INTERNATIONAL BUSINESS

MERCEDES-BENZ
CASE-1- ANALYSIS

Submitted by-Arya K (21128)

1.Evaluate the advisability of Mercedes Benz’s announced shift in strategy. How might
this shift in strategy improve Mercedes Benz’s competitiveness in the global auto
industry? What are the risks?
Sol- In the year 1993, Mercedes-Benz appointed its new chairman, Helmut Werner, who took
a huge strategical decision for the survival of Mercedes-Benz’s cars in the global market to
sustain in the market as its competitors were offering customers with way more product line
that Mercedes-Benz Werner, chairman, took was to increase the company’s product line by
offering high-quality vehicles in all the segments of the market, and target consumers starting
from the mid-market consumers by offering them with small cars, up to four-wheel drive
sports utility vehicle.
Mercedes-Benz decided to start a new plant in Alabama. This was a plus because the
government provided them with resources and subsidies worth $200 million, and labour costs
are lower, but the risk was that Alabama has a population of 250 people and is ranked last in
education, income, and productivity, so hiring managers and skilled workers from other
countries will be more expensive.
This would result in increased profits due to lower wages in other countries such as the Czech
Republic and higher expertise due to better infrastructure and more experienced workers in
countries such as France and the United Kingdom.
The above strategical decision would allow the company to gain the market share not only in
the European countries but also across the world. As above were the advantages for the
company now I will also talk about the risks which the company might go through by taking
the new decisions: -
 Since consumer automobiles are new to the market, they can't charge a high price for
them, but they also must retain their high product expenses, which means they'll lose
money.
 Any recession in other nations would have an impact on the firm, resulting in
eventual losses.
 It would result in them losing market share in the luxury automobile industry across
Europe and the United States.
2.The legal structure of Mercedes Benz’s worldwide organization is presented on
Exhibit -2. For managerial purposes (as opposed to legal purposes) what
organization design would you recommend for Mercedes Benz’s passenger cars
Division? What are the implications for the global distribution of activities and
decision-making processes?
Sol- For managerial purposes, I would like to devise the following organization design
which would have probably worked for Mercedes Benz’s passenger cars division: -
Structure of the Organization: It is critical to have a solid organizational structure for
Mercedes-Benz, with a decent hierarchy inside the company; the structure should be set
up in such a manner that it allows for effective communication and better delegation of
authority among the organization's employees and employers, resulting in good decision-
making.
Departmentalization: Mercedes-Benz should have good departmentalization because it
will have to deliver much more and there should be a good flow of communication in
order to avoid chaos in the organization. There are various departments that will perform
their own functions, such as HR, IT, and so on.
Global distribution procedure will be easy and seamless as a result of this worldwide
production. It would ensure that the automobiles were delivered on schedule. Due to the
customer-centric production method, it would also enhance sales.
The above organizational decision might have allowed organization to delegate additional
decision-making authority to regional and business unit chiefs. In other words, because of
this, firms' decision-making processes have grown less centralized. All business unit
leaders, however, report to the company's worldwide headquarters. This flexibility allows
the organization to respond quickly to problems and produce higher-quality products.
3.Consider the person in charge of Mercedes-Benz ’s new SUV activities in Alabama.
What job description would you propose for that person? By what measures.
Sol- Mercedes-Benz took one of the most surprising decision(s) when it opted to start a new
plant in the state of Alabama though it had some backlashes from people. Now I am
assuming the role of being in-charge of Mercedes-Benz ’s new SUV activities in Alabama.
Job-description for the person: -
 He needs good communication abilities to be a successful plant manager.
 He must also be able to identify and solve problems, operate independently and
cooperatively, manage plant staff, and fulfil deadlines.
 He should also be able to create and monitor budgets, as generating and approving
them may fall under your purview.
 He should also be knowledgeable with and comfortable handling plant equipment
since he may be called upon to train new staff on how to operate it effectively and
safely.
 He must have at least a few years of prior experience working with Germans in order
to better comprehend what the top management is trying to say.
Measures: -
 The individual should have a complete awareness of the processes and how
straightforward it is to export, because the ports were so far away from Alabama.
 He should also be knowledgeable with and familiar with the sports car sector.
 To better grasp what the top management is attempting to express, he must have at
least a few years of prior experience dealing with Germans.
 The applicant should have past expertise in the vehicle manufacturing business and,
ideally, be an Alabama resident, since he will be more familiar with the culture and
laws and regulations than an outsider.
4.Assume the role of Mercedes-Benz ’s new chairman, Helmut Werner. Suppose
that following your recent announcements you have come under vocal criticism
by several elements of German society. One critic argues that Mercedes-Benz ’s
leadership in the world automotive industry has been due in large measure to the
German educational system (supported by German taxpayers), the German
transportation and communication infrastructure (also paid for by public
funds), as well as by the enduring loyalty of German workers. A firm which has
benefitted from these public goods, he maintains ought a reciprocal obligation to
include ways to contribute to a high national standard of living, rather than to
export jobs, since the export of jobs will inevitably lead to an erosion of the social
system that Germans have worked hard to build. How would you reply?

Sol- Assuming the role of Mercedes-Benz ’s new chairman, Helmut Werner. Being a
chairman is one of the crucial positions in the organization, as all the major decision
which must be taken regarding all the operations of the organization will be taken by
the chairman. Now since the company has to take major strategical decisions there
will certainly be criticism by several elements of German society. The major reason
for criticism is the company’s decision of starting a new manufacturing plant in
Alabama instead of any state in Germany. The people of Alabama were happy as they
had the opportunity for new jobs and people in Germany felt deprived after this
announcement was made as they were a period of recession and unemployment was
driving them to search for new jobs. If being the chairman of Mercedes-Benz I had
taken the decision of starting the manufacturing plant in one of states in Germany
then the company would run into losses, as Germans had to be paid more wages
compared to Alabama state. If the government intervenes and changes the wage-hour
rates of labourers, then further being the chairman of Mercedes-Benz, I can start a
new manufacturing plant in the states of Germany.