Product Development Strategy in South Asia and New Product Idea of Mercedes Benz - Assignment Example

? A Business Plan for Mercedes Benz: A Changing Paradigm Contents Executive Summary 2 Introduction 3 Market Overview and Competitor Analysis 5 Buyer Power 5 Substitute Products 6 Barriers to Entry and Exit 6 Technological Outlook 7 Supplier Power 7 Product Analysis 7 SWOT Analysis 9 Strengths 9 Weaknesses 9 Opportunities 9 Threats 9 Product Development Strategy in South Asia and New Product Idea 9 Findings 11 Conclusion 13 References 15 Executive Summary The Mercedes is the most popular brand of the past. But, it’s inability to experience changes according to the changing consumer preferences and tastes in the 21st century. The human need to maximize economic interest and gain is translating into price sensitive consumer behavior in all parts of the world. The Mercedes Benz is too expensive to buy in the current economic conditions. The technological outlook of the industry is challenging while, the buyer power is also higher. Additionally, suppliers are executing their substantial level on companies and the barriers of entry and exit are also believed to be substantially powerful. The modifying economic conditions of the world are warranting the companies to balance out differentiation and cost effectiveness so that Mercedes can be sold in emergent markets of the world. A Business Plan for Mercedes Benz: A Changing Paradigm Introduction The Mercedes is considered one of the most expensive brands in the modern array of cars and vehicles. The company is historically targeting elite class of the world in order to generate sales for the past number of decades. However, the economic recession and depression in advanced parts of the world has seriously influenced the business of the featured company. The focal shift in the direction of emerging market also caused the sales of the product to drop significantly. The developing regions of the globe do not have sufficient buying power needed to purchase luxurious rides in which the company specializes. However, a strategic modification is required in order to cater changing consumer preferences and behaviors in the global arena of the commerce (Kotler, Keller, Brady, Goodman, & Hensen, 2009). The company needs to develop a strategy to disseminate the benefit of long term belief that Mercedes is a brand that is reserved for an elite class of the world. Nevertheless, the per capita income in all over the globe is declining and the sense of harmony and equality is going to prevail in a few years from now. The idea of economic supremacy is going to be word of past in the future. The product with the brand name of Mercedes has finally lost its appeal because nowadays nobody is fortunate enough to afford it to say the least. The subunits of the companies that were hugely lucrative in the past were recently closed down as a response of insufficient demand (Baker & Hart, 2007). The latest closure took place in the English economy because the demand was not enough to house a local production unit. The changing economic paradigm has forced the people of all nations to become price sensitive as the level of disposable income is declining in all regions (Lindstrom, 2008). Vision and Mission Statement of the Company “A pioneering spirit and power of innovation for sustainable mobility. For almost 125 years we have been developing answers to the automotive challenges of the respective eras. As the inventors of the automobile, we are equally committed to protection of the climate and the environment and to the safety of our vehicles and accident prevention. Our customers - and all other road users - throughout the world can put their trust in this commitment” (Hashmi & Biesebroeck, 2013). The vision statement of the company is always considered as an attempt to talk to the future and give a direction to the company. The vision statement in every case must define the core values of the company for that it stands. Secondly, it is of great importance to keep on modifying the statement according to the changing environment of the industry. The featured company’s vision statement is an ideal one because it is successfully mentioning the core objectives of customer centric innovation. “We invented the automobile and are passionately shaping its future. As pioneers of automobile design and construction, we intend to continue this unique tradition and to make future mobility safe and sustainable. We want to inspire our customers with exciting premium automobiles that set standards in design, safety, comfort, perceived value, reliability and environmental compatibility, commercial vehicles that are the best in their respective competitive environment, and outstanding service solutions related to these products” (Hashmi & Biesebroeck, 2013). However, the mission statement specifies the objectives of the company to a further extent and therefore, in a scholarly view it should have some basic characteristics and elements. The mission statement of the company is not identifying target customers effectively while, it has failed to mention current technology. The geographical coverage is also not present. The core attributes of the products are discussed to a some extent. The mission statement needs serious thought and appropriate modifications. Market Overview and Competitor Analysis The Mercedes is simply too expensive to buy in the current times. The lack of disposable income has notably contributed towards making consumers extremely sensitive when it comes to dealing with expensive products and services (Klein, 2010). Following is the application of Porter’s five forces on global automobile industry: - Buyer Power The orientation towards life is becoming very simple and therefore, people are more than happy to satisfy their basic needs and avoid any extra expenses (Shimp, 2007). The developed nations are transforming into knowledge-based economies and because of this reason, major changes are taking place in terms of infrastructure. The economic ideology is currently in flux. The fiscal world is facing a dilemma and all of the mentioned factors are causing the consumers to become highly price sensitive and they are committed towards spending less and saving more in order to cope with the futuristic uncertainty (Tungate 2008). The modern companies are attempting to shave off any extra and unnecessary costs so that they can offer their products to the customers at reasonable prices. The humans are getting more and more pressurized regarding maintaining their way of life. The economic pressures are changing consumer behaviors rapidly. Things are looking grim as people see the future