RESEARCH PAPER

THE

MERCEDES
10 YEARS.

GROWTH STRATEGY OF

BENZ

IN THE NEXT

SUBMITTED

BY

NAME:
CLASS:
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ABSTRACT:
The Mercedes Benz Company took birth with the merger of Daimler Motor Company and
Benz & Company in 1926. Having recently commemorated the occasion of being one of the
leaders of the automobile industry for more than a 100 years, in this research paper, the
objective will be to observe and analyse the course Benz will adopt over the upcoming
decade.
In its growth strategy, Mercedes-Benz 2020, Mercedes has stated that it aims to regain
leadership in premium-segment sales by 2020, by when it wants to double deliveries of
Mercedes and Smart vehicles from 2010/11 levels to about 2.6 million units and overtake
rivals BMW and Audi.1
While it seems, that these figures look like a stretch it is not entirely impossible that
Mercedes wont achieve these figures. In order to achieve this, the company will have to
focus on improving its strong showing in the Chinese market and will have to consolidate its
growth in the Asian markets as well. Mercedes has always had a strong showing in the United
States and must look to continue that.
Through the course of this paper, some of the major threats to Mercedes will be highlighted.
Subsequently the opportunities which can be exploited by the company will be analysed. A
brief understanding of the weaknesses which the company must look to address will be
followed by a summarization of the longstanding strengths of the company which must aid it
in its pursuit of its goals for the decade.

1 http://www.automotiveworld.com/research/mercedes-benz-future-model-plansproduction-outlook/

BACKGROUND:
The company is an offshoot of German manufacturer Daimler AG, which is in the business of
the manufacture of a variety of luxury automobiles, buses, trucks and coaches. It is
headquartered in Stuttgart, Germany. Mercedes-Benz can draw its beginning to Karl Benz's
creation of the first petrol car, the Benz Patent Motorwagen, which in January 1886 was
patented.
1926, the first Mercedes-Benz brand name vehicles were mass produced, consequent to the
merger of Gottlieb Daimler's Karl Benz's and Karl Benz's companies into the Daimler-Benz
company. Mercedes-Benz was famous for introducing many safety and technological
innovations that later became common in other vehicles. Mercedes-Benz is one of the most
established and well known automotive brands in the world, and is also the world's oldest
automotive brand.
Widely regarded as the manufacturers of the first Automobile in 1886, Mercedes has carved a
niche for itself amongst affluent buyers. Historically, the company like all luxury
manufacturers catered only to the rich and the famous, but through the course of time it has
evolved as a manufacturer of goods which even the common man can aspire to buy. This is
clearly evidenced, by the companys rapid advances into the small car segment.
Following its phenomenal success in the manufacture of cars, Mercedes Benz expanded into
the truck market. It was a runaway success as the company is today one of the largest
manufacturers of trucks in the world. Today the company is a standard presence in almost all
the nations of the world and is the preferred choice of transport for heads of state to the
common man. Today Mercedes stands on the edge of a precipice and its actions over the next
couple of years will determine its long term future.
With the Asian market up for the taking, an increasingly rich uber middle class is what
Mercedes should attempt to tap into. Also, with the sheer number of automobile companies
sprouting up, and the need for a smarter and more fuel efficient cars coming up, Mercedes
should attempt to tread the middle ground while offering its potential customers a viable
status symbol and must at the same time, attempt to be as ecologically sensitive as well.

CHALLENGES

TO BE FACED BY

MERCEDES

OVER THE NEXT DECADE:

While Mercedes should prepare itself for a plethora of challenges over the next decade, one
of the most significant challenges it is going to face will be the intense completion presented
to it in the American market, especially by Ford and General Motors.
U.S. automakers are looking to recapture the luxury market, with Ford reviving the Lincoln
Continental and General Motors expected to introduce its latest offering the Cadillac model
Tuesday. However, the companies are going to face difficulties in competing against German
automakers.2
Kelley Blue Book who is the senior market analyst said in an engrossing interview with
"Closing Bell"3 that Mercedes and BMW at this point, and even Audi for that matter, have a
huge lead over Lincoln and Cadillac, who have been deteriorating for a lot of years. In
addition to challenges in the American market, Mercedes will also have to deal with
increasing home grown manufacturers of automobiles which are looking to compete with the
global brands.
For example, Markets in Asia such as South Korea have seen a variety of carmakers such as
SsangYong have given tough competition to global automotive leaders such Audi and
Mercedes. Similarly in India, there have been a slew of locally home grown car
manufacturers such as Mahindra and Maruti which have captured a large share of the middle
class market, which Mercedes has consistently attempted to make forays into.
In addition to the above, Mercedes will have to come up with a more evolved strategy to
break into the Trucks market in Asia. Tata Motors is one of the largest manufacturer of trucks
in the world and has a presence in a large number of countries in the region. In addition to
them Mercedes will also have to deal with a number of Japanese competitors such as Honda
and Toyota who have captured a large scale of the market with their combination of great
quality with competitive pricing.

2 http://www.cnbc.com/2015/03/30/us-automakers-may-face-challenges-inluxury-market.html
3 Supra.

