Table of Contents
- Vision Statement
- Mission Statement
- Market size
- Product life cycle
- Distribution channels
- Environmental forces
- Porter’s 5 forces model
- Macro-economic factors
- Market Forces
- Market Size and Growth Rate
- Buyer Power and Customer Loyalty
- Competitive Intensity
- Number of Competitors
- Price Rivalry
- Ease of Entry Substitutes
- Market Access
- Customer familiarity
- Channel Access
- Sales Requirement
- Company Fit
- Competitive Position
- Strategic market plans
- Biggest Roadblocks
- Issues in Tactical Marketing Strategy Development
- Process for Developing Next Marketing Plan
Mercedes Benz is a premier segment car which caters to niche market. Presently Mercedes Benz is facing a tough competition from other luxury car segments like BMW, Audi etc. Recently sales of Mercedes Benz have been increasing because of new demand from markets like China and India. With the increase of market size of luxury car segments, Mercedes Benz has increased their profit margin across the world. But tough tariff regulations and high input cost of the raw materials have led to increase in price of the cars. It is true that the organization is considered as one of the leading organizations within the luxurious automobile industry. Mercedes Benz needs to revise its marketing plan and objectives as the market demand is changing at a rapid pace. Introduction of fuel efficient cars in reasonable price will help the organization to develop potential client base. The organization mainly focuses on urban market. The organization cannot increase its business network all over a specific country if the organization does not increase its supply chain network.
Mercedes-Benz is a German automobile manufacturer company. In the fall of 1998, Mercedes-Benz and Chrysler merged forming Daimler-Chrysler AG. This made Daimler-Chrysler the world’s third largest car manufacturer in terms of sales. Daimler-Chrysler is best known for making luxury sedans. The company also manufacture commercial vehicles, aerospace products and sports utility vehicles. Today Mercedes-Benz USA is a wholly owned subsidiary of Daimler-AG. Presently Mercedes-Benz has their headquartered in Stuttgart, Baden-Württemberg, Germany. Mercedes-Benz cars were first sold in United States in the 1950s.These cars were mainly known as a symbol of status for high class consumers (Mercedes-Benz. 2013).
The vision of the company is to become the number one in quality, Image and Profitability in the Automotive Sector (Mercedes-Benz, 2012)
The mission statement of Mercedes Benz is to delight their customers in everything the company does. The company also want to make a continuous improvement in their Quality Management System and in their business processes. It follows an open minded corporate culture in their company where the employees will work in a team oriented approach and the company will have to accept their responsibility and perform to their optimum level. The company want to improve their quality of products and services. Another mission of Mercedes Benz is to be aware of the external environment and act accordingly. The company must maintain a professional relationship with their business partners who will help them in increasing more revenues and creating strong corporate connection worldwide (Mercedes-Benz, 2012).
The Goal of Mercedes Benz is to achieve a sustainable profitable growth and by doing that increase the value of the company. The company strive to achieve the leading position in their business through their operational excellence and efficiency. The company want to achieve this with the help of their high-performing and inspired set of employees. Another goal is to minimize the impact their cars have on the environment and climate. Their focus is to provide comfortable driving experience through alternative fuels (Daimler, 2011).
The objective of Mercedes Benz is to meet and satisfy the consumer demand which is growing worldwide. But the company also want to achieve this through the production of safe, fuel-efficient and low-emission vehicles. The objective is to have top quality cars with appealing design to it. The company want to increase their traditional strengths, while maintaining safety at the same time. The company also want to reduce their CO2 emissions more quickly than their competitors. Improving customer relationships is also important. This whole process will ultimately improve the efficiency (Daimler, 2011).
The following factors will affect the market position of Mercedes Benz:
Mercedes-Benz has shipped 126,421 vehicles this October, which is 15.3% more than any October of previous years. In passenger car segment the company have achieved another record of selling a total of 1,189,059 passenger cars in the beginning of this year which is a rise of 10.7% than previous year. Sales have picked up momentum mainly in the NAFTA region which includes United States, Mexico and Canada. Along with it the regions like Turkey and Japan has also contributed to its sales growth. In the Europe market, Mercedes-Benz has sold a total of 55,235 vehicles in the month of October with 6.9% growth. Strong growth was seen in the premium brand cars in UK, Turkey and Russia. In Home ground Germany Mercedes-Benz was able to sell 22,758 units which almost equalled previous year’s level. In October 2013, Mercedes-Benz has gained a market share of 9.5% and still remains the star player in the premium segment in its home market (Kotler and Keller, 2011).
