History and Growth
Mercedes-Benz is a German automobile manufacturer with its headquarters located in Stuttgart, Baden-Wurttemberg in Germany. It is a multinational corporation (MNC) and a division of the Daimler AG, which is a German manufacturer. Mercedes- Benz brand is used for luxurious automobiles, trucks, coaches and buses. The slogan of Mercedes-Benz Company is Das Beste oder nichts, which refers to the best or nothing. It signifies that the core objective of the manufacturing company is to offer the best of the automobiles in the automotive industry.
The company name Mercedes traces its origin to Daimler-Motoren-Gesellschaft’s in the year 1901 and to Karl Benz of year 1886 Benz Patent-Motorwagen, which is commonly considered as one of the first gasoline powered automobiles to be established. Mercedes –Benz manufacturing company originated from Karl Benz and Gottlieb Daimler innovative and creative ideas as the originators of the first car to be powered with petrol known as Benz Patent Motrwagen. Mercedes automobile products were marketed for the first time in 1901 by Daimler-Motoren-gesellschaft. In the year 1926, the first brand name of Mercedes-Benz was produced as a result of merger between the two companies, that is, Karl Benz’s and Gottlieb Daimler’s companies which merged to form the Daimler-Benz company. Mercedes-Benz Company has been since initiation known for its safety innovation work and technological advances in the automotive industry that later were applied in other vehicle in the industry. The company is recognized worldwide as being one of the best established and known brands in automotive industry and it is also among the world’s oldest automotive brand that is still in existence in the current times having produced petrol powered car.
Mercedes-Benz Company Strengths
Mercedes Benz has a strong brand value and for more than a century of conducting business in the automotive industry, it has been a global leader in premium cars. Strong brand name has enabled Mercedes-Benz Company build an excellent reputation, made it stand out from the competition and helped the company project values which have been attracting potential clients to purchase its product. This strong brand name has also played major role for the business by influencing customer’s purchasing decisions to buy Mercedes-Benz products. This has been reflected by the high profits that the business generate annually raising its profitability level all the time in a progressive trend. The strong brand name built by the company has hence increased its customer recognition, built on competitive advantage in the market over its competitors and enables the company introduce its new products easily in the market. Additionally, the strong brand name has enabled the company gain customers loyalty and shared values, enhanced credibility and ease of purchase of company’s products. Increased customer loyalty and shared values connects consumers to the products and hence resulting to repeat purchase. Repeat purchases contribute significantly to the profitability level of Mercedes-Benz company enabling it compete well with its competitors for the market leader position. A strong brand name is a major strength for Mercedes-Benz and it gives it the ability to charge higher prices on its products since consumers place additional value in the brand.
Mercedes Benz Company enjoys the benefit of having large capital base hence lowering the level of capital constrains to the company. The large capital base enables the company to invest in short term and long term projects with ease. The capital constrains limit the growth of a company, limit expansion and risks being acquired by other companies. Mercedes-Benz can acquire finances from the shareholders, financial institutions, and debentures holders with ease using its capital as a security. Mercedes-Benz Company has also been leading in innovation of new products in the automotive industry. This has enabled the company to enjoy the benefits of new innovations before their competitors invest and imitate their works. For instance, the company has been in the leading row in innovations and was the first automobile organization to come up with the first diesel engines, fuel injections and anti-locking brakes.
Another advantage revolves around its priorities of investing in R&D activities. Mercedes-Benz Company invests hugely on R&D and it allocates significant amount of funds to cater for these projects. This has played a major role in putting the company ahead of competition by coming up with new products, technology or ways of solving existing challenges faced by the companies in automotive industry. Advanced technology allows Mercedes-Benz to fulfill their customers’ wants in ways their competitors in the industry cannot imitate.
Mercedes-Benz Company Weaknesses
Mercedes-Benz cars have high maintenance costs, which has high potential of scaring customers away. The brands are also very expensive and hence eliminating high number of potential customers with low disposable incomes. Lacking proprietary technology and patents also hurts the company’s ability to compete efficiently with the competitors in the industry. Mercedes-Benz Company operates a weak supply chain management that delays its ability to deliver demanded products to customers on timely basis and when needs falls due. Weak supply chain causes unnecessary delays that forces customers to cancel orders and shift their buying decisions to the company’s competitors in the market causing it loses of sales in the long run.
Mercedes-Benz Company operates a weak management system that increases the total business risks. Management team are responsible for the health running of the business and when the system is weak, business cannot perform in an optimal and most desirable way and hence end up generating lower profits. Mercedes-Benz also has poor customer services systems, which hurts the company’s reputation. As a result, most of the company’s customers fleet to the rivals who are likely to respond positively to their needs. Mercedes-Benz brands are highly priced compared to other competing companies in the automotive industry. This is a result of high quality and luxurious products produced and hence affordable to minority wealthy individuals lowering its level of customer base. As a result, the company lacks scale and hence the cost per unit of the company’s products is high. Increasing quantity and maintaining quality would greatly help the company lower its production costs per unit. Mercedes brand is also less popular to young generation compared to BMW product. Additionally, a weak cost structure for the Mercedes-Benz Company implies that its brands cost high prices when comparing them with other competitors in the market.
