Business Strategies of Mercedes - Essay Example

? Marketing Strategy International business helps to coherent capital flows, technical skills and even service opportunities across the globe. Worldwide business is decisive in the globe of money-making contacts. This is the age of globalization and liberalization when almost all the companies of the world are going universal. Luxury car is a status symbol product in character. The probable consumers of these cars behave in almost a perfectly inelastic pattern with reverence to changes in prices. Thus, these goods do not pursue the general theories of demand and supply laws in economics (Sultan, 2011). It is anticipated that for such status symbol goods the quantity demanded always increases with increase in their price levels. Thus, those nations who are rich in income can serve better markets for this classy merchandise. The report analyzes the market and business operations of Mercedes and recommends further ways in which it can improve in future. Table of Contents Marketing Strategy 1 Abstract 2 International business helps to coherent capital flows, technical skills and even service opportunities across the globe. Worldwide business is decisive in the globe of money-making contacts. This is the age of globalization and liberalization when almost all the companies of the world are going universal. Luxury car is a status symbol product in character. The probable consumers of these cars behave in almost a perfectly inelastic pattern with reverence to changes in prices. Thus, these goods do not pursue the general theories of demand and supply laws in economics (Sultan, 2011). It is anticipated that for such status symbol goods the quantity demanded always increases with increase in their price levels. Thus, those nations who are rich in income can serve better markets for this classy merchandise. The report analyzes the market and business operations of Mercedes and recommends further ways in which it can improve in future. 2 Table of Contents 3 Introduction 4 Methodology 5 Part 1: 5 Situation Analysis-Current Strategies 5 Segmentation Targeting & Positioning (STP) 6 SWOT Analysis 7 PESTEL Analysis 8 Part 2 10 Unique Selling Proposition 10 SMART Objectives 11 Recommended Marketing Strategies and Programs 11 Conclusion 12 Reference List 14 Introduction International business is indispensable in the world of economic affairs (Moffett, n.d.). This is the era of liberalization and globalization when almost all the companies and firms of the world are going universal (LOC, 2007). Industrialized firms, companies involving music, arts and even the service firms like insurance companies and banks are all expanding their branches across the world outside their domestic terrain. International commerce helps to coherent technological skills, capital flows and even employment opportunities across the globe. The consumer’s are now familiar to variable choices of different goods and services. The market for goods and services has enlarged in every country with open trading, giving its consumers a wide variety of products. International trade also facilitates mobility of the workers in the labour market (Rutgers, 2001). The activity moves to a global level when there is reallocation of productive resources and facilitates preferential choices in business. To suffice the objectives of firms, organizations and people, business houses are getting involved into cross border dealings. Worldwide businesses have diverse branches like administration contracts, foreign trade, and franchising, licensing along with involvement in foreign institutional speculations. In the past 30 years the quantum of global trade has expanded in Billions. Global links have helped largely by improving the livelihood standards and augmenting technology for business. The business and trade guidelines are now integrated together between countries. It is estimated in 2013 that the business of high end cars contribute the greatest share of income generated in the luxury industry (PRLOG, 2013). The segment of high end cars has gone through enormous changes in the current years. In the recent trends companies like Audi and BMW are rationalizing or filtering the market for luxury cars. The growth in the economy is increasing the consumption spending of individuals as their purchasing power is increasing. The producers of luxury cars are also enjoying fruits of the increasing market demand. This report focuses in the implicit and explicit business strategies of Mercedes that is a giant business firm producing luxury cars. Along with cars, this giant German manufacturing firm also produces coaches, busses and trucks. In its early inception the first patrolled Mercedes Benz car was introduced by Karl Benz in the early 1886. The sports cars produced by the company are famous all over the world like McLaren cars. The success of the business is a resultant of the great operating and marketing principles of the firm. Methodology The methodology in the report uses several tools that would help to analyze the brand value and popularly of Mercedes in the market for high end luxury cars. Segmentation, Targeting and Positioning (STP) tool is used to explain the segment of the market that has the potential customers of the company. It throws a light on the various strategies used by the company to target its potential customers whose loyalty would help the organization to achieve a successful position in the market. The report also enumerates on the several strengths, weaknesses opportunities, and threats (SWOT) faced by Mercedes in its course of business. The impact in the organization due to political, economical, social, technological, legal and environmental (PESTLE) changes in the market is also focussed in the report. Finally in order to estimate the future growth of the business the report analyzes the unique selling prepositions (USP) that may help the company to augment its business. The report also summarizes certain specific, measurable, achievable, time bound and realistic objectives that would help Mercedes to achieve success in the global market. The analysis is primarily made on the basis of secondary data and information. The report uses scholarly references to analyze the quantitative and qualitative aspects