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ASSIGNMENT
MMG

CONTENTS

1/ Executive Summary................................................................p.3

2/ Introduction..........................................................................p.4

3/ Market audit.........................................................................p.5

3.1/ External analysis.............................................................p.5

3.2/ Internal analysis.............................................................p.6

4/ SWOT analysis.....................................................................p.10

5/ Segmentation.......................................................................p.12

6/ Portfolio analysis..................................................................p.15

6.1/ Product analysis............................................................p.15

6.2/ Service analysis............................................................p.15

7/ Strategy..............................................................................p.17

8/ Conclusion..........................................................................p.18

EXECUTIVE SUMMARY
INTRODUCTION

Daimler-Benz AG is one of the most notorious automobile firms in the world. In fact, the only name Mercedes
personifies comfort, luxury, quality and safety. Nevertheless, the October 22, 1997, Robert Colin -a car tester and
deputy editor in chief of a Swedish car magazine- capsized the A-class during the "Moose-test". From this instant,
Mercedes lost a lot of credibility concerning safety of its cars. Indeed, 98% of all cars pass this test without
problems and the most important problem concerns the brand image: this failure could have an effect on the other
Mercedes models.
So, this case study will allow us to exhibit and analyse the strategic position of Daimler-Benz AG in Marketing
terms during and after this sad event. In this way, I will develop a market audit (with an internal and an external
point of view) to undertake a strength, weakness, opportunity and threats analysis of the organisation. Moreover, I
will offer suggestions about the possibility of market segmentation -considering its customer base and market
position- and make a portfolio analysis (product and service portfolio) of the Mercedes offer.
At last, I will formulate potential strategies for the organisation to move from its present position to a more
successful one.

MARKET AUDIT

In order to make a market audit of the Mercedes A-class case study, we will divide the analysis in an external
analysis (with the structure of market, the trends in market, the SLEPT analysis, etc...) and an internal one (thanks to
the 4P and 3C's).

3.1/ External analysis:

·Structure of market: the current market is a more and more oligopolistic market. In fact, a lot of companies realised
fusions or mergers to become a huge multinational firm with a big scale economy capacity. In this way, we can
notice the merger of Daimler and Chrysler, the fusion between Renault and Nissan, the purchase of Volvo and Jaguar
by Ford. We can also remark the BMW's disposal of its Rover acquisition, when Fiat and General Motors confirmed
their cross-shareholding alliance in March 2000. So, from now on, a lot of brand names belong to the same company
(VAG has got Volkswagen, Audi, Seat, Skoda, Lamborghini, Bentley...)

·Trends in market: in the automobile market, we can see a decrease of sedan cars, whereas there is an increase of
convertibles, coupes and SUV (Sport-Utility Vehicles). Leisure is more and more important in the current market
(that's why a product like Vaneo was created for the European market). Nevertheless, subcompact cars seem to have
a good future thanks to their homogeneity and congestion of the roads. Moreover, it can allow to have more
opportunities in other countries (Asia for example). In addition to these different trends, we can see the introduction
of vans and minivans in the United States, in Asia, but in Europe too with products as Suzuki Wagon R, Daewoo
Matiz or Mercedes Vaneo that is a "multipurpose van". At last, we can notice that luxury cars and supersport cars
come back: "carmakers ready assault on super-rich". Prestige brands have several incentives to enter small-car
segments currently dominated by mass-market brands. Small cars add volume and capture young buyers likely to
buy more cars of the same brand over their lifetime.

·SLEPT analysis:

_ Political/Legal: the UE allows a free trade market, a free exchange in a global market. Thanks to the euro, a price
harmonisation is intended even if it can create more competition between countries. Concerning the sustainable
development, a lot of government insist on the need to cut greenhouse gas emissions. In Britain, the government
announced last year an implementation of the transport policy thanks to investments in light rail as well as roads. In
France, the government opened the public firm car park to foreign firms which has increased competition with other
countries (for instance, Ford signed up a contract with "La Poste" for its cars). In the USA, the American
Automobile Labelling Act (AALA) was adopted by the House and Senate in 1993. The purpose of the AALA is to
identify the final assembly point of passenger vehicles sold in the United States and the percentage of parts (by
value) installed in those vehicles according to their country of origin. At last, the luxury tax, the CAFÉ (corporate
average fuel economy) standard tax, and the gas guzzler tax discriminate against European automobile imports.

