Contemporary Issues in Business - Research Paper Example

? Contemporary issues in business Contents Introduction 4 2.0 Today’s drivers of change 5 2 Political 6 2.2 Economic 6 2.3 Social 7 2.4 Technology 7 2.5 Environment 8 2.6 Legal 8 3.0 Mitigate against negative forces of change 9 3.1 negative forces of political 9 3.2 negative forces of economic 10 3.3 negative forces of social 10 3.4 negative forces of technology 10 3.5 negative forces of environment 11 3.6 negative forces of legal 12 Conclusion 12 References 14 Introduction This piece of work is written by a student of the university who has been given the work to submit a report on the contemporary issues in business. The work has been authorized by the university for the purpose of analyzing the drivers of change in the business environment and the steps of change management in the modern business in order to mitigate the forces of change. The purpose of this report is to analyse the business environment of a company in terms of political, economic, social, technological, environmental and legal aspects. The report would also address the various ways of responding to the turbulent changes in the business of the company. The company that has been chosen for this work is Mercedes Benz. Mercedes Benz is a multinational automobile company that is headquartered in Stuttgart, Germany. The company is the automobile distribution of the German automobile producer Daimler AG. The business of Mercedes Benz has its roots way back in the patent of Daimler in 1901 and the patent of Benz in 1886. The model first emerged in 1926 under the name of Daimler-Benz. The restructuring of the organization resulted in the change of name of the business model and is today referred as Mercedes Benz. The products of the company are the luxury automobiles in the categories of various cars, coaches, trucks and buses. The customers served by the Mercedes Benz automobile business comprises of mainly the luxury market segment and its customers. However, the company has also launched lower price model from the year 2011 which included the B-class, C-class and the M-class automobile products. The roadster model has also gained popularity among the customers in the market. This has led to the increase in market share of Mercedes Benz over the years as compared to its competitors in the world market, namely Audi, BMW, etc. The growth of market share for Mercedes Benz from the year 2006 to 2011 has been represented below in graphical form. The market share of Mercedes Benz has increased from 12.96% in 2006 to 16.59% in 2011. The business of Mercedes Benz could be termed as an open business which is open to the challenges and opportunities of the macro-economic environment in the world market. The business has been able to identify the changing market environment in various economies over a period of last five years for which the company has been able to operate efficient as an open system (Phillips, 1983, p.185). 2.0 Today’s drivers of change The business of Mercedes Benz has been an open system to the prevailing conditions of the several markets in which it has ventured. The company is influenced by the drivers of change in today’s market. It is therefore, important for the company to identify the drivers of change in today’s automobile market in order to be prepared for the challenges to be faced in future course of business (Cameron and Green, 2012, p.88). The drivers of change in the business of Mercedes Benz could be analysed by reviewing the political, economic, social, environmental, legal and technological environment in which it operates. 2.1 Political The political environment in the markets of operation of Mercedes Benz has varied due to the policies of the government that are driven by the political motives. The governments in US, UK, France, etc. have showed concerns over the quality of models launched by Mercedes Benz in order to ensure safety and protection of the customers. The political interferences in the merger and acquisition of Mercedes Benz with the other companies like Studebaker and Packard Corporation are important for consideration of Mercedes Benz. In their strategic move to launch economy class models namely the C-class and the roadster, the political concerns over the quality of the cars have been taken into account by the company. The launch of the roadster model in the world markets have led to deviation of attention from the maintenance of quality. Due to the changes in the political framework, the standard of quality of the cars has been maintained at level of market requirements. 2.2 Economic The automobiles of Mercedes Benz also faced the drivers of change in the economic conditions of the market in which it operated. The economic conditions of the markets of US, UK and other developed economies demand the fuel efficiency in the operation of automobiles. The fuel efficiency signifies efficient running of the Mercedes Benz luxury model of cars, buses and coaches with a preset level of mileage. The inability to meet the fuel efficiency of the Mercedes Benz models in the market has resulted in the imposition of hefty fines on the company due to the violation of the government rules. The gas guzzlers used by the company in the luxury car models manufactured by them have resulted in the payment of additional tax by the customers. These have resulted in the economic drivers of change for the company in order to attain a sustainable business in the market. Apart from the inability to control the fuel efficiency and the additional cost for gas guzzler, the cars of Mercedes Benz have also not been able to reduce the volume of carbon-di-oxide emissions. The emissions have been one of the greatest concerns of the company that needed to be addressed in order to reduce the cost of emission control (Paton and McCalman, 2008, p.75). The economic drivers of change are important as the customers have wide option to choose automobiles on the basis of fuel efficiency and control of carbon-di-oxide emissions. 