters. It also has a very large sales network and trained sales personnel to achieve better distribution facilities and cater to the consumers much better than any other car manufacturer.

One of the major weaknesses of Hyundai is the commodity price risks. Due to inflation, the prices of the raw materials such as steel, aluminum, plastics etc. have increased which makes production costs higher for Hyundai. Hyundai is trying to enter into long term contracts to counter these risks. Long term contracts are very helpful when the commodity prices are very shaky and to ensure smooth flow of goods. Exchange rate risk is yet another weakness for Hyundai because it exports a large amount of its production to foreign countries and hence when there is fluctuation in the foreign exchange rate, the cash flows vary a lot. Hyundai is trying to manage this by hedging according to the market conditions.

Hyundai is the market leader in terms of manufacturing and the growth. Operating profit margins are also higher compared to other competitors. Hyundai also has the opportunity to diversify into US and EU regions to counter business risks in the emerging countries although these are the markets which could witness higher growth rates in the future.

The primary target segment of Hyundai is the middle to upper class professionals. These people look for value for money which Hyundai provides. The secondary market is the college students and Hyundai caters to the style and speed requirements of college students.

Hyundai has positioned itself as a value for money brand and focuses its marketing strategy on promoting its brand as an economy car.

General Motors SWOT analysisGeneral Motors is one of the very few car manufacturers with a global presence and awareness which is very important from today’s competition perspective. It has operations in nearly 40 countries and its vehicles are sold in more than 190 countries. Since it is present in a large number of countries it can integrate its operations and concentrate on developing its core competencies. It is also focusing on reducing costs by sharing them with its alliances or joint ventures. This is the strategy followed in most European markets since small vehicles continue to dominate in these markets. General Motors is trying to sustain its business in the European Markets by having joint ventures and alliances with other car manufacturing companies which are relatively strong in the region. The problem with having such alliances is that the profit margins become lower although the market share and brand visibility is increasing.

General Motors is also very strong in terms of the sales it does in various parts of the world. It is also trying to release hybrid cars to tap the future eco friendly fuel technology markets. General Motors also spends a lot of money on advertising. It spends around 3 Billion USD on advertising in US alone. It has followed a promotion strategy of providing its customers with internet coupons. This strategy has worked very well in favor of the company. Gm comes up with very relevant innovation strategies which makes it remain at the top of the industry. One other strength of General Motors is that it has been able to convert its threats into opportunities every now and then. The threat of losing safety professionals due to retirement has been converted into an opportunity by developing the recruitment program. General Motors has also started using the E-business strategy and technology for different regions of the world.

One of the major weaknesses of General Motors is that it had launched a price war 5 years ago which is continuing even now. This has made the market share of General Motors to fall down. Another weakness is that the General Motors plants in the United States have excess capacity while the demand is not that

much. There are also issues with the labor for wages in Germany. Another major weakness with general Motors is the discontentment of the workers. General Motors has seen many strikes over the past years which have led to significant losses to the company. It should take steps in this course to make sure that this does not escalate in the future. Also General Motors has entered late into the Hybrid car segment which might be a disadvantage to it. Although General Motors has increased the pace of innovation, it still needs to do a lot to cope up with the competition.

General Motors is trying to change its strategy by concentrating on producing cars rather than trucks. However it does not want to depend entirely on the production of cars but would also like to produce trucks. It also plans to launch a product line dealing with compact pickups with more comfort and style.

General Motors can improve a lot in terms of employee satisfaction, innovation, expansion into emerging markets etc. Managers and executives should review their policies to make sure that the employees adhere to the rules and they should also make sure that the rules are fair and equitable. It should start giving incentives to its employees like health care reimbursements, education for children etc. to make sure that its image doesn’t go down in the employee’s minds. Otherwise it will be very difficult to attract new talent later.Yet another area where General Motors needs to improve is the Innovation. General Motors leads in Hydrogen fuel technology but lags behind in the hybrid automobiles. It should also consider the preferences of the consumers and then invest in the Hydrogen fuel cell technology or Hybrid car segments depending on the attractiveness of the segments. Inc ase it doesn’t do this it becomes very difficult for General Motors to compete with other car manufacturers like Honda, Hyundai, Toyota, Daimler etc.General Motors has also recently started its retail store format which sells merchandise from miniature models of cars, hats, T-shirts etc. It should also try to set up these kinds of stores in the emerging countries to attract a large number of customers and ensure brand recognition. But before taking such a decision it needs to identify proper locations where this can be done so that this doesn’t become a failure. It should also focus on advertising more than it is doing today to compete with other cars with increased advertisement spending.