_ Economical: we can notice the important impact of oil prices rises in several countries. In fact, crude oil prices
have increased from $9 to $30 per barrel in the 12 months to March 2000. Furthermore, protectionism is quite
important in the Asian and the American market because of several laws (AALA,etc...) whereas it is not really the
case in Europe. Nevertheless, we can observe transaction cost problems in the UE for the consumer (problems of
registration, etc...)

_ Sociological: population changes; in fact, one third of the population will be over 50 by 2001. Social responsibility
is more and more important for the consumer. For example, public is increasingly having a say in political issues
ranging from sustainability to GM crops. The urbanisation phenomenon has got an impact on the sells of
subcompact cars, when we can notice a trend of a 2 car per family model (especially in Western countries). Finally,
people search more functionality, a useful car but they want also to distinguish themselves.

_ Technological: we can notice an incredible technological evolution concerning safety, ecology and comfort
systems in the current and future cars. From now on, a lot of cars are equipped by ABS system (antilock brakes),
ESP system (electronic stability program) and even BAS system (brake assist). As regards the environment, Peugeot
created the particle filter which is currently installed on the 607 and we can see more and more LPG vehicles in the
product range of the manufacturers. Concerning prototypes, Citroen works on the "Dynamo" system for its future
products when Mercedes develops a prototype based on Hydrogen (the A-class "F-Cell"). Finally, we can observe a
generalisation of GPS (global positioning system), that is not only for executive cars.

3.2/ Internal analysis:

·Profit: in 1997, Daimler-Benz AG had revenues of DM124 billion and an operating profit of DM4,3 billion. In
1998, Daimler-Chrysler had a revenue of 154,62 billion euros and an operating profit of 5,66 billion euros whereas
in 1999 it realised a revenue of 149,95 billion euros and an operating profit of 5,74 billion euros.

·Positioning: Mercedes is a luxury brand with a good image all around the world. The name "Mercedes personifies
comfort, safety and quality of the German engineering skills". Generally speaking, Mercedes cars are more
expensive than their competitors because of their brand name.

·Planning: the launch of the A-class aims to attract new customers (young, female) and to be able to settle on the
subcompact cars in Asia and Europe. Mercedes wants also to launch the SLR (a supersport car to compete with the
Ferrari Enzo and the Lamborghini Murcielago). It re-created the Maybach brand name this year to improve its place
in the limo market. Today, Mercedes has broadened its portfolio thanks to new cars (CLK, Vaneo) and a lot of lift
faces (A-class, S-class). In the next few years, the new SLK will be launched to cope with the new BMW Z4 which
was shown in the "Mondial de Paris"

·Performance: in 1997, Mercedes sold 1% A-class, 49% C-class, 38% E-class, 9% S-class, and 3% M/G-class
whereas in 1998, it sold 15% A-class, 43% C-class, 29% E-class, 6% S-class and 7% M/G-class. This evolution
(especially the A-class evolution) can be explained by the good impact of the advertising, the desire of customers to
access to a Mercedes product at a smaller price, and the fact that the A-class wants (and succeed) to reach a new
customer target (young an female). Generally speaking, performances of Mercedes are good: in 2000, Mercedes
says overall sales are up in several major markets, including the U.S. (7.9%), France (7.8%), Spain (9.6%) and
Germany (2.5%). In 2001, it increased its units sales of 6% around the world as we can see in the table below:
Finally, in 2002, despite the general market decline, Mercedes-Benz increases its market share worldwide (12% in
Germany).

·Product: we can present the Mercedes product range in the table below in order to gather the main information
about the products (type of car, price, etc...)

