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Introduction
Mercedes Benz is one of the most recognizable brands in the automotive industry, one of
the biggest industries in the world. It is a vehicle manufacturer company whose products are sold
all over the world. Along with the United States, China is considered to be the largest automobile
markets in the globe, both in terms of production and sales. Majority of Mercedes’ sales is in
these two countries. The aim of this paper is to make a strategic audit, with Mercedes Benz being
the focal corporation. This audit will conclude with strategic suggestions formulated on the basis
of the broad environmental analysis, industry analysis, internal analysis, and SWOT analysis
Company Overview
German manufacturer Daimler AG. The company has gained publicity for its magnificent
automobiles, trucks, buses and coaches. Its headquarters are situated in Stuttgart, Baden-
Wurttemberg in Germany. Mercedes is regarded as one of the first automobiles as its name first
appeared in 1926 under Daimler Benz, whose origin is traced to Daimler’s 1901 Mercedes and
Karl Benz’s 1886 patent Motorwagen (Ott, 2013, April). The Mercedes automobile’s first market
was made in 1901 by Daimler Motoren. Vehicles manufactured under the very first name were
produced in 1926, after which followed the merger of the former companies of Karl and Daimler
in to what is currently known as Daimler Benz company. This brand is however known to be
among the established and popular automobile brands around the globe as it has introduced
several, technological inventions that were later adopted by other vehicles. In addition, it is the
oldest automotive brand in the world that still exists today (Blau, 2015). Regarded as Germany’s
automotive pioneer, the company always introduces new models of cars. In fact, it has recorded a
14% increase in it sales worldwide, 9.5% of which is in the United States, the largest market for
Mercedes Benz.
The company also has a 60% increase in demand of its S class line. Most of its recent
success of Mercedes is owed to the continuing innovation and commitment to providing new
products and services. In fact, by next year the company plans to introduce 30 new models in to
the market (Clarke, 2005). Being the world’s largest manufacturer of commercial vehicles the
company has a global reach. It sells its products in almost all the countries of the world.
Mercedes has its production facilities in America, Asia, Africa, and Europe (Fleisher &
Bensoussan, 2003). Daimler continues to shape the future of mobility through the application of
green technologies so as to produce superior and safe vehicles that delight and fascinate its
customers. In fact, it is the only automobile brand that has invested in all three green
technologies, with the aim of achieving emission free mobility as a long term goal.
Industry Overview
characterized by the world’s largest passenger automobile and light truck manufacturers. The
companies that hold the largest market share in the automobile manufacturing include Toyota
Motor Corporation, General Motors Company, Honda Motor and Ford motor Company
(Gilmour, 2009). Even though there tends to be a limited brand integration at some levels in
marketing and advertising, the industry offers a variety of markets and models. According to
statistics, there are more than 12 million people working in the automotive sector or in related
industries, producing over 17 million vehicles every year (Gupta, 2013). After being hit by the
economic crisis of 2000s the industry is said to be “on the mend”. However, it continues to be a
major provider of jobs all over the world and a major source of revenue as well as tax generator
for governments. Nearly 20% of the world’s motor vehicle production occurs in the EU (Gupta,
2013). Nevertheless, the United States is among the nations that hold the biggest shares around
the globe. Moreover, it is home for many global vehicle and auto parts manufacturers. In fact, in
Generally, America ranks in the second position of market for vehicle sales and
production. Europe is however the largest producer of motor vehicle, with Germany being the
European leader with over 6 million units produced only in 2014 (Hornsby, Kuratko & Zahra,
2002). The automobile industry is the forefront of innovation. The initiatives of the research and
development (R&D) that is based in the United States are enabling the industry to leverage the
opportunities presented in the 21st century as well as react better to threats. According to reports
from Auto Alliance, out of the 100 billion dollars that are spend on research and development
globally, almost twenty percent is being utilized in the United States. In 2017, new light vehicle
exports from the united states amounted to approximately 2 million while the number of medium
and heavy trucks was 130, 000, which valued more than 63 billion dollars (Ott, 2013, April).
With the government incentives, large consumer market, available infrastructure, investment
policy and a highly skilled workforce, America is the premiere market for the 21st century
automotive industry.