Internal AuditDamiler- Benz SWOT Analysis

Daimler AG previously Daimler Chrysler is the number two automobile manufacturer in terms of revenues. Many brands like Mercedes Benz, Dodge, Chrysler, Jeep etc. Come under the umbrella of Daimler Chrysler. Hence it can be seen that Daimler AG has very strong brand presence and recognition all over the world. Daimler AG also has its brands across different price ranges .Mercedes Benz is the luxury car brand of Daimler, Jeep is the off road and SUV range of Daimler while Maybach is the super luxury brand of Daimler AG and competes with rolls Royce and Bentley. It is one of the most innovative car manufacturers known worldwide. The cars manufactured by Daimler AG cater to the consumers in a very well defined way and satisfy them in terms of style, comfort and image.

The company has worldwide presence and is one of the premier quality car manufacturing companies. It also has partnership with Mitsubishi which gives it market entry into the Asia region. This partnership also allows for greater product visibility and sharing of technology between the two companies.Daimler is a leader in the alternative fuel cell technology which is considered to be the next generation technology for automobiles. Daimler Ag spends significant amount of revenues on Research and Development which can make it remain at the top of the list for years to come.Although there are many strengths to Daimler AG’s profile, there are weaknesses too that can arise from the external economy. It is very much essential to have revenues from different parts of the world rather than have all the revenues from only a few regions to diversify risk. Daimler AG is very strong in the European and US markets but doesn’t have a significant presence in the Asian regions. It doesn’t have brands which occupy significant market share in the Chinese and Japanese regions. Although it came up with a partnership with Mitsubishi it didn’t work out that well because of the fall in market share of Mitsubishi.

Brands of Daimler are very weak in the Asian regions and also had very limited success in other regions. The Mercedes Benz brand is the best known brand of Daimler AG. But since it is a luxury brand it has limitations in terms of economies of scale and so cannot be marketed in the Asian regions. The Jeep brand is also well known but it appeals only to the off road buyers.

Hybrid vehicles may also pose a significant threat to Daimler AG as they might beat the Hydrogen fuel cell technology developed by Daimler AG. Many car manufacturers are developing hybrid technology which if successful will leave the company lagging behind. Also most of the companies are planning to launch their famous brands in the hybrid versions while that is not the case with Daimler AG. Daimler could lose a large chunk of their market share in case hydrogen fuel cell technology doesn’t gain popularity in the next few years.

Daimler also merged with Chrysler which is generally seen as a acquisition rather than a merger. Many believed that this might lead to losing the innovation tag of Chrysler. Also most of the operations have been shifted to Germany where wage rates and costs are higher. It became difficult for Daimler Chrysler to cut costs.With the changing environment Daimler has a huge number of opportunities to leverage on its strengths and to fix its weaknesses. China has the fastest growing automobile market in the world and Daimler could exploit this opportunity by expanding into the Chinese areas. The jeep brand of Daimler might just do the trick as there is increasing popularity for SUV segment in the Asian region. It can also build partnerships with other local brands to build manufacturing plants in Beijing. Hence by building new plants it can push its products to the largest consumer base of the world.

Assuming that the oil prices go up in the future, the concept of hydrogen fuel cells can work out wonders for the company. The high prices might help in leading the company to invest more in R&D for alternative fuel technology. High prices will also lead to government promoting various clean energy initiatives which might be beneficial for the company.One of the major threats being faced by Daimler is its shaky partnership with Mitsubishi. The recession has badly affected the condition of Daimler. It is very difficult to establish its presence in the Asian markets without significant partnerships and investments which at this point of time is very difficult. Mitsubishi is also badly affected by the recession and its partnership might actually bring about the

downfall of Daimler as well in the future.Another great threat is the investments made by Daimler in the Hydrogen fuel cell technology. If the hybrid engine technology becomes successful it poses a significant threat as it might lose market share in the hybrid fuel technology segment. The worst thing which can happen is that hydrogen might not be a viable form of energy source in the future. All its investments in Hydrogen fuel cell technology might become sunk costs.

Daimler has a four pillar strategy – Strong Brands, Global Presence, Broad product range and Technology leadership. It depends upon these four pillars to make it a world wide well known brand.

Recommended StrategyBase on the past strategies and the future outlook, strategy can be formulated for Mercedes benz. The process followed is as follows. Firstlt the organizational inputs like capital, labor, organizational skills, technology and other goals are identified to maximize the value for the stakeholders. Then the enterprise profile is prepared, the orientation of the top managers is clarified, major objectives of the firm are determined, present and future external environment are identified, resource audits are prepared to cater to the company’s weaknesses and threats, alternative strategies are developed, strategies are evaluated, tested and contingency plans are prepared.

TOWS matrix can be used for developing the strategies that integrate the threats and opportunities with the weaknesses and strengths of the firm.