PRODUCTPRICE (£)
FromTo AMG version
SEDANA-class13.02519.890
C-class19.99529.20043.790
E-class24.94041.84060.640
S-class44.41087.58085.890
BREAKC-class20.94531.65044.740
E-class25.84040.84056.940
ROADSTERSLK25.08031.35044.460
CLK cab29.94044.190
SL-class54.64167.79089.040
COUPECoupeSport18.79522.105
CLK27.24043.04057.040
CL66.44081.94084.140
4WDG-class35.48754.444
M-class29.39541.99051.690
VANVaneo14.68018.680
V-class23.88027.915

·Promotion: Mercedes-Benz uses a lot of medias for advertising (TV advertising, posters -with B.Becker -,
magazines, newspapers and Internet with its own website and online magazines) but it uses also others means to
promote its products. In this way, Mercedes-Benz takes a leading part in motorshows (like the "salon de Paris",
Detroit, etc...), in different automobile championships (like in Formula One, in DTM, Dakar, etc...), and in
sponsorship of sport events (tennis tournament for example). Moreover, A-class won the Silver Award in the
passenger cars subcompacts in 2001 and it was named the most practical new car on the market by the UK magazine
Autoexpress. Finally, Mercedes-Benz won an Automotive Safety Award in 1998 for its a-class and it also recently
won an Asian Times Silver Award with the "Get-it" A-class campaign.

·Place: Mercedes-Benz is currently present in about 190 countries all around the world. It has got 350 exclusive
dealers in the USA market. The most important car markets for Mercedes-Benz are Germany, the rest of the
European Union, the United States and Japan. In fact, in 1997, 39% of its cars were sold in Germany, 25% in the
UE, 17% in the USA, and 6% in the Japan.

·People: in 1997, Daimler-Benz AG had about 41.000 employees in Germany and 82.000 in the rest of the world. In
1998, after the merger with Chrysler, Daimler-Chrysler had about 400.000 employees around the world whereas in
the beginning of 1999, they were 441.500 and 466.938 and the end of the same year.
·Physical: the headquarter of Mercedes-Benz is in Stuttgart in Germany. There is a factory for standard and long-
wheel bas A-class in Rastatt (Germany) and another plant only for standard A-class in Juiz de Fora (Brazil).
Moreover, the plant for SMART cars in based in "Smartville" in France.
·
·Policies: Mercedes-Benz tries to deliver its products "just in time". It tries to have resources only when it needs
them. Its "Research and Development" department which is placed in Czech Republic takes a leading part in its
policy (we can see a lot of innovations in their prototypes). Concerning job cuts, the Daimler-Chrysler group
downsized its staff in 2001-2002 and we saw that several Chrysler managers were fired and a lot of new bosses of
Chrysler departments come from Mercedes-Benz.

SWOT ANALYSIS
Strengths·Strong brand (Germany's image)·Image of quality, luxury, safety·Capacity of innovation,
differentiation·Finance power, access to capital·Geographical power (dealership)·Wide range of products·Very
efficient R&D department·Strong management·Good image of services·AMG for specific needs·High fidelity of
customers·Dexterity in luxury carsWeaknesses·SMART (not yet profitable)·First feedback of Mercedes for the A-
class issue was arrogant·Male image of Mercedes·Poor quality of services·Cost structure·Diversification leads to
some image problem·Technical problem with A-class·A-class has an identity problem (doesn't look like another
Mercedes)
Opportunities·Limo market (Maybach)·Supersport cars (SLR)·Subcompact cars (Europe and Asia) which is a very
important market·M-class which allows Mercedes to reinforce its position in US market·Professional Sport
Sponsorship (F1)·Active preparatory market (Brabus, Carlsson, ...)Threats·Tiny cars of luxury brands don't succeed
to penetrate the subcompact market·Protectionism in the USA·Taxes for USA and Japan on larger luxury cars·Power
of competitors (BMW, Lexus, Cadillac, Jaguar, Porsche, and Volkswagen - which has Audi, Bugatti, Lamborghini,
etc...)·Problem of culture (difficult to penetrate Asia)

So we can see that Mercedes benefits from an excellent image (quality, safety, luxury...) and a wide range of
products. Nevertheless, the company really needs to watch out its competitors because most of them are efficient,
aggressive and have a good reputation too. In this way, Mercedes has to continue to be innovative to keep its
excellent image and look new market.
Thus, thanks to the SWOT, we could analyse the advantages and the drawbacks of Mercedes-Benz. All the same, the
SWOT is not only an analysis but a plan for action, so I will explore the options available based on both aspects of
the SWOT in the table below:

Organisational StrengthsOrganisational Weaknesses

Environmental Opportunities·keep an excellent image to launch SLR and Maybach·use their dexterity to take a huge
notoriety around the world·use the German quality and management to improve the Chrysler's image and its
organisation·Daimler-Benz has to enhance its Asian implant either by merging with an Asian car manufacturer or by
settling plants in Asia to avoid administration taxes and culture barriers·Mercedes has to make a A-class successor
but maybe under the Chrysler label by using the same wheelbase than a Mercedes product to improve scale
economies and the US penetration·Develop thanks to their finance power their Service/Quality department
Environmental Threats·Use the financing power to merge or purchase a foreign company to allow a better
penetration of protected market (new dealership perspectives thanks to Chrysler)·Use the R&D department to
develop prototypes to cope with new segment markets created by the competitors and keep their competitive
advantage·The autoderision policy with the A-class issue has to be stopped to come back to the original strong and
confidently image·To keep avoiding the mass producer pressures, A-class has to cultivate its competitive advantage:
its different subcompact car concept·Their quality and service must be improved to fit with their good brand image

SEGMENTATION

"Market segmentation is the subdividing of a market into distinct subsets of customers, where any subset may
conceivably be selected as a target market to be reached with a distinct marketing mix"
Kotler (1995)

In this way, the car market is relatively clustered, with a range of identifiable market segments, each with its own
purchasing criteria, i.e. safety, comfort, family, sporty, engine size, length of the car, etc...In the car market,
Mercedes-Benz is a brand with a medium volume of production, but in high-value segments. Recently, it looked at
highest volume segment with the launch of the A-class.
In fact, we can realize a market segmentation of the Mercedes products as we can see in the table below thanks to
these three theories:
·Grade*: A: Upper middle class (higher managerial, professional or administrative jobs)
B: Middle class (middle managerial, professional or administrative jobs)

C1: Lower middle class (supervisory or clerical jobs, junior management)

C2: Skilled working class (skilled manual workers)

D: Working class (unskilled and semi-skilled manual workers)

E: Subsistence level (Pensioners, unemployed, casual or low grade workers)

·Lifestyle** (analysis developed by McCann-Erikson) :

oChameleon: want to be contemporary to win approval. Act like barometers of social change, but copiers not
leaders.

oPontificator: strongly held, traditional opinions. Very British and concerned about keeping others on the right path.

oSelf-exploiters: the "doers" and the "self-starters", competitive but always under pressure and often pessimistic.
Possessions are important.

oSleep-walkers: contented under-achievers. Do not care about most things and actively opt out. Traditional macho
view.

oSelf-admirers: at the young end of the spectrum. Intolerant of others and strongly motivated by success and
concerned about self-image.

oAvant guardians: concerned with change and well-being of others rather than possessions. Well educated, prone to
self-righteousness.

·The TGI*** (Target Group Index) classification of Geoff Wicken (marketing director of BMRB International):

oThrifty traditionals: they are not well-off, budget for every last penny, have trouble saving, prefer paying by cash,
and are most likely to read down-market tabloids, listen to local radio and be heavy TV viewers.

oOutgoing fun-lovers: they are magazine orientated, reading titles such as BBC Holidays, Country Homes and High
Life and enjoy newspapers like Today, the Star, the Mail on Sunday. They love traveling, entertaining people at
home, and eating out. They are above-average viewers of TV, as are most of people in the age group, but look
forward to an increasing number of TV channels.

oAstute cosmopolitans: these are the ones with most money, and far most likely to read the FT, Guardian,
Independent and other broadsheets. Magazines such as Golf Monthly, Country Living and Moneywise get a look in
here. Astute cosmopolitans find it easy to save and invest, and like spending money on foreign holidays, foreign
food and restaurant. They are the only section of the grey market who are light TV viewers.

oApathetic spenders: they are similar to thrifty traditionals, but more likely to take on debt trough credit cards, do
not enjoy planning foreign holidays or entertaining at home. The Sun, News of the World, and the Mirror are
favoured newspapers here.
PORTFOLIO ANALYSIS

6.1/ Product analysis:

In April 1997, former Daimler-Benz motor vehicle business was divided into two divisions, i.e. "Passenger Cars"
and "Commercial Vehicles". Passenger Cars include all the products like V-class, SLK, CLK, M-class, A-class,
Vaneo, Coupesport and the traditional model series comprising the C-class, E-class and S-class. Commercial
Vehicles extend from the Vito light van to the Actros 48-ton truck, thanks to a variety of special versions. This offer
is completed by the urban, interurban, tourist buses of the Mercedes-Benz and Setra marques.
Concerning "Passenger Cars", we can notice that low classes are not aimed, but this is included in the Mercedes
strategy. Nevertheless, we can be sorry about the poor representation of females in the Mercedes range of products:
in fact, most of buyers are men. Moreover, should develop a small SUV (Sport Utility Vehicle) to improve its
penetration on the Europe SUV market and to cope with competitors like Nissan X-Trail, Toyota Rav4 and the
future BMW X3. At last, concerning the spectacular increase of the A-class market share between 1997 and 1998,
this success was permitted thanks to a good advertising campaign (after the problem of the Moose-test), a big
potential market, the innovative architecture of the A-class, and a price which allows more people to buy a
Mercedes.

Anyway, Mercedes has not the same penetration and the same success all around the world, so we can summarize in
the table below the position of Mercedes in the world:

EuropeUnited StatesAsia
Weak penetration in the subcompact car and van marketGood market shares for sedan, limo, coupe and
convertiblesGood professional and rental market (join with Easyjet for A-class rent)Good penetration with a good
image and notorietyNo A-class, Vaneo and CoupesportMarket very hard to penetrate Only extra-luxury models (S-
class, CL-class)Problem of European image

So we can notice that Mercedes hasn't got any problem in Europe and in the United States but -as a lot of European
and American manufacturers- the reality is very different in Asia. Indeed, this market is very hard to penetrate
because of a very specific culture and a certain kind of protectionism. In this way, maybe Mercedes could build
plant, increase dealerships and make a specific and active marketing to improve its sales on the Asian market.
At last, concerning the US market, maybe Mercedes could develop a pick-up model to penetrate one of the biggest
car markets in the United States.

6.2/ Service analysis:

Mercedes proposes to its customers different kinds of services. For new and even used vehicles, there is the "Service
24h"(In the majority of European countries, every Mercedes-Benz driver has the Mercedes-Benz network of
assistance centers at his or her disposal - 365 days a year and free of charge), the "MobiloLife program (a mobility
guarantee and a bodywork corrosion warranty for all new Mercedes-Benz passenger cars - for the entire car's service
life) and the MobilityGo program (a mobility guarantee for all new Mercedes-Benz Sprinter, Vito and Vaneo models
straight from the factory).
In addition to these services, Mercedes proposes Finance and Insurance services. For instance, concerning finance
and leasing, it gives the choice between a Hire Purchase, a Contract Purchase, a Hire Purchase with balloon
payment, an Operating Lease, a Finance Lease and a "Mercedes Advance".

So, even if Mercedes has got several services for the product itself but also for finance and insurance, we can't say
that these services are "exceptional": indeed, BMW -one of its most serious competitors- proposes a wider range of
services to its customers...

STRATEGY

Generally speaking, it seems that Mercedes has got a good strategy, because it is one of the most profitable
manufacturers around the world, with Porsche. Indeed, Mercedes has got a wide range of products which allows it to
make good performances in Europe and the United States. Nevertheless, there is still a problem: the Asian market
that is very hard to penetrate for a European manufacturer.

Moreover, we can't say that Mercedes is a very innovative brand because most of its products can be placed in the
"present product" and the "present market" in the table below (except the A-class, the Vaneo and the SLR). In fact,
maybe it is the best thing to do if you don't want to risk a flop: launching a new product on a new market implies a
high risk, a high cost and a low profit.
So we can see in the Ansoff scheme below several strategies to improve Mercedes outcomes:

Present ProductNew Product

Present MarketImprove the Mercedes service.Make an advertising campaign to improve sells.Launch "limited
series" to reinforce attractiveness.Replacement of current products by new products with better image, safety and
technology.
New MarketPenetrate new markets (Asia or United States) thanks to Europeans products and improve the market
share.Search alternatives into new market segments (age, attribute preferences...)A-class because it is a small and
high car which hasn't got the same feeling than other Mercedes.Vaneo which is a "multipurpose van" especially
developed for European market.The SLR which was developed to be the most exceptional product of the range and
to cope with Ferrari Enzo, Lamborghini Murcielago...