Mercedes Benz’s external factors that impact the business are identified in this PESTEL
analysis. With over two hundred thousand of employees, this company is one of the leading
players in the automotive industry (Pries & Schweer, 2004). However, it must exploit the
opportunities it has while addressing the threats in its macro environment. Various external
factors influence this firm and the automotive industry as a whole. With this vital knowledge,
Mercedes should develop strategies and programs that will support its business stability and
growth, so as to maintain its position as a global firm. Below entails PESTEL analysis of
Mercedes Benz, which shows how the political, economic and other factors affect the company.
Political
There are several political factors that play a significant role and have a direct impact on
the profitability of Mercedes Benz. The PESTEL analysis will help identify the impacts that the
government has on this company. Below are the significant political factors in the macro
The presence of political stability in major majors presents an opportunity for Mercedes
to grow its business with no or minimal political tension. The free trade that exists in Germany
and other nations where Mercedes operates is also an opportunity that improves market
penetration (Rhee & Haunschild, 2006). The company is able to improve its products in order to
satisfy or exceed environmental expectations. All governments around the world are in favor of
vehicles that have low emissions. Environment friendly vehicles are receiving government
support because of their low environmental impact. These political factors are usually beyond the
controlling power of the businesses but their importance is well understood from the fact that
companies in this industries have opted to shift their manufacturing bases to the countries that
have lenient regulations that are related to wage. For instance, China has recently become the
favorite for several brands, Mercedes being one of them (Rubenstein, 2001). The reason behind
this is that its labor costs are low as a result of lenient wage regulation.
Economic
Economic forces are of importance in determining the success of Mercedes. During the
great recession, all the brands in the automobile industry, Mercedes being one of them, were hurt
badly (Shubik, 2013). The point is, when the economic conditions are low, the sales of vehicles
fall. Demand for the most expensive Mercedes products are impacted when the economic
conditions are not favorable. If the economic conditions are good, the sales remain boosted.
During good economic conditions, the number of units sold by Mercedes is doubled especially in
developed countries. The importance of economic factors can be understood using the
purchasing power of customers. When Mercedes is aiming at selling their vehicles at low costs in
the market, it is because they know that they can attract a large number of customers this way
(Voiculet et al, 2010). Mercedes has the opportunity to grow its business in developing countries
because the company is already popular in developed countries. As for the gradual growth in the
United States, Mercedes still has the opportunity to expand its market shares there, which is the
Technological
Technology and innovation has become one of the most important determinants of
market share in the automobile industry. The interesting thing about Mercedes is that the
company takes commitment to their cars and customers very seriously (Weihrich, 2003). Its
engineers are very aware of the fact that no car should be allowed on the road if it is capable of
destroying the natural defenses of our planet. In order to minimize the contents of carbon dioxide
released in to the atmosphere, the company has designed hybrid options as well as natural gas
tanks. However, this is just the tip of the iceberg. Regarding matter of technology, Mercedes
Benz has so much more in store for its customers. For instance, AdBlue is the company’s way of
converting the exhaust fumes from cars in to nitrogen and oxygen instead of nitrous oxide, which
is harmful to the atmosphere (Weihrich, 2009). There are many more forms of technology such
as BlueDirect, F cell and AirPanel. With these technologies, Mercedes can easily acquire support
from the governments because they are manufacturing vehicles that are eco-friendly. In addition,
the company can utilize mobile technology trends that will help them enhance their apps so as to
Environmental/Ecological
Environment friendly laws as well as carbon emissions are getting stiffer all over the
world. Mercedes, as a major player in the automobile industry is focusing upon low emission
vehicles so as to receive tax subsidies and to be favored by the law and the government
(Weihrich, 2012). There are stricter pollution tests and only those vehicles that past these tests
are allowed in certain markets such as EU and UK, which are the largest markets for Mercedes.
The government has started focusing so much on pollution control and hence car makers must
ensure that their products are environment friendly. Some of the major ecological factors
Climate change
Even though Mercedes is among the leading positions in producing environment friendly
vehicles, the company still has an opportunity to provide more of these products such as electric
cars. By improving its business efficient, the corporation will be able to raise its sustainability
performance.
Legal
Law is also a factor that impacts the profitability and performance of Mercedes Benz.
Selling vehicles in the international market makes this company subject to laws related to safety
and quality (Williamson, 2015). In terms of quality, vehicles being exported overseas have to
pass through emission controls. In terms of safety Mercedes had its brand reputation destroyed
because of the several recalls because of the faulty engines in their cars that led to several fire
accidents. Other laws that impact the company are intellectual property laws.