Mercedes will also have to compete with other prominent luxury automobile manufacturers
such as Porsche and Maserati. The first Plug-In Hybrid Maserati is the Levante SUV and will
be available in 2018. In the following couple of years, Ghibli, Quattroporte, GranTurismo and
GranCabrio are scheduled to follow. The only model of the Maserati without a plug-in hybrid
makeover is the Alfieri sports coupe, which was scheduled to arrive in 2016, but the Italian
carmaker decided to enlarge and extend its development process, so it's not very probable to
see the car any time before 2018.4
On March 12th 2016, Porsche reported the best financial and sales numbers in company
history. But although revenue and profits both surged 25% in 2015, profit margins have been
in a steady decline. In 2013, Porsche reported 19% margins. That number fell to 18% in 2014
and to just 16% in 2015. Although Porsche still has some of the best margins in the business,
this trend is a direct effect of the company's strategy that has made it so successful in recent
years.5 Porsche has sacrificed margin for volume and in doing so it is attempting to force
other luxury automobile manufacturers to either do the same or reduce prices of their
vehicles. It is a dangerous game which Porsche is playing at present, but is a gamble which
might just work.
The final challenge which Mercedes will have to address is the mind-set change of people
over a period of time. Earlier a car was something of a status symbol and was looked upon as
a collectible. Today, luxury cars are a passing fad and are leased more than they are
purchased. Customers have opted for convenience rather than comfort and exclusivity. It is
only a small percentage of the global population which still scampers behind exclusivity.
Hence, Mercedes will have to choose its path over the next decade in a very careful manner.
It needs to decide whether it shall continue to cater to a largely exclusive customer base, or
whether it shall make strides to capture the larger market.

OPPORTUNITIES AND STRENGTHS OF MERCEDES BENZ FOR THE NEXT DECADE:

4 http://plugin-magazine.com/driving/maserati-will-join-the-plug-in-hybrids-clubby-2020/
5 http://www.businessinsider.in/Porsche-is-playing-a-dangerousgame/articleshow/51366763.cms

As it has already been noted in the beginning of this paper that Asia remains the largest
playing ground for all luxury car makers, Mercedes must attempt to capture a large portion of
this market. To the credit of Mercedes, they have already made significant inroads in relation
to the same.
In 2015 Mercedes Benz recorded total sales of 1,39,802 units in August 2015, 17.6 percent up
from same month over the previous year. Maximum growth has been witnessed in the Asia
Pacific region, where sales rose by 34 percent to a new record of 51,307 units in August
2015, when compared with the same month back in 2014.
Contributions to this exponential growth came from Australia (28.3 percent), China (53.1
percent), India (18.9 percent), and South Korea (13.9 percent). The strategy of MercedesBenz in China to produce locally bore fruits. The locally produced C-Class Saloon and GLA
were especially successful in August.6
In addition to the above, Mercedes has a huge potential in the Trucks market as well. They
have already made a bold statement while announcing the Future Truck 2025, which
Mercedes claim will be a self-driven truck. 7 While, it is unlikely that such a truck would have
a great impact outside of the American and European markets, it certainly is eye-catching and
will ensure that the company is at the forefront of technological innovations.
As always, the greatest strength of Mercedes lies in its great customer base and its stellar
reputation which should ensure that irrespective of the risks it takes in its future endeavours,
it shall always have the backing of a strong and loyal customer base.

FINAL OBSERVATIONS AND CONCLUSION:

In conclusion, it is pretty evident that if Mercedes plays its cards right, it can lead to
exponential growth over the course of the next decade. Its obvious competitors are going to
be Audi and BMW which are being as aggressive as Mercedes when it comes to competing
for the larger slice of the pie.
6 http://auto.economictimes.indiatimes.com/news/passengervehicle/cars/mercedes-benz-sales-up-17-6-in-august-2015-maximum-growth-inasia/48836009
7 http://www.wired.com/2014/10/mercedes-making-self-driving-semi-changefuture-shipping/

Mercedes will have to hold its cards close to its chest and make some difficult choices. The
first obviously being, if they are willing as a company to enter into the mid-range segment,
seeing as how they have consistently been in the list of automobile manufacturers
manufacturing only luxury automobiles. Secondly, the next big battleground is going to be
Asia and it looks to be seen which automobile manufacturer can conquer that viable market.
However at the cost of expansion, Mercedes must not fail to consolidate its position in the
American and the European markets seeing as this is where its home base exists. The ideal
solution for Mercedes would be to locally manufacture the automobiles in every country they
establish business in, as this would serve two purposes. One, that it would drastically reduce
the cost of the automobile itself. Secondly, it would receive a lot of goodwill from the citizens
of the nation, and in turn would encourage them to purchase the product.
This is a methodology which has successfully worked in china and Mercedes must attempt to
replicate the same elsewhere in other key markets. Lastly, the trucks market is a huge
opportunity. There are plenty of competitors, both local as well as global, such as Tata
Motors, Volvo, etc. Mercedes should focus on providing a blend of practicality along with
cost benefits in order to ensure that its trucking endeavours pays a good yield.
Thus, in conclusion, if Mercedes sticks to the script and continues to make strategically good
decisions, it should ensure that they have a great control over the global automobile sector in
a decades time.

REFERENCES:
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4. http://www.inboundlogistics.com/cms/article/strategy-and-process-daimlerchryslercorporation/
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-at-daimler.html
13. http://www.helpathy.com/Leader%20-%20Follower.pdf
14. http://www.mbusa.com/mercedes/about_us/careers
15. http://www.mbusa.com/mercedes/benz/innovation
16. http://www.mbusa.com/mercedes/benz/green#module-9
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