of the marketing phenomenon of Mercedes. Part 1: Situation Analysis-Current Strategies The vision of the company is very simple but it shows the inherent quality of ambitiousness of the firm. The company aims to be the primal choice of the customers while providing the financial services. The organization also wants to be the first preference among the dealers who want to become partners of the company for selling its automobile brands. The company also firmly believes in its mission. It attempts to innovate and deliver excellent branded products to all its customers. It wants to appoint the most efficient workers in the globe, who would provide amazing services to the customers. The company suffices its mission and vision strategies because it successfully increases its popularity among the consumers. This can be stated after observing the rise in the company’s earnings before interest and taxes (EBIT) over the last few years (Kapferer, 2012). The company desires to provide good quality, superior products to the customers. This would help the organization to win trust and loyalty of the consumers over their brand, as they would experience class. It desires to lead its brand in the market and thus one of the strategies of the firm is to create high brand awareness among the consumers. The company spends high overheads for research and development that would help it to become the market leader in terms of innovation and technology. It constantly upgrades its global presence and networking. The company believes that its operational efficiencies will always facilitate the marketing activities. Following the path of these main pillars the company desires to inspire customers with its high performances. The report analyzes the marketing strategies of the company in details in terms of the four P’s (product, price, place and promotion). The company builds luxury cars that have attractive designs and powerful engines. The cars produced by Mercedes are distinct and highly modern in technology providing goods safety to the users. The mileage guarantee of the cars produced by Mercedes is also high. Though the cars manufactured and sold by the company are expensive but still the firm provides flexible payment facilities to the buyers. The company offer deferred payment facility to the buyers and allows them to pay the price in instalments with low rates of interest. Seasonal offers involving price cuts are also provided by the company to the buyers. The consumers enjoy high brand prestige in the market when they ride on Mercedes’ cars. The company also gives leasing facilities to the consumers. The network for the business of the organization is excellent. There are plenty of dealers selling Mercedes cars. The second hand distributing networks of the brand is also appreciable. The world economy is growing over time and the company gets the chance to export its cars to a many wealthy nations. In order to promote its product the organization uses highly dispersed media and internet channels. The expensive advertisements made by the company help it to create brand awareness among the consumers. The company sponsors various sports and high class events. Thus, the above context shows innumerable push and pulls strategies adopted by Mercedes. Segmentation Targeting & Positioning (STP) Segmentation of a market primarily helps Mercedes to segregate buyers into different groups, each with different characteristic features. Then after the step of segmentation the company targets those groups that possess potential buyers of the company. Then the firm tries to observe the key features that will attract the member of those groups to purchase its cars. Positioning helps Mercedes to occupy an advantageous, typical and unambiguous place for its products relative to the products produced by the potential rivals in the market. The cars produced by Mercedes are expensive cars thus; the company primarily targets the wealthy economies to sell the classy and pricy vehicles. United States, Norway, Hong Kong etc are the developed countries in the world having over 80% of urbanization and high level of Gross Domestic Products at the per capita levels. Thus, most of the people living in these countries are rich with high purchasing powers (CIA, 2013). Mercedes’ potential buyers originated from the segment of developed economies. The cars produced by the company are modern in technology. The young generations are more habituated to use modern technical gadgets than the older generations. Thus, the company targets the segment of young rich working class generations in the developed economies. Once the company has set its segments, it targets to augment its sales among the potential groups. Among the rich working young generations the company may target to sell its sports cars to the young generations. Youth symbolises speed and fashion, thus the Z class models of the company may be advertised to the young generations. The company adopts differentiated strategies to sell their products. The firm advertises more expensive products to the richer customers and less expensive once to the less wealthy customers. The company sets its self as a value provider among the customers. It clearly shows that the cars produced by the firm are way different from the products produced by the potential rivals in the market. The class and the prestige of the brand of the company are richer than the other competitors in the market. The technological benefits offered by the cars of Mercedes are better than the other potential rivals in the market. The company produces large variety of cars, thus offers the rich customers a wide choice during their purchases. SWOT Analysis Strength Producing a wide range of premium cars, Mercedes have now become a global leader and enjoys high brand value in the market. The company is rich in resources and have less capital constraints. Diesel engines, anti lock in brakes and fuel injection are the innovations of Mercedes, thus the company lead’s the market in terms of research and development. Mercedes cars have popularity in the market of motor sports. The company has many manufacturing and assembling units in over 20 countries in the world. For most of the safety features the company acquires patents (Peng, 2008). Weakness The cars