There is a variety of factors that affect the automobile industry worldwide. During the
great recession, the industry was hurt really badly such that some of the brands were on the verge
of extinction (Zhang, Henke Jr & Griffith, 2009). It would be difficult for these brands to survive
if the government had not intervened. The five force model, developed by Michael Porter, is
advantage. This model applies to all companies that are competing in the same industry, and
whose market is the same (Zhongchang & Xiang, 2007). The five force analysis of Mercedes
Benz Corporation will identify the intensities of the external factors in the automobile industry
environment. Recommendations for steady growth are also offered. It shows that the two factors
that the industry should concern itself about are competition and the bargaining power of
customers. The five forces and the intensities are shown in the table below.
Force Strength
In the automobile industry, threats of new entrants is usually very minimal. The main
reason behind this is that it is very difficult for newly introduced brands to join the industry
especially because of the huge amount of investment needed (Clarke, 2005). In addition, there is
a barrier of competition form the existing brands such that unless a new brand brings something
new and different to the market, chances to acquire market share are very low. However,
Mercedes faces a weak threat of new entrants as a result of the following external factors in the
automobile industry:
These barriers weaken the effects of new entrants on companies like Mercedes. For
instance, there are few Asia firms that have tried competing with the existing players but have
failed to grab a market because consumers are not willing to try out new brands (Zhongchang &
Xiang, 2007). Brand image is a major competitive advantage for existing companies such as
Mercedes. For a new brand that would wish to enter the market, they will have to put their focus
on a lot of engineering and product quality. For small players, getting raw materials might be
easy but achieving economies of scale is pretty very challenging. In addition to the above
mentioned barriers, entering a new market is not easy as governments have imposed huge import
taxes that discourage foreign brands (Zhongchang & Xiang, 2007). Therefore the threat of new
entrance is among the least of Mercedes’ concerns in achieving success of its business.
A large part of buyers is formed by individuals who purchase single vehicles. However,
there are government agencies as well as corporations that buy vehicles in bulk, which puts them
in a position to bargain for lower prices. Nevertheless, buyers can switch to a new brand
regardless of whether they are purchasing one vehicle or a whole bunch simply because there are
no costs associated (Zhongchang & Xiang, 2007). Even though buyers do not pose a threat of
backward integration, their bargaining power is moderately strong. For that matter, brands try to
build customer loyalty through quality, design and competitive prices. In Mercedes case, the
As mentioned earlier, the low switching costs mean that the consumers can change their
interest in Mercedes to any other brand in the automotive industry at no cost. Customers can
easily choose the best option because they have access to accurate information from the
companies’ websites. Even though Mercedes might be better in some ways, substitutes are still
available from other firms. Some brands offer customers the choice of customizing their vehicle.
An example is Roll Royce whereby customers can select dashboard color, and other features
(Zhongchang & Xiang, 2007). Their brand loyalty is hence higher and consumers are willing to
pay more and thus the bargaining power of buyers is high against Mercedes. Therefore,
Mercedes must ensure that their products match the preferences of customers as well as meet
their expectations.