Opportunities and threats
Developing hybrid cars that are using electricity and are fuel-efficient is an opportunity that prevails for the Mercedes-Benz company to maximize on. These new products can help the company in expanding its business and diversify their customer base. Similarly, the company should tap the emerging markets across the world and concentrating on building a worldwide brand. The new markets should allow the company expands its businesses and diversify its portfolio of products offered to the clients and hence increasing its revenue margin. The company should target individuals in developing countries whose level of incomes and purchasing power are increasing. The company is vulnerable to threats that result from substitute products availed in the market by rival companies. There is increased competition in automotive industry from Japanese automakers that are producing luxury vehicles to substitute Mercedes brands, for instance, Toyota Lexus and Nissan Infinity. In addition, the company faces threat of increasing cost of fuel and governments increasing taxes on luxurious products adding to company’s cost.
Mercedes-Benz Company can apply its strengths in innovation, financial leverage, and brand loyalty to counter the weakness in terms of high costs of its products accelerating its growth pace in the market. The available opportunities in terms of increasing purchasing power and incomes of consumers in developing countries can be maximized as opportunities to curb and lower rivalry from competitors. Additionally, the company can invest in new products to lower competition from substitute products. These measures will help the company maintain its profitability and increase its competitive position. Under current state, Mercedes-benz Company may not be in a position to overcome threats of substitute products, changing tastes of customers and its high cost of production that lowers scale of production and profits.
Corporate Level Strategy
The company operates under strict missions that are meant to increase customer satisfaction and hence increasing on the profitability. The company main intent is to delight customers, continually improve on quality of products offered while improving on quality management system and business processes. The company also has a duty of considering environment of its operation, motivating teamwork, delegation and, involving employees to decision making process. Mercedes Company also intends to continue having professional relationships with its business partners as stated in the mission statement.
Goals of Mercedes-Benz Company are to be the pioneer of automotive industry, make the future mobility safe and sustainable and inventing in green technologies to lower pollution by introducing emission free driving solution. This is through playing a role of leadership in technology and innovation in the automotive industry. The company also has a core goal of ensuring returns are generated by always projecting profits growth expected per accounting period.
Mercedes-Benz has formed many alliances, acquisitions and opening subsidiaries all over the world. It acquired Mercedes –AMG with a core objective of increasing its profitability. The company contracted with McLaren Group, which enabled it participates in motorsport as its marketing strategy. The company acquired Maybach until year 2013 when it dropped its ownership due to poor sales. The company also operates more than 20 subsidiaries, which enable it to get the customer contact worldwide. The advantages of these strategies are that, Mercedes-Benz continuously increases on its scale hence lowering the cost per unit produced. This adds to the revenue margin and hence increasing company’s profit level. Acquisition of some companies, for instance Maybach caused the company lose on the capital invested due to poor sales. Acquisitions also bring about ownership dilution and changes in organization culture to accommodate culture of acquired companies.
Competitive Strategy, Marketing Strategy, Costs, and General Focus
Mercedes-Benz Company applies differentiation as its competitive strategy to win over competition by making their cars appear more luxurious than models of rivals in the same range. Mercedes-Benz Company applies diverse methods to compete with its rivals in the industry, which include investing heavily in R&D to ensure that it comes up with an idea that competitors cannot imitate. The company also invests in technology to ensure it is intact with the emerging needs of customers and hence meeting them. Company stresses on its strong brand name as one of the marketing strategy. Customers like associating themselves with strong brand and hence building loyalty on company products. The company is also a sponsor of a German Bundesliga club, as one of its ways of marketing its brand. Mercedes-Benz products are highly priced due to its high cost per quantity produced. As a result, the company ensures products are of high quality, to retain existing, and attract potential customers. The company has in general performed recommendable for the last century of its operation in automotive industry. It has managed to retain its strong brand name, strong quality, innovation and technology leadership, overcome intense competition and adapt to the changing tastes of customers.
Mercedes-Benz Company operates its production facilities in North and South America, Asia, Africa and Europe. These facilities are run by teams of management, which ensure that the company business strategies are implemented. They all report to the Mercedes-Benz headquarters. Mercedes-Benz Company sells its product to almost all countries worldwide using dealers. The company hires the team of professionals and it is among the best employers in the world. It involves its employees in leadership roles through delegations and allowing them to participate in decision making processes of the company. It embraces diversity in employee team in terms of gender, nationality and age without discriminations upholding corporate core values of integrity, passion, respect and discipline. The internal culture practiced by the company ensures that employees across all production plants strive to continually improve output to meet the company’s quality benchmark and hence implementing on its business strategies.
Mercedes-Benz Company products are highly priced in comparison with competitors in the industry. In order for the company to lower its unit price, it is recommendable that it pays attention to both quality and quantity and increases its scale of production. Increased scale will lower its production unit cost and hence reduce its selling price per unit while maintaining quality products. It is recommendable that the company considers young generation when producing luxurious cars to counter competition from its main competitors like BMW. Additionally, Mercedes-Benz Company should target making sales to the potential customers in developing countries whose levels of income and purchasing power are increasing as one of its marketing strategy to optimize on increasing customer base.