enveloped in uncertainty. Everyone is fearful concerning his or her futuristic income potential. The so-called developed world that was considered a major hub of the featured luxury in the past is presently plagued with downsizing as the era of industrialization is coming to an end (Tungate, 2007). The market of luxuries has been shifting to the emerging countries of South Asia and therefore, Disney Land is planning to operate in India and China while, the Mercedes has to develop a product offering according to the local fiscal and economic conditions of the abovementioned countries. Both of the nations are believed to have a collective capacity to become economic leaders in the future. The companies that are engaged in production of luxuries are already settling down in China where tourism is experience a boom. Substitute Products The major competitors of Mercedes include the names Honda, Suzuki, Ford, Toyota and General Motors. All of the companies have managed to incorporate latest technology whereas adopting state of the art Just in Time inventory system while, providing high degree of customization to the customers (Zeithaml, Bitner, & Gremler, 2009). Additionally, maintaining fruitful customer services and feedback system as well. The Mercedes however, failed to incorporate technology and the system of customer involvement is also crude and ineffective. The company on the other hand is failing to give an organic touch to its system and therefore, remaining ineffective in the modern times of the 21st century. Barriers to Entry and Exit The industry of automobile is a capital intensive industry and therefore, the companies are needed to have significant and notable level financial and political muscle in order to enter into the industry (Hashmi & Biesebroeck, 2013). The exit barriers are also high because there is substantial amount capital invested in the operations and therefore, the companies attempt to fight their way out without quitting. Technological Outlook The technology is the ultimate and most valuable part of any business in every business. The objective of cost effectiveness cannot be achieved without incorporating technologically enhanced assembly line (Hashmi & Biesebroeck, 2013). The technological crudeness of Mercedes is a major undoing of the company. Supplier Power The suppliers of Mercedes are very specific in nature and therefore, they have significant power of bargaining over the companies. All of the companies operating in the industry are faced with overwhelming level of influence (Hashmi & Biesebroeck, 2013) from the suppliers and they are exercising their control over the prices and even the delivery times are settled. Product Analysis The Mercedes is a misfit in the current and prevalent set of products and services that are being specifically designed in order to incorporate operationality and cost. The Mercedes is developed on the idea of differentiation (Barnes & Kaplinsky, 2000). But, in the era of the 21st century, the humans are highly interested in protecting their income from vanishing. The protective behavior towards economic prosperity is guiding people in the direction of having a resource conserving behavior while spending money. Market Segmentation Apparently, the Mercedes as a company failed to take the message and because of this reason, they are not adjusting their strategic outlook according to the external environment. The company is also not effectively following resource dependency theory as it is not working towards minimizing bureaucratic cost by incorporating new technologies and managerial philosophies. The Mercedes is believed to be living, operating and existing in the past and therefore, using its energies and sources toward revitalizing the dead and obsolete philosophy of differentiation. In the current era however, the companies are needed to focus on differentiation with an effective degree of cost advantage. The target company is following an outdated philosophy towards organizational structure and culture. The company somehow believes in mechanistic metaphor regarding organizational philosophy (Mongaa & Johnb, 2008). In short, it can be established that organization has failed to change their status-quo in relation to the changing environment. Thusly, an outdated company is attempting to cope with an advanced environment where governments and customers along with every social relation have evolved into its better state. The technology has made the customer awareness to take a quantum leap whereas, the manufacturing costs of all the models are available on the internet and therefore, the company’s ability to charge undue premium on an imaginary differentiation is a wrongful strategy in the global market (Davidson, 1983). The humans have been famous to base their decision making process on the current and latest information so that they can maximize their financial return and output. The abovementioned objective remained intact in each and every era of human civilization but it was being fulfilled in the light of current information of that time. The 21st century is an era of information technology where information is everything and therefore, the customer cannot be fooled in the name of poorly conceptualized differentiation because modern customers need a very realistic and tangible benefit against their each monetary unit (Zelek, Stern, & Dunfee, 1980). The cost is the controlling factor in the modern day market of each and every conceivable product that is currently available. SWOT Analysis The SWOT Analysis of Mercedes as a company is as follows. - Strengths Strong brand name Loyal consumer base in the past Durability and reliability of the products Weaknesses Lack of technological advancement Non-conformation with modern organizational culture and structure No formal setup for Research and Development Poor customer services and feedback systems Opportunities Entry in the emergent markets Collaboration and alliances with local companies of China and India Seeking local government’s support in the home country to survive Threats Further economic degradation Lack of customer support Cultural shock Product Development Strategy in South Asia and New Product Idea The following diagram shows an ansoff matrix for the company that needs to develop a new product for the emerging South Asian markets: - Existing Market Existing Product New Product Market Penetration Product Development New Market Market Development Diversification The current economic conditions are indicating that Mercedes is in need to develop a product that can be purchasable item for the emerging economies of the world. The differentiation of Mercedes is going to help the