their businesses. However, the bargaining power of suppliers in the automobile industry is low,
the reason being that majority of them are small players (Williamson, 2015). Consequently, the
threat of forward integration is also low. Suppliers ought to play by the rules set by brands. Raw
materials are always available in plenty and hence brands can switch from one supplier to
another without any difficulties. Brands are said to hold the power and that is part of the reason
why the bargaining power of suppliers is considerably low. For instance, Mercedes suppliers
include wood designers, leather products, providers of interior electronic devices and many more
(Williamson, 2015). In other words, there are hundreds of them and being a supplier of this
brand should be an honor for them. Therefore, the weak force is contributed by:
Competitive Rivalry
It is obvious that all car manufacturing companies are engaged in fierce competition as
the automobile industry is very competitive. All major vehicle producing countries, Japan, Italy,
France, the UK, Germany, China, India and the United States, experience this intensive rivalry
(Gupta, 2013). Competitors for Mercedes Benz include Lexus, Jaguar, Audi, Porsche and many
others. The vehicles manufactures by all these other brands vary in terms of design, luxuries,
functions as well as other technical aspects. In order for these brands to generate a perception of
recognition, status, achievement as well as success, they need marketing and communication
with the customers, which is an integral part of the industry. For instance, in the year 2015,
Mercedes was ranked in the second position of the highest seller units, with approximately 2
million units sold (Gilmour, 2009). As a result of high huge investments exit barriers are very
high and hence competitive rivalry is high for Mercedes Benz. In addition, there is low number
of brands that are recognized and influential. Therefore, any company that wishes to exit will
have to bear big loses. In this industry, customer loyalty is high and has matured as the industry
is growing, which intensifies the market share (Gilmour, 2009). However, different brands,
target different segments and yet they still overlap. The competition is based on quality, design,
and technology and customer safety among many other aspects. The company should deal with
Threats of Substitutes
Even though this force is weak, it can be a threat to the automobile industry if buyers can
look to the other comparable products and switch easily at a very low cost. However, with new
vehicles, this cost is high. The reason behind this is that a customer cannot sell a brand new car
for the same price they purchased it (Weihrich, 2009). A Porter Five Force analysis of this
industry focuses on the new market rather than second hand products. There are various
substitutes as well as other alternative modes of transportation, which include buses, taxis, planes
and trains. Nevertheless, none of them are capable of providing the kind of convenience and
accessibility that the automobile industry does. Owned vehicle will serve a customer round the
clock but once the train is missed one has to wait for another. However, in case of alternative
modes, one does not need to worry about things like maintenance, which are costly. But still,
most people buy cars for convenience and prestige and hence the threat of substitutes is
weakened (Ott, 2013, April). A small percentage of threat might come from commuters who find
it cheaper and easier to take a train or bus. In addition, when it comes to analyzing the threat of
substitutes, it is important to look at product differentiation. In the automobile industry, there are
many vehicles that are similar, for example, when purchasing a mid-range Toyota you can find a
2016 was a year of dynamic and continuous growth for Mercedes Benz, which was
largely based on the new products, particularly SUVs and the new E class. The company is
Below is a SWOT analysis of Mercedes Benz that gives an evaluation of its strongholds, weak
Strengths
Being among the leading companies in the automobile industry, Mercedes has several
strengths that enables the company to compete with other brands in the market. These
strongholds are not only protect the market share in the existing markets but also assists in
Brand recognition. Over the past years, Mercedes has been investing in building a
strong brand portfolio and hence it has a high brand recognition (Weihrich, 2009). In addition, its
A variety of popular products. Mercedes produces a wide variety of products that are
recognized worldwide, with its C class being the best-selling model. C class’ popularity has been
on the peak from the very beginning of its launch in 1982 and has sold over 9 million units
(Weihrich, 2009). Similarly, SUVs from Mercedes are also gaining some popularity. The
company’s success can be credited to the new models that it has launched in the market.
Financial performance. Mercedes had a double digit growth in the year 2016 as it sold
more than 2 million vehicles, which was an increase from 2015. The United States alone sold
more than 350, 000 cars. Overall, the company has seen a lot of financial success and growth
over the years as the performance of the “SMART” kept getting better (Weihrich, 2003). Besides
the financial aspect of performance, Mercedes has been able to build expertise at entering new
markets. The company has built new revenue stream as well as diversifying the economic cycle
High recognition in developed countries. The popularity of this brand in the developed
markets is quite promising. In 2016, there was a double digit growth that was achieved in the
major markets of Great Britain (Weihrich, 2003). For China, however, it remained the biggest
individual market for Mercedes Benz in 2017. This demand is anticipated to grow further in the
global as it is present in more than 4 continents. Its manufacturing plants are all over France,
Brazil, United States, Hungary, Germany and South Africa (Rubenstein, 2001). Consequently, its
assembly plants are situated in Vietnam, India, Malaysia, Thailand and Indonesia. Mercedes also
has joint ventures in China and a cooperation with Renault Nissan in USA and Mexico.
Weaknesses
Strategy is about making choice and the following weaknesses are the areas where
costly, which is the reason for their popularity especially in the developed markets where income
is higher. However, maintenance of these cars is quite expensive (Rubenstein, 2001). In addition,
the company needs more investments in new technologies and given the scale of expansion it is
planning to expand in to, a lot of money is required to integrate the processes across the globe.