In United States, the sales figure reached over 30,069 units, and thus recording a growth of 25.4% as compared to last month. With this it became the market leader in premium segment. In Brazil it recorded an increase of over 40% in sales figure since the start of the year 2013 (Daimler, 2013). In Asia and Pacific region there was an increase in the market share primarily through its record sales in Japan. In Japan, the brand has achieved a sales figure of over 42,580 units which is more than three times than that achieved in the same period previous year. In India also it was able to increase its’ sales figure by a third. Same case was followed in the Chinese market with its sales unit up by 9.1% to 17,348 vehicles (Daimler, 2013). Presently in China the locally produced E-Class and C-Class and the imported S-Class are in High demand (Usunier and Lee, 2012).
Mercedes-Benz is known for its premium car segment category like E-Class, C-class, and S-class etc. The Target market is middle aged people who have middle to high incomes. The brand is not much popular with young people as it very expensive to buy and they don’t have enough money to buy it. Mercedes cars cater to both males as well as females as the company include both male and female specifications in their design. It has a Classy distinctiveness and elegance to its style. It doesn’t have a sporty look like BMW or Porsche (Best, 2013). This has been shown in (Figure 1 in the appendix.)
The main competition that Mercedes Benz faces is from BMW of North America, Porsche Cars, Audi and Saab Automobile USA. The competition between BMW and Mercedes-Benz is intense with each challenging the other head-on. Each other trying to come up with a car which would compete each other like C-class vs. 3-series,1-series vs. A/B-class, SL vs. 6-series , X3 vs. GLK, 5-series vs. E-class, Rolls-Royce vs. Maybach, Mini vs. Smart, S-class vs. 7-series, M division vs. AMG. Similarly the rivalry between Mercedes-Benz and Audi is fierce. With many successful launches of new cars like A3, A5, A7 and Q5 it has increased its market share from 4.5% in 2006 to 8.0% in 2011. But Mercedes-Benz has also increased from 13.0% to 16.6% (Hooley, Nicolaud and Piercy, 2011). Hence the competition is intense between them. (Figure 2 of the Appendix)
Product Life Cycle
Mercedes-Benz is now in the maturity phase of the Product life cycle. At this stage the company are clearly going for new innovations with newly launched cars like C-Class, CL-Class, CLA-Class, CLS-Class, E-Class etc. The market share is also more or less constant with no new markets available to capture (Besanko, Dranove, Shanley and Schaefer, 2013).
Mercedes-Benz is now investing across the country to expand their reach globally. For example in India the company have opened two dealerships, one at Surat and another at Goa with two more to come up. Similarly in China Benz has two distribution channels, one is Mercedes-Benz China, which sells only imported cars. The other is Beijing Benz, which sells China-made cars. These two distribution channel works to promote branding.
Porter’s 5 Forces Model
- Bargaining Power of Buyer
The bargaining power of buyers in luxury car segment is high. In 2012 Mercedes-Benz was offering heavy discounts to some buyers in their premium category cars to maintain its lead over BMW in the U.S. These included a discount of $750 for C-Class segment, $3,000 for GKL-Class, $5,000 for GL-Class and $2,250 for E-class (Lamm, 1997).
- Bargaining Power of Supplier
In the US the auto unions have tremendous power hence the company can easily demand more price from the company and so the bargaining power of the suppliers is high (Kapferer, 2008).
- Threat of new entrants
Mercedes Benz targets niche market segment. For any new player to enter into the market, it has to set up their prestige of being a luxury car, and it will take several years to do it. Again luxury car market is at saturation point; hence growth is not as high as the rest of the market. Also the setup cost of such an industry is very high. Hence it will require huge capital base. Again the consumer base of this segment already has developed their taste for a particular brand of their choice. Hence it will be difficult for new players to enter into this segment. This shows that the threat of new entrants is relatively low as compared to car segments targeting the middle income group (Adler, 2006).