company in developing loyal customer base. The working class of these nations will become very much attached with smaller version of Mercedes. The Mercedes will become a hot cake in the emerging economic sectors of the world. Moreover, the companies that are already operating in these areas will have stronger brand name as their leading weapon against all out invasion by a smaller version of Mercedes. Additionally, the company is required to develop and establish local production facilities in the areas so that they can effectively control costs and can compete on a same level. The Mercedes has to fight its way in the new and emerging markets with the help of providing cost related benefits to the customers. First time in the history the product that was considered the symbol and synonymous for quality and differentiation is going to need to fight on cost related dimension of the product offering (Hashmi & Biesebroeck, 2013). The product positioning has to be modified so that the consumer whose buying is low, should consider the newer version of the old and traditional product more in reach and attainable. The human psychology is bound to work in order to attain the attainable whereas, it is designed to forego and abandon that it cannot have. Budget and Sales Forecast for Mercedes Benz Following table is going to show the financial forecast of Mercedes Benz’s smaller version in India and China. The amounts are given in US dollars. – Income Statement Forecast for Mercedes Benz in South Asia 2014 2015 2016 Sales 2500,000 3000,000 4000,000 CGS + New Product Development 1000,000 2000,000 2500,000 Overhead Expenses 1000,000 1000,000 1200,000 Profit 500,000 0 300,000 Findings Following are the key findings of the study. - The economic climate of the world is changing and so does the consumer preferences The human love for financial power and resources is more than ever in the era of the 21st century The technology and modern management philosophy is the integral part of modern day organizations Customers are getting more and more informed and therefore, information asymmetry is vanishing with the passage of time The basic and fundamental human need and want of financial return is also more than strong in the modern times The customers are in need to buy clearly present and identifiable benefits in exchange of their money The Mercedes Benz is being manufactured by the company that has somehow failed to follow the modern organizational philosophy The lack of technology and modern management is serious drawback for the company in the long-run The company cannot base its product offering on the basis of differentiation and it is required to balance cost effectiveness as well The company is falling behind as it does not have the ability to give an organic touch to its setup The company’s major and most notable flaw lies with its overdue dedication towards mechanistic metaphor of the organization The company is also not able to manage its environment and customers The company’s strategic outlook is obsolete and therefore, it needs significant modifications in order to survive in the turbulent environment of the 21st century The company is also recommended to focus on developing a living organization by increasing employee participation in the decision making process The Mercedes as a company is required to establish its presence in the Alpha quadrant of the world that is made of China and India The brand name of Mercedes is going to help the company in attracting loyal clientele in the market Recommendations The Mercedes is something that is used for travelling and the goal of transition can be easily fulfilled by much less expensive product (Gabszewicz & Thisse, 1979). Additionally, the Mercedes does not have a resale value and therefore, business-minded people do not like to engage their money in such a product that cannot be salvaged when the need to do so arises. The human mind is accustomed to move with the changing preferences and designs of the products and in current times, nobody have required financial muscle that is needed to keep changing models of Mercedes when the preceding one is not resalable. The superficial ability to innovate on the behalf of the company is also playing significant role in driving away customers that require new, different and improved set of wheels under them on a frequent basis. The basic and fundamental argument of the whole discussion is developed in order to suggest sensitivity towards price dimension of product offering in the upcoming models of Mercedes Benz. The key societies of India and China that will play a notable hand in determining the success level of all products in the near future. The era is gone when people were highly committed to acquire expensive and luxurious products in order to appear wealthy and sober. The richest individuals in the world have been known to purchase vehicles of low cost as in their view the product has to be exposed to road risks and therefore, it should be economical in nature so that the loss can be reduced in the case of incident (Samli, 2013). The approach towards vehicles has been significantly changes in the past few years so that the turbulent economic conditions can be handled and managed effectively and efficiently. The human economic information and knowledge have grown substantially over the past recent years and therefore, major percentage of population in developing and developed nations is trying to maximize their economic and fiscal return by saving a large chunk of cash on a monthly or even yearly basis Conclusion This paper has reviewed and analyzed the leading causes of an ongoing failure of Mercedes Benz. The product is an exceptional hit of the past. But, the item’s ability to click in the current market situation and outlook is less than exemplary in the past few years. The major reasons of this trend is stemming out of company’s non-ability to cope with the changing world order. The emergent economies of South Asia are getting more and more valuable in terms of determining the quality of economic future of the world. The company should focus on designing a new and better product for the economic conditions of the above mentioned economic sectors of the world. The human dedication with economic rationality is no secret and because of this reason, companies must attempt to provide solid and concrete returns in the form of improved products so that the assumptions of social exchange theory can be fulfilled that is the vital behavioral framework in the modern literature of business studies. References Baker, M., & Hart, S. (2007). Product Strategy and Management . 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