Fire recalls. Some of Mercedes’ models that were built between 2014 and 2017 had to be
recalled as a result of the involved fire hazard. According to a report, the fires were as a result of
issues in the engine (Rhee & Haunschild, 2006). These recalls was not good for the brand image
Opportunities
rise in the Asian markets in the upcoming years, in terms of sales. Even though the growth in
continuous growth for past several years. Its markets have seen a growing demand, except the
Asian markets, caused by several factors such as easy credit options and cheaper gas prices
(Rhee & Haunschild, 2006). Trends like the low unemployment rate are going to sustain the
Rising demand for premium vehicles and SUVs. The demand for premium vehicles
has been rising since the end of recession. This is not just happening in the developed nations but
in the developing countries because the millennial seem to have fallen in love with SUVs (Pries
& Schweer, 2004). Furthermore, there is a growing demand for environment friendly vehicles.
This is an opportunity for Mercedes to introduce smarter electrical vehicles in to the market, as it
Threats
Intense competition. There is stiff competition in the vehicle sector, which has kept
growing over the years. Mercedes Benz is facing competition from BMW, Audi as well as other
premium brands present in the global market (Hornsby, Kuratko & Zahra, 2002). This
Compliance risks. All automobile brands, including Mercedes, face political and legal
issues. These include laws related to labor, certification and emission laws, which have a huge
impact in the automobile business (Gupta, 2013). It can be very costly for any brand that fails to
weakening of growth present a major risk before Mercedes. For instance, some of the important
markets for Benz, Russia and Brazil, have had disappointing developments (Gilmour, 2009).
When the economy has a weak growth but rising interests there are a number of risks that lead to
defaults.
Strategic Suggestions
Growth Strategy
Mercedes is on its way to achieve its 2020 growth strategy so as to reclaim the number
one position in the premium segment. According to the chairman of the Board of management of
Daimler AG, the company is consistently implementing its growth strategy. The firm is aware of
the challenges and by the end of the decade, the company believes that it will reclaim its position
as the leading manufacturer in terms of sales (Fleisher & Bensoussan, 2003). However, in order
to increase the unit sales, the automobile portfolio should be successfully expanded. In addition,
expanding sales structures and production capacities especially in Asian pacific markets where
the market share is still low, will allow broadening of geographical presence. This will definitely
have a positive impact on the progress to achieving the 2020 strategy growth, the reason being
that the automotive industry will forever continue to grow as a result of new inventions. In fact,
according to forecasts the car sales will increase from 60 to 100 million units by 2020 (Clarke,
2005). When it comes to units’ sales, China is the biggest market in the world and it will remain
to be in 2020 but the country’s car market will have doubled by then. Therefore, the country is
the cornerstone for Mercedes’ growth strategy. The company will also be able to improve its
profitability by cooperating with brand such as Nissan and through savings achieved from
improved efficiency in the value chain, which will also make it possible to respond faster to
fluctuations in demand.
Leverage Research and Design (R&D) and Corporate Social Responsibility (CSR)
can be leveraged for the purpose of achieving the 2020 growth strategy within the automobile
industry. According to research, there is a positive relationship between the rate of corporate
growth and implementation of CSR activities (Ott, 2013, April). Therefore, if Mercedes
continues to align its growth strategy with CSR sales growth will be achieved. Research and
development on the other hand will help engender innovation that will not only drive corporate
The paper has provided a strategic audit on Mercedes, with detailed analysis on the
company and industry overview, the external factors that affect the success of the company,
industry analysis using Porter’s five force model, internal analysis which discusses the
company’s strengths, weaknesses, opportunities and threats. The paper has finalized by giving
strategic suggestions on what the company should do in order to achieve success and maintain
growth. Mercedes Benz is among the most recognizable brands in the automobile industry. Its
products are sold globally in several countries, with China holding the biggest market share in
terms of unit sales. However, the company aims to reclaim its leading position in the premium
segment not only in unit sales but also in brand, profitability as well as products. This will be
achieved through the 2020 growth strategy that is anticipated to increase sales up to 100 million
units. Consequently, in order to achieve this strategy, the company should expand its market to
Asian pacific as well as developing countries where its popularity is quite low. It should also
leverage research and development (R&D) as well as Corporate Social Responsibility (CSR),
which will help engender innovation that will drive its growth and profitability.
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