Internal Strengths1. Cash2. Brand Image- Luxury3. Styles & Models4. Close locations to

suppliers5. High technology

Internal Weaknesses1. Costs2. Diluted brand3. Bureaucratic4. Only past successes5. Weak position in Asian

MarketsExternal Opportunities

1. Growing luxury car market

2. Eastern Europe and Asian Markets

3. Technology

Strength – Opportunity Strategy1. New Models and

premium pricing2. Increase production 3. Acquire other companies

Weakness –Opportunity Strategy1. Flexible manufacturing

systems usage2. Reduce costs3. Manufacture parts in low

cost locationsExternal Threats

1. Loss of Defense sales2. Competition from BMW,

Strength – Threat Strategy1. Move out from defense

business and convert into

Weakness- Threat Strategy1. Retrenchment in

locations where there are

Audi3. Emissions regulations4. Political issues in

manufacturing locations like South Africa

normal sales2. Develop better models

political issues2. Strategic alliances in

Asian Markets

Alternative Strategies for Daimler BenzThe external and internal environments are studied in detail and the following strategies can be implemented based on the need of the firm. The following are the 4 strategies that can suit Mercedes which are developed based on the TOWS matrix presented above.

1) The Strength-Opportunity strategy maximizes both the strengths and weaknesses.

2) The Strength-Threats strategy tries to maximize the strengths and minimize the threats.

3) The Weakness – Opportunity strategy is to minimize the weaknesses and leverage upon opportunities. This is a developmental strategy in which companies try to transform weaknesses into strengths.

4) The Weakness-Threat strategy minimizes weaknesses and threats.

S-O Strategy :The best SO strategy for Benz is to come up with new cars and better models. It should launch more and more cars into the market using its prowess in technology and world class engineering capabilities. It can also charge premium prices based on its luxury brand image. Customers will be more than willing to purchase the brand to cater to their aspirations. Also with the increase in disposable income, consumers look for high end cars which others look upto. Also the demand for luxury cars is known in the European and US markets. This is being spread to the Asian Markets as well. Fuel efficient and better safety models can be launched into the market and the proximity to well known suppliers can be leveraged upon.

Also some policies of the federal government in Germany fosters investments in companies in East Germany. Daimler-Mercedes can acquire such companies to gain cost advantages and also cater to the social objectives. It can also invest in auto components which do not require high R&D interactions. This stands out as an advantage to counter the larger distances between Mercedes and its suppliers.

The SO strategy also helps to counter the threats from the competitors in the automotive sector in different parts of the world. It can maintain its position through innovative products compared to different brands like BMW, Lexus, Jaguar etc. Also rapid development will lead to sustained edge over the competitors in the Asian regions as well.

S-T strategyThis strategy counters the threats to the firm by using its strengths. Daimler is seeing a decline in the sales of its vehicles to Defense/Government. Hence the company should use its technology used so far in

defense vehicles to develop new products for the consumers. It can also use its prowess in the aerospace projects by shifting more and more resources to this particular segment from the Defense segment.

W-O strategyInvestments in flexible manufacturing systems can subside the high labor costs to some extent. Also by setting up some manufacturing plants in Eastern Europe region and Asian regions Mercedes Benz can significantly reduce manufacturing and labor costs because of cheap labor and raw materials there. It has also got the resources necessary to acquire any company present in these areas to boost its presence and have a cost advantage.

Also reorganization of the organizational structure can be done to overcome its bureaucratic structure. This will result in better responsiveness and accountability by which the customers can be served better. Centralized R&D also leads to cost reductions.

W-T StrategyDaimler can withdraw from locations where there is political turmoil. The major problem area is South Africa from which it can withdraw. It can also have co-operative agreements with local players like Mitsubishi in the Asian regions which it is currently doing. The cost of setting up dealerships and distribution comes down drastically because of such alliances.

Hence Daimler can pursue a combination of strategies based on the TOWS matrix prepared.

CONCLUSION

Daimler- Mercedes Benz has to make some strategic changes to be sustainable in the future. It changed its mission from being an automotive company to an integrated transporting company, defense contractor and appliance manufacturer. As seen earlier four strategies have been developed based on the TOWS matrix which can be used to select a strategy which best fits the current scenario. These choices have to be made inspite of the risks involved to remain competitive in the industry and to retain market share if not gain market share. Daimler has to come up with a shorter developmental cycle in order to remain competitive. It should try to reinvigorate its culture and come up with products which cater to the customer’s needs better than the competitors.

References

1. http://sirpabs.ilahas.com/Case%20Studies.doc 2. http://news.pickuptrucks.com/2009/05/general-motors-set-to-declare-bankruptcy.html 3. http://indianwine.com/cs/blogs/indian_wine/default.aspx?PageIndex=2 4. http://www.socialiststudies.ca/program.htm 5. http://www.solarmobil.net/ev-world-2002.htm 6. http://www.automation.com/digital-factory/preview-articles/more