- Threat of Substitutes
The threat of substitutes is medium-moderate. The sales of luxury automotive have increased with rise in consumers who are looking for cars that give them value. Hence more number of people are moving towards the luxury car segment though there will always be competition for brands catering to middle level people like Honda (Ahlstrom and Bruton, 2009).
- Degree of Rivalry
The degree of rivalry within the industry is high. The luxury car industry is well established with companies like BMW, Audi engaging in turf completion with one another (Saxena, 2005).
The social, political and legal forces that exist in the macro environment have to deal with by all the auto manufacturing companies. The company has to adhere to the changes like high import tariff of auto parts brought from abroad which can necessarily raise the cost of the car. Again the foreign exchange movement can affect the prices with depreciation in the local currency will result in high cost of body parts which have to be imported from outside.
The factors which shape market attractiveness are as follows:
Market Size and Growth Rate
The market size of the luxury car segment is increasing globally. The auto car sales have jumped 31.5 per cent, which is almost double the 17 per cent gain of the overall auto industry last year in the same month (Gupta, 2011).
High-End Rides in August
Buyer Power and Customer Loyalty
In the present world the customers are more informed than ever before as the company have all the information at their fingertips. This fact is critical because the company are associated with many social media sites which can give user reviews and the company can themselves do the research to find out which brand is giving more reliability and durability. Hence it is a serious threat towards potential buyers.
The Substitutes can also be a threat. Customers who go for luxury cars know that the company are looking to buy the best car their money can buy. With so much available options, Buyer power is considerably high here and can easily switch to other options to get the best value for their money (Ferrell and Hartline, 2011).
Number of Competitors
Mercedes Benz mainly faces competition from luxury car segment like BMW, Audi, Lexus, and Cadillac etc. So there is large number of competitors which the company have to face.
The price rivalry is intense between the competitors which each other trying to give high discounts to a section of their customers. The company offer more or less same comfort and quality so the one giving more discounts win.
Ease of Entry Substitutes
The threat of new entrants is relatively low. This is because of high initial investment required to set up the firm with majority of the capital invested in R&D. Again the economies of scale achieved by the established players are also quite high which enable them to give discounts or lower the cost without affecting their profitability.
Nowadays majority of the customers are familiar with luxury car segment and the company can easily search for their choice of car in the Internet. Hence customer knows what features the company need to comfort them and what extra to look into the features to buy them. It has a relative importance of 35% with attractiveness of 3. Hence it gets overall score of 105 (Albaum, 2006).
Luxury cars have gained channel access with majority of them opening the distribution channel across the world. The company are opening new Showrooms across the developing countries to access the market. It has a relative importance of 20% with attractiveness of 5. Hence it gets overall score of 100 (Brooklands Books, (2004).
Sales requirement of luxury car segment are giving discounts during period of slump growth in sales. Leasing of vehicles can also pick up sales. The company can also target the young customers buy reducing the price a little a giving a sporty look to it like BMW has done. It has a relative importance of 35% with attractiveness of 5. Hence it gets overall score of 175.
Company fit is also a major criterion for the sales to pick up. The Company has to follow appropriate strategy which will fit their objectives and goals. It has a relative importance of 10% with attractiveness of 6. Hence it gets overall score of 60.
(Figure 3 in the appendix.)
Luxury car segment has a high competition in them. Their competitive position with respect to intensity within the industry is very high and no player can afford to lose their position in the market because there’s a high cost associated with each product the company sell.
Strategic Market Plans
Luxury car industry is highly competitive and has high market attractiveness. Hence the company must go for offensive Strategy. The company must go for adaption of their sales organization as per changing customer wishes. The company must consolidate on new approaches in marketing, sales and after-sales service to offer customer a consistent premium-brand experience. The company must cater to newer, modern and younger groups through modernization of their brand, innovation and differentiated sales formats (Grewal, 2010). (Figure 6 in the appendix.)
Mercedes Benz is one of the leading global automobile manufacturing and distributing organizations headquartered in Germany. The organization has significantly expanded its business operation in several global areas in order to develop potential customer base and increase market share. The organization developed employee and customer oriented mission statement. On the other hand, the vision of the organization is to increase brand image and profitability of the organization by improving product and service quality. It is one of the oldest and traditional vehicle manufacturing organizations (Henning-Thurau & Klee, 1997). Throughout many years the organization maintained its competitive market position in global market place by implementing several unique and innovative marketing and business operation strategy.