2.3 Social The social drivers of change require the company to contribute to the development of the society and its people in which it exists. This has resulted in the rising need of corporate social responsibility of Mercedes Benz. The company has identified the need to undertake programs that are not aimed producing commercial profits and on the other hand aims to uplift the community in which it exists. The operations of the company in Australia, Asia-Pacific have been influenced by the need to contribute to the development of the culture and arts of the society. The health concerns of the society also needed to be addressed by the company in order to create an impression among the customers that the business is there to stay for long term in the societies across the world (Hiatt and Creasey, 2003, p.73). 2.4 Technology The technological drivers for Mercedes Benz could be understood by comparing the products of the company and its technological advancements with respect to its competitors. The company has a wide range of passenger cars as well as light and heavy vehicles which are technologically competitive. However, the company is driven the factors of technological changes where it needs to develop automobiles that have high value of torques, fuel efficient engines, strong exteriors and improved interior designs. The company needs to adapt to the technological drivers of change in order to increase their market share. 2.5 Environment The environmental drivers of change influence the business of Mercedes Benz in the various markets of operation. The environmental concerns demand that the cars should be fuel efficiency. The efficiency in the consumption of fuel would help to reduce the emissions in the air. The emission of carbon-di-oxide is another concern of the market which has to be addressed by the company. The consumption of fuel and the emission of carbon-di-oxide are two important parameters that have been stressed in the manufacture of new models of Mercedes Benz. 2.6 Legal The legal aspects of the business of Mercedes Benz refer to the requirement of registration of the patent, trademark and logo of the company in order to avoid duplication of the company in the product offerings to the customers. The logo of Mercedes Benz is unique with a trademark symbol and is recognized by the customer in the world-wide markets. The company is prepared to take up legal issues in which the brand image of the company is tampered due to the unfair and illegal use of its logo and trademark (Kotter, 1996, p.48). The legal issues in automobile industry have become extremely important due to the increase in market competition and the illegal use of brand name in order to achieve unfair advantages in the market. 3.0 Mitigate against negative forces of change The approach to mitigate the negative forces of change in the business refers to the strategies of change management which enables the organization to meet the challenges and explore the opportunities in the market. The change management strategies are useful as it enables the company to respond to the turbulent conditions in the market. The various strategies for change management include the changes in the management in order to instil a change in the culture of the organization. The change in the organizational culture includes the changes in the policies of innovation, research and development, work culture, market oriented strategies, risk management, corporate social responsibility, etc (Witcher and Chau, 2010, p.62). 3.1 negative forces of political The Mercedes Benz brand operates under the parent company Daimler AG and needs to respond to the turbulent conditions in the market. The automobile manufacturer and seller being a German multinational is rigid in its policies and would therefore need to modify its policies in order to respond to the drivers of change due to the changes in the political, economic, social, technological, environment and legal conditions in the market. The negative forces of change in the market would lead to decline of market share of the company for which the company would need to undertake strategic measures for meeting the conditions of change in the market. The concerns over the quality and efficiency of the models launched by Mercedes Benz have created forces of change in the existing business structure of the German automaker. 3.2 negative forces of economic Mercedes Benz has therefore looked at the opportunities in the emerging markets like China, India, etc. The areas of innovation, research and development has also been addressed in order to achieve competitive advantage in the market (Fitzroy and Herbert, 2007, p.43). The company has also engaged into merger and acquisition with the local automakers like Chrysler in US. Mercedes Benz has a strong financial performance over a period of time and operates in around 21 countries all over the world due to effective risk management. The company should look at the possibilities of expansion and diversification of the business. 3.3 negative forces of social The collaboration with the Chinese automaker would enable Mercedes Benz to manufacture cars that match the safety and quality specifications of the market. This change management strategy of diversifying the business and entering into joint venture with local automakers and partnerships with dealers have helped the company to reduce the political interference in the business and thereby increase the sales and market share (Mazzucato and The Open University, 2002, p.71). The expansion of the dealer network in China has resulted in the increase in sales in the Chinese market by 11% in the last three years. This has helped in achieving competitive edge over its competitors like Audi, BMW, etc. These change management strategies have led to the overall increase in market share of the Mercedes Benz brand from 13% in 2006 to 17% in 2011. 