manufactured by Mercedes are highly expensive and a consumer who uses such cars incurs high expenditure. The parts of the cars are extremely expensive and the incident of an accident involves high costs on behalf of the users. As the cars are very expensive the company losses out the large sections of middle and low class customers in the society. Opportunity The company has enough resources with which it may launch new hybrid and fuel efficient cars in the future. The firm should tap the emerging markets in the economy. Brazil, India, China, Russia and South Africa are the emerging economies in the world. Mercedes should promote their products to the growing rich classes in these economies. The company would obviously enjoy the fast growing automobile business in the market and increase its income along with rising sales. Threats The market for automobile industry is highly competitive in nature. The policies of the government are advantageous to the growth of the industry all across the globe. The price of fuel is constantly increasing with time. Since the demand for car and fuel is complementary in nature the fall in demand for fuel will also reduce the demand for high end cars. BMW, Audi, Porsche, Lexus etc are the potential rivals of Mercedes in the industry (Muller, 2005). PESTEL Analysis Political Factors The rules and regulations imposed by the government of any economy on the automotive industry are primarily on environmental issues. The automobile manufacturing companies are instructed to manufacture cars that do not emit pollution. The taxes imposed by the state on the automotive industry are primarily high because these goods are luxury items. Thus, the cars produced by Mercedes are under the norms of the state and subject to the regulations imposed by the government. The company is giving its best to produce cars with high mileages. Economical Factors Exchange rates, economic growth of the countries substantially affects the business of high end cars. The company has used its finances to produce a large amount number of cars. Thus, this helped the company to augment its sales and introduce new designs in the cars. The Gross Domestic Product of the most of the countries have increased in the last few years, thus with higher purchasing power the consumers have created higher demand for the Mercedes cars. However, fall of the exchange rate in the Euro zone economies have lead to lowering the profit level of the company. The sovereign Debt Crisis unfavourably affected the business of Mercedes Benz in the European countries, thus the company now attempts to tap the markets of the emerging economies. The surplus amount of capital and a rise in the purchasing power of the buyers in BRICS like India and China have helped the organization to upkeep its turnovers and sales. Social Factors There has been a change in the cultural outlook of people in the modern world. They generally do not consider cars as a status symbol to them. They rather desire for cars that generate less pollution and are fuel efficient. In the mature markets the consumers now possess less disposable income to spend over cars due to the recessionary phrase in the economy. While the demand for cars have increased significantly in the emerging economies with the rise in the group of the rich middle income population. People are now aware about protecting their environment and thus have become conscious about the pollutants generated from the use of cars. Technological Factors Mercedes continuously upgrades its technologies to achieve competitive advantages in the automobile industry. The company launched new designs that provide sophisticated looks of the cars being sold. The company spends a wholesome amount in research and development to manufacture cars that generate less pollution and are more environmentally friendly. Environmental Factors The automobile industry is largely responsible for the global warming, greenhouse effect in the environment. No matter whatever restrictions implemented on pollution emission is imposed in the industry in the last few decades. The consumer’s tastes and preferences have shifted towards the eco friendly cars, hybrid and fuel cell cars. The European regulations have sternly instructed to reduce the extent of pollutions in the developing nations. Legal Factors The government in both the markets of the U.S. and Europe has introduced restrictions and norms regarding pollution to the car manufacturing companies. Following the regulations imposed by the governments of the developed economies the developing countries government have also introduced certain regulations regarding the environmental issues. The BHARAT norms implemented in India is regarding protection of environment (Westwood, 2005). Part 2 Unique Selling Proposition The success of marketing and advertising of a company largely depends on its unique selling proposition. This proposition explains the most advantageous quality of a business firm. The unique selling proposition of Mercedes is its brand value. The prestige, class and richness rendered by the cars of the company are incomparable when compared with the rest of the rivals in the industry. Rich buyers never get reluctant to purchase such cars although they are pricy because they render a status symbol to them. The cars manufactured by Mercedes are unique in terms of their design, looks and features. Thus it can be analyzed that the company is unique for its brand value an offers nothing but prosperity to its clients all over the world (Rogers, 2001). SMART Objectives Specific, measurable, achievable, realistic and time bound objectives will help Mercedes to operate its business activities in a more effective and efficient pattern. The company must have the target to be the best automobile manufacturing company in the world. This is a specific aim for which the company must build its targets and strategies. The company should try to achieve an annual growth of at least 10 % in its sales in order to lead the industry. The employees of all levels must be encouraged to work extensively for the betterment of the company. The market for automobile is highly competitive in nature, thus the company must formulate its strategies in a way that it can easily overtake the success of the potential