According to the corporate goals and business objectives, Mercedes Benz always prefer tries to implement offensive marketing strategy based on its leading competitive position in global marketplace. The organization always looks from its own point of view, does not consider customer’s point of view in the development of pricing strategy. The organization’s major corporate goal is to offer innovativeness and high quality products to the target market. The organization does not compromise with the quality of products. Therefore, the company have to implement several operational cost strategies in order to manufacture the vehicles. This strategy cannot be considered as realistic strategy as the organization always tries to achieve significant growth rate right after the introduction of a new vehicle. The company implement several offensive marketing and distribution strategy in order to gain rapid business growth rate through these new products. It is quite difficult to do so as the organization does not target the customers of all income and demographic segments (Barnes, 1997). This strategy and business goal can create huge problem for the organization due to low sales growth rate of the new products. It is true that Mercedes Benz has adopted quality-cost analysis structure in order to position each and every product. From this analysis, it is clear for all that the organization always try to maintain quality above the operating cost. Therefore, it is impossible to achieve business and corporate goals within quick period of time as the organization always targets high-income group customers.
Maintaining high quality in the vehicles is another major business operation strategy of the organization. In spite of its commitment, some customers are dissatisfied with the after sales service and quality aspects. Burning of oil issues, leaking of oil issues and technological problems in cars are affecting the brand image of the organization. The organization always tries to implement advance technology in vehicles to offer modern technological features and accessories in cars. In addition to this, the organization is trying to introduce fuel efficient and green vehicles to maintain the environmental sustainability (Baker, Walker, Mullins & Boyd, 1996). Unfortunately, the above mentioned issues are affecting the brand image of Mercedes Benz. Therefore, the organization is losing its prime and potential customers to the competitors. The process of rapid adoption and implementation of strategy in luxury automobile segment is making it difficult for the company to justify its vision and mission. Too much automation in the business process can create several problems for the organization, such as unexpected breakdown of vehicles and customer dissatisfaction.
Sales objective of Mercedes Benz is to maximize sales of products from initial point product introduction time. Several risk factors are associated with this strategy. First of all, it is important for an organization to introduce differentiated products after conducting an intense marketing research. The organization needs to give time behind research works in order to identify and determine the market demand and behaviour of customers. Aggressive sales growth strategy can result huge loss for the organization in near future due to lack of appropriate market research.
Issues in Tactical Marketing Strategy Development
The goals and objectives of Mercedes Benz can become the key issues in the tactical marketing strategy development. Major goal of the organization is to become leading organization within the global automobile industry in terms of profitability. On the other hand, the objectives of the organization are to provide vehicles maintain high quality band safety aspects. It is discussed earlier that the organization does not compromise with quality of vehicles. Recently, the organization is trying to experiment new things in vehicles in order to ensure competitive advantages.
These goals and objectives can make it difficult for the marketing managers to develop effective marketing strategies. As it is mentioned that the goal of the organization is to become most profitable organization within the luxurious automobile segment, therefore it is impossible for the managers to develop customer centric market strategies. It is true that recent economic slowdown has affected the purchasing behaviour of people. It is known to all the luxurious vehicles are considered as highly fuel consuming cars (Bowen, 1990). On the other hand, the customers are shifting from luxurious car segment to fuel efficient small cars segment in order to support their reduced disposable income. However, the organization has developed vision 2020 in order to target these segments of customers. According to this vision 2020, Mercedes Benz is trying to introduce several differentiated fuel efficient vehicles in different countries to gain market share growth (Juin, 2000). The organization is trying to cover a vast global market through this plan. In addition to this, the organization is trying to increase the number of inter-city outlets in order to capture more market share. The competitors of Mercedes Benz are adopting slow and steady business differentiation strategy due to change in market demand. It is important to consider the pricing factors along with other marketing aspects. It can help the distributors and marketing department of the organization to develop effective and tactical marketing strategy according to the market demand and customers of different income segment.