3.4 negative forces of technology The senior management of Mercedes have undergone changes over the years due to the need to respond to the forces of change in the market. The management policies have been revised and the parent group of Mercedes Benz have focussed on increasing the stake of the Mercedes-Benz in the joint venture with local automakers. This has allowed the company to attain higher control over the operations in new markets (Hill and Jones, 2009, p.38). Thus the company has been able to set up manufacturing units in China, India and cater to the target customer segments in the market with the designs and efficiency according to the market demands. Mercedes Benz has made modifications in the manufacturing process that meet market regulations on fuel efficiency and carbon-di-oxide emissions. The economic demands of the market have been taken into consideration by the automaker by contributing to reduction of expenses for fuel consumption and controlling the emissions. The company has emphasized on meeting the market regulations and complying with the requirements of fuel efficiency and reduction of emissions. The launch of new models like the B-class, M-class and other economic models manufactured by application of new technologies have contributed to greener environment (Wadell and Sohal, 1998, p.28). These models are accepted by the customers due to whom the company has been able to increase its sales revenues and market share. 3.5 negative forces of environment Mercedes Benz has looked to contribute to the development of the societies and the communities in which it operates. The changes in the organization culture and the need to set up strong relationship bonds with the communities have led them to offer sponsorships for the conduct of cultural events in the communities. The organization has also contributed by setting up medical treatment facilities for diseases like cancer, etc. The activities of corporate responsibility have allowed the company to establish its brand among the customers in the market. The growth of mutual relationship and faith in the business of Mercedes-Benz has ensured the sustainability of the business of the German automaker. 3.6 negative forces of legal The diversification of the business and expansion in the emerging markets would reduce the limitations due to the government policies on the existing markets. The new emerging markets where the government policies on the quality and safety specification match with the company’s manufacturing policies would be a better place for business expansion. Mercedes Benz also looked at the prospects of entering into dealership networks of several markets in order to attain the maximum efficiency of distribution of the cars through these channels. The company also entered into a joint venture with the BAIC Group of China. Conclusion The contemporary issues in the business of Mercedes Benz have been analysed with the help of PESTEL framework that indicated the drivers of change in the business of the automaker in the worldwide markets. The business of the automaker has been subject to the changes in the political, economic, social, technological, environmental and legal framework in several markets all over the world. The contemporary issues point at the standard of quality and safety of the vehicles launched under the new models and the economy class models by Mercedes Benz. The fuel efficiency of the cars of Mercedes Benz, the level of emissions of carbon-di-oxide has raised greater concerns over the acceptability of the cars by the customers in the developed and developing economies all over the world. Mercedes Benz has responded to turbulent changes by bring about changes in the management and effecting a change in the organizational culture which have set themselves apart from the rigidness of the organizational policies. The company has considered expansion and diversification of the business in new market, strengthening its share in the joint ventures and deepening the dealership network in the new market through collaboration. The company also brought about technological and innovative changes in the product design to attain competitive advantage. The company also engaged in corporate social responsibilities in order to build a relationship of mutual faith with the customers. All these change management strategies have led to the increase in market share of the business and paved the path for sustainable business. References Cameron, E. and Green, M. 2012. Making Sense of Change Management: A Complete Guide to the Models Tools and Techniques of Organizational Change. London: Kogan Page Publishers. Fitzroy, P. and Herbert, J. M. 2007. Strategic Management: Creating Value in a Turbulent World. New Jersey: John Wiley & Sons. Hiatt, J. and Creasey, T. J. 2003. Change Management: The People Side of Change. Colorado: Prosci. Hill, C. and Jones, G. R. 2009. Strategic Management Theory: An Integrated Approach. Stamford: Cengage Learning. Kotter, J. P. 1996. Leading Change. New York: Harvard Business Press. Mazzucato, M. and The Open University. 2002. Strategy for Business: A Reader. London: SAGE. Paton, P.R.A. and McCalman, J. 2008. Change Management: A Guide to Effective Implementation. London: SAGE. Phillips, J. R. 1983. Enhancing the effectiveness of organizational change management. Human Resource Management. 22(2): pp.183–199. Wadell, D. and Sohal, A. S. 1998. Resistance: a constructive tool for change management.  Management Decision. 1(1): pp.27-39. Witcher, J. B. and Chau, V. S. 2010. Strategic Management: Principles and Practice. Mason: Cengage Learning. Read More