giants in the industry. The company’s aim to become the best high end car manufacturer would help it to get success in many other segments. Brand value, loyalty of the customers is factors that can automatically be attained by the company if it aims to grow and lead the industry. However, the company should always keep its goals time bound. The company should try to attain its leading position in the market with a growth of 10% in a span of about 10 years. Keeping the goals time bound would help the company to achieve them quicker in a proficient approach. Recommended Marketing Strategies and Programs In order to achieve a time bound growth of approximately 10% and succeed in the automobile industry, Mercedes must try to increase its popularity among the existing customers and try to create additional customers for its manufactured cars. The company generally engages in the production of expensive cars. If it tries to innovate new models of cars at lower prices than it can tap the large section of growing middle class population in the world. It has been previously discussed that rich luxury cars are now more preferred by the people in the emerging economies than the affluent customers living in the developed economies. The infrastructure of roads in these developing economies is not very good; moreover the traffic in the busy locations of these countries is overcrowded crowded. Thus even if they possess the purchasing power, the people living in these nations do not desire to purchase expensive luxury cars. Luxury E and Z class cars produced by Mercedes are more suitable in the smooth and broad streets of the developed countries like Norway (Newmark, 2009). However, the company should not cease its marketing in such situations due to these problems. Successful advertising both through sales promotion and personal sales can result in higher sales for the company. The company should decide the budget for its marketing programs before starting to undergo the process. Mercedes has access to large financial reserves so its budget for marketing can be $2.5 billion (McLeish, 2010). The marketing promotion of the firm must be such that it is consistent with the mission and vision proposed by it. The company should claim to provide 100% satisfaction to its customers during and after the course of their purchases. For the purpose of personal sales the company must train its sales personnel in a way that successfully built excellent customer relations. Good sales relation will make the customer biased towards the firm. The salesmen may be provided with extra commissions on the event of a successful trade of a pricy car. In order to encourage the employees to generate more sales the company may conduct sales programs that would involve award giving ceremonies to the employees for customer service, highest sales and bonuses. The company should provide good after sales services like internal car washing and polishing till one year after sales. Celebrity endorsement in advertisements is a process in which the company may encourage a large group of buyers. The company may sponsor various sports event like in world cup cricket the man of the match may be gifted an E class Mercedes car (Adler, 2008). The organization may create a higher brand value by making attractive advertisements in the internet. Thus, with the above recommendations and strategies the company would surely be able to achieve its goals within time. Conclusion The business run by Mercedes is matured and still modern. It is the brand name that matters, when it comes to the forum of conspicuous consumption. The brand value of Mercedes is priceless; it was the first company manufacturing luxury cars in the automobile industry. In the primitive era during 1950’s and 1960’s the cars produced by Mercedes was unique and well known for its high performance engines and customized leather seats. Over the years the competition in the automobile industry has increased and many potential luxury car manufacturers have evolved in the market. BMW, Lexus and Porsche are famous automobile companies that provide high class luxury cars for the affluent classes. , The name of Mercedes is well established in the automobile industry. There are certain complaints regarding the reliability of the company but they can be taken care off after the measures mentioned above. Subject to the changing market conditions in the world economy the company must try to adopt Blue ocean strategies in order to win the demand of the new customers in the emerging economies (Webster, 1995). No longer have developed economies served good markets for high end cars, the growing economies have a wide customer base of the high end cars. Reference List Adler, D., 2008. Mercedes-Benz. Osceola: MotorBooks International. CIA, 2013. The World Factbook. [online] Available at: [Accessed 20 August 2013]. Kapferer, J. N., 2012. The new strategic brand management: advanced insights and strategic thinking. Delhi: Kogan Page Publishers. LOC, 2007. Modern Global Automobile Industry. [online] Available at: [Accessed 20 August 2013]. McLeish, B. J., 2010. Successful marketing strategies for non-profit organizations: winning in the age of the elusive donor. New Jersey: John Wiley & Sons. Moffett, C. R., n.d. International Business. [ppt] Available at: [Accessed 20 August 2013]. ? Muller, A. K., 2005. Swot-analysis for henkel's loctite. Munich: GRIN Verlag. Newmark, J. H., 2009. Automobile business. Cambridge: Cambridge Scholars Publishing. Peng, M. W., 2008. Global strategy. Connecticut: Cengage Learning. PRLOG, 2013. Global Luxury Car Market: Trends & Opportunities (2012-2017) – New Report by Daedal Research. [online] Available at: [Accessed 20 August 2013]. Rogers, S. C., 2001. Marketing strategies, tactics, and techniques: a handbook for practitioners. Connecticut: Greenwood Publishing Group. Rutgers, 2001. Intrenational Business. [ppt] Available at: [Accessed 20 August 2013]. Sultan, A. L., 2011, The Impact of Customer Relationship Marketing in the Luxury Retail Market of Kuwait: A Thematic Analysis. [online] Available at: [Accessed 21August 2013]. Webster, F. E., 1995. Industrial marketing strategy. New Jersey: John Wiley & Sons. Westwood, J., 2005. The marketing plan workbook. Delhi: Kogan Page Publishers. Read More