It is discussed earlier that the organization is losing its brand image due to lack of effective quality control in the cars and other modes of transport. Rapid differentiation strategy is creating pressure on the quality control department. The organization needs to give time to the customers to accept a single product. Too much aggression can affect the brand image of the organization.
Process for Developing Next Marketing Plan
Mercedes Benz is considered as one of the leading manufacturers and distributors of luxurious vehicles. The organization always tries to implement unique business strategies in order to maintain its competitive position in global market place. Mercedes Benz always tries to ensure the quality of vehicles. In addition to this, the organization also implements advanced technology in order to make cars and vehicles with modern and innovative accessories.
However, it is discussed earlier that too much aggression and automation is associated with several risk factors. First of all, it can make it difficult for the organization to fulfil market demand in a quick period of time. In addition to this, the customers’ needs and market demand is changing at a significant rate due to change in social and economic environment (Fahy & Smithee, 1990). Several people around the globe are focusing on the consumption of fuel efficient small but attractive cars. Competitors like BMW and Audi have introduced small MUV in the market place considering this change in market needs and consumer behaviour. It is clear from the perceptual map that the organization introduces variety of luxurious models, but lack of fuel efficient cars can motivate the potential customers to switch over other brand name (Homburg & Giering, 2001).
First of all, it is important for the organization to review each goal and objective that has been developed by the organization. At the same point of time it is necessary to monitor the business performances and sales margin of all the distributors in a given city or a specific location. It will help the management of the organization to identify real issues and problems that are associated with the development and implementation of business strategy. Mercedes Benz strongly depends on its product differentiation strategy (Zeithaml, 2002). Therefore, it is important for the organization to use marketing mix strategy in order to improve the performance of a specific product by adopting effective product, promotion, and pricing and distribution strategy. On the other hand, according to the product life cycle strategic tool it has been identified that the vehicles of the organization has reached to the maturity stage of the life cycle. Therefore, it is important to adopt reposition strategy or new product differentiation strategy. Here product differentiation means target new customers based on their several needs, such as social, economic and demographic needs.
Mercedes Benz effectively implemented rapid business expansion strategy. This strategy is considered as one of the major business growth driver. The demand and needs of people in different countries cannot be similar. For example, people in countries like India and China always demand for fuel efficient and economic priced cars. In an addition, these people prefer low price cars due to inadequate quality of roads. Honda and Suzuki effectively understood the needs of customers. The company have implemented diversified business strategies in various countries depending on various external environmental factors of a particular country. It is important to maintain a balance between price, demand and quality based on external environmental factors of a specific nation (Smith, 1998).
It is important Mercedes Benz to integrate price sensitivity aspect with the marketing plan. The management of the organization needs to develop research and development centre in all the countries in order to focus on quality of products. In addition to this, it is important to maintain effective customer service as several competitors of Mercedes Benz are trying to grab its market share by improving customer service (Morgan & Hunt, 1994). Promotion of the newly developed products is highly important to create effective customer awareness beside of the product development strategy. The marketing managers in each and every country need to target the potential group of customers by creating advertisements which can cover the necessity of the target customers. Social needs of people used to differ from a country to another country. Therefore, it is important to focus on the promotional strategies (Wakefield & Blodgett, 1999).
In terms of product development strategy, it is important for the management of the organization is to introduce products of various segments. In addition to this, it is the responsibility of the research and development team of the organization to introduce fuel efficient cars or the cars that could run by substitute energy resources (Table 2). Mercedes Benz always ensures the quality of vehicles (Sherman, Mathur & Smith, 1997). Therefore, effective quality and green energy resource can increase the brand value of the organization. In addition to this, it can help the marketing managers to develop significant tactical marketing strategies.
The organization is planning to increase the number of its distribution stores as limited presence in a country can affect the profitability and sales margin of an organization. Now-a-days, the organization introduced discounted pricing strategy for specific vehicles due to lack of sales and economic downturn. This discounting strategy can reduce its brand value. The organization can implement reposition strategy by reducing business operation cost (Lovelock, 1998). In addition to this, lack of effective relationship with suppliers is making it difficult for the organization to expand number of outlets within a country. The organization needs to target the people of middle class income group in several emerging economies by introducing fuel efficient small and attractive cars. It can help the organization to fulfil its goals and objectives according to the newly developed marketing plan.
