INTERNATIONAL BUSINESS

MERCEDES-BENZ
CASE-1- ANALYSIS

SUBMITTED BY:
Amal P V
21123
SECTION C

SUBMITTED TO:
PROF.CHANDAN PALAKSHA
INTERNATIONAL BUSINESS
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?
Ford Motor company had established itself as a world leader in passenger automobiles and
over the year Mercedes Benz established reputation as high quality and superior engineering
automobile manufacture. It had 2 division passenger car division which offer 3 level of luxury
cars and commercial vehicle which include trucks and bus. All the firm’s automobile production
and design plant were in Germany and foreign subsidiaries were primarily responsible for sales
and service while truck and bus division have manufacturing site in Mexico, Argentina, Turkey
and united states.
As its competition was increasing in global market with many firms include Ford, General
Motors which had manufacturing plant across various country and Japanizes companies like
Toyota and Nissan which has decades of experiences and facilities in exporting to different
countries. Many Japanese firms had begun to establish its manufacturing firm in US and Europe
and began to offer similar quality to Mercedes Benz in lesser price which effected Benz’s sales
volume. New S-class series launched in 1992, in response to Japanese Toyota’s Lexus.
As German autoworkers were highest paid in the world with shortest work week which
increased the production cost of Germen automakers and vehicles was becoming unaffordable
in several countries. As a result of increasing production cost and over capacity of existing
plants it had abandoned new plant at Ahrensdorf, Germany which had been intended to be
most modern truck plant in Europe. Newly appointed chairman Helmut Werner had announced
a new direction of the firm which is to transform to an automaker of Luxury cars to vehicles in
all segments.
It had planned to develop small cars for mid-market, lifestyle vehicles such as minivan and SUV
and low energy electrically pored city car. As European and American market had high demand
for SUVs it had expected to make good revenue from it. But the market was dominated by
domestic automakers.
Benz shift strategy was gain competitive and cost advantage among its competitor in global
market. As it diversified its luxury segment to various categories which would help to attract
people from all income level. Production plant in different countries reduce the manufacturing
and other cost which helps in aggressive pricing with keeping high the quality and bringing
manufacturing closer to the point of sale.
The risk major risk was unusual plant location. Alabama consistently ranked at the bottom of
the fifty states in terms of education, income, and productivity. Furthermore, rural Tuscaloosa
County had little industrial infrastructure and was located far from international air nodes,
ports, canals, or even power and water supplies. This could turn out to be a huge point of cash
leakage. Tight competition from domestic and Japanese companies which have strong base and
market share and working cultures employees in new plants. Change in pant location may
affect brand image of superior build quality.
According to me strategic changes can bring fortune to the company by providing of Cost
Competitiveness, on time Delivery and increased choices offered to the customers.

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?
I would recommend divisional organization structure. Divisional structure to help Every division
the autonomy to make decisions, formulate strategies, adjust operations, and customize
product or service specifications; they respond to the needs and demands of the markets in
their area of territory. The design and features of the car can be customized according to the
regions need and production and sales can be diversified cross the world.
Distribution process would be comparatively smooth and easy by global manufacturing.
Customized manufacturing and on time delivery make more customer centric and boost sales.
Decision making would become smoother and faster and focusing on course with positive
report can increase the revenue of the company.

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.
Job description for Mercedes-Benz’s new SUV activities in Alabama:
In charge of handling political pressure or trade union pressure, monitoring all plant operations,
including employee management, meeting projections, and guaranteeing quality
Requirements:

 Degree in Mechanical engineering or supply chain management

 5 years more experience in administration and plant management field
 Responsible for managing employees, meeting projections, ensuring quality and all
other activities in pant
 Good communication skills and comfortable in handling all situations
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?
Since German auto workers were among the highest paid in the world yet worked the shortest
work week which led to incurred high production costs and global automotive sector is
becoming competitive, the decision was essential for the survival and sustainable business.
Competitive pricing can’t be possible due to the increase in production cost in Germany. Being
a German brand, we would like to expand our operation here if the situation changes. We
would request the government to take some necessary measurement for this issue of high
wages.