Mercedes Benz is one of the top ten most recognised brands around the world. The company have attained high brand success and marketing success over the years. It is the world’s oldest automotive brand that still exists today. People are looking for value of their money and hence the company are willing to buy premium cars. The competition between the luxury cars is intense and Mercedes is lagging behind a little. Only by formulating appropriate business strategy and implementation of it the company can improve their global ranking.
It is clear from the above discussion that the manufactured vehicles of Mercedes Benz have reached to the maturity stage of the product life cycle. Therefore, it is necessary to bring some innovative ideas in next marketing strategy in order to meet business goals and objectives. Following recommendation plan will help the organization to bring its competitive position in market place.
- First of all it is important for the management of the organization to review present business goals, marketing strategy and objectives to determine the effectiveness of developed strategy and real business outcomes.
- Mercedes Benz should try to increase its supply chain and distributor networks. It is true that the organization is ailing to meet current market demand due to limited product supply. The management of the organization needs to motivate the dealers or the distributors to increase the number of outlets. Direct selling and online promotional strategy can help these dealers to create effective customer awareness (Meenaghan, 2001). In addition to this, the dealers or the distributors should organize promotional rally of cars or vehicles to attract the target customers. Several potential competitors are using this specific promotional strategy to increase customer awareness.
- It is true that the organization has global presence, but limited manufacturing plants in each and every country are affecting the organization’s profitability. Now-a-days, the value of foreign currency is changing at rapid fluctuation rate due to economic downturn in several developed countries. Therefore, the organization is finding it difficult to maximize business profit in the developing and third world countries. It is important to increase the number of manufacturing firms inside the countries. It can help the organization in several ways. First of all, it will help to generate employment (Fisher & Wakefield, 1998). Secondly, this strategy can help the organization to reduce overall business operation cost.
- The management of the organization should try to introduce small segmented cars as the demand for these types of vehicles is significantly increasing among the target customers. The competitors of Mercedes Benz are trying to enter in this specific market segment to tap the potential market. It is important for Mercedes Benz to adopt this product diversification strategy to foster sales growth rate.
- Mercedes Benz has to adopt competitive pricing strategy in order to become most profitable organizations within the competitive global automobile industry. Continuous hike in fuel price and high maintenance cost of luxurious cars pushing the global customers to consume hatchback and fuel efficient small segment cars.
- Last but not the least; the organization needs to develop strong quality control team and research and development team in every operating country. It will help Mercedes Benz to meet its commitment to target customer, mission and vision. Lack of effective quality and customer service can result lose of client base which can affect the sales growth of the organization.
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Figure 1: Perceptual Map
Figure 2: Competition between Mercedes Benz, BMW and Audi
Figure 3: Factors that Shape Market Attractiveness
Figure 4: Indexing the Market Attractiveness of a Market
Figure 5: Indexing the Market Attractiveness of a Market
Figure 6: Portfolio Analysis and Strategic Market Plans
Table 1: SWOT analysis
The company has been in the luxury car segment for more than 100 years. The company have strong goodwill and a robust brand image.
In the luxury car segment, there are a lot of other competitions from other players like BMW, Lexus etc. When the company merged with Chrysler, their brand image took a hit, and as a result the market share declined.
New Market are opening up to luxury car segment like India, China where there is a good opportunity to capitalize.
The present economic situations of the global market are a threat to the company, with euro zone crisis being the main factor.
Table 2: 4Ps Matrix
Mercedes Benz is a luxury car manufacturing organization. It is important for the organization to focus on product differentiation strategy as it has reached to the maturity stage of product life cycle. Introduction of fuel efficient cars will increase its brand value.
The organization implemented premium pricing strategy due to high quality of vehicles. It is important to reduce business operation cost that can help the organization to develop potential client base.
The organization mainly focuses on urban market. It is important for the organization to increase its supply chain and distribution network to target the market of semi-urban and small town areas.
Effective digital media, online and print media advertising will help the organization to create significant brand awareness. In addition to this, the organization should motivate its distributors to organize road shows and different promotional campaigning.
The organization is committed to become the leading employer in the global automobile industry. The organization always tries to integrate innovation and creativity in order to maintain its business values. The organization believes in high quality customer service in order to develop strong relationship with the customers.