POLITICAL Legislation Environment - The EU are bringing in a new legislation that the average CO2 emissions from new European cars must be cut to 130g/km by 2015. Competition - legal restraints on competition within the EU car industry are expected to drop substantially over the next 5 years Taxes and Duty- MOT, price increased. Road tax directly linked to amount of emissions Subsidies- The Government has today met the automotive sector to discuss the help available to the stricken industry. Commenting, David Frost, Director General of the British Chambers of Commerce (BCC), said
ECONOMIC Recession/Boom. Due to the current economic
crisis Mercedes along with other car manufacturers are finding it increasing difficult to sell cars and many have even closed plants. Exchange Rate- Euro v £ Could make Mercedes more expensive in the UK
SOCIAL The social factors can be broken down according to the following
demographics: Age Gender Income
Which age group are interested in the Mercedes company? Mercedes products are mainly targeted at middle aged people. They
are not very popular with youngsters as the brand is expensive and is very hard to get insurance on at such a young age.
What Social class are most likely to purchase Mercedes
cars ?
Due to their relative expense, Mercedes are targeted at people of
middle to high incomes. Unlike Vauxhall, for instance, Mercedes doesn't offer different prices ranging from high to low so the products don’t really appeal to consumers with a low income.
SOCIAL Are males or females more popular with
the Mercedes company? Mercedes products target are both males and
females . They design cars to fit both male and female specifications.
http://www.youtube.com/watch?v=MgVB5HRrhtM
Mercedes also needs to focus on trend. Mercedes is recognised as a quality, expensive,
corporate, upmarket and mature brand. So need to make sure there update with fashion, technology and social trends, such as the green movement, to maintain its image. This could be done through research and development .
A n o th e r fa cto r M e rce d e s n e e d s to th in k a b o u t is Advertising . Mercedes tend to promote there brand on Bill boards, Business newspapers they also offer there own Mercedes magazines
TECHNOLOGICAL Safety- Advances in technologies such as
shatter-proof windscreens, air-bags, crumple zones and collapsible steering columns have made it possible to manufacture safer cars. Safety sells Plant Efficiency- New Production methods that improve efficiency. E- commerce Gizmos
SWOT ANALYSIS Strengths
Strong brand name Owners club Successful F1 team Good Resale Value Good relationship with
the government
Weaknesses
Price
SWOT ANALYSIS Opportunities
Threats
Development of new
The current economic
models crisis Environmentally friendly Strong competitors cars New entrants into the market
PORTER'S 5-FORCES ANALYSIS
TH R EATS O F N E W EN TR A N TS
IN G P O W E R S O F S U P P LIREIRV AS LR Y A M O N G FIR MBSA R G A IN IN G P O W E R S O F B
TH R E ATS O F N EW EN TR A N TS
RIVALRY AMONG FIRMS The rivalry among firms in the same market as Mercedes-
Benz is highly intense. The main competitors within this segment include: BMW AUDI JAGUAR ASTON MARTIN ALFA ROMEO
Rivalry has led to firms
producing similar range of vehicles, as well as expanding into new products or services e.g. financial services, alcoholic products etc.
THREAT OF NEW ENTRANTS Segment is at low risk to the threat of new entrants. This could be down to the following reasons:
PRESTIGE: existing companies have set up their prestige over several
years of providing quality products in the market.
MATURE/SATURATNIG MARKET: the segment is at a saturated point
where growth isn't as high as the rest of the market.
SET-UP COSTS: the set up costs are high in this segment. CUSTOMER BASE: consumers within this market are likely to have
developed tastes for specific brands
THREAT OF SUBSTITUTES Mercedes-Benz has numerous substitutes that it has to be
weary of. These include:
ALTERNATIVE TRANSPORT: this includes means such as buses, trains,
motorbikes and planes.
ALTERNATIVE PRESTIGE PURCHASES: because Mercedes-Benz vehicles
are considered luxury products, they also have to be cautious of other prestigious products that consumers could buy instead of ‘fancy’ cars. These include: Designer Clothing Expensive/Collector’s Furniture Holidays Luxury Homes Art e.g. Paintings, Sculptures etc. Jewellery Boats/Yatches
BARGAINING POWER OF SUPPLIERS The bargaining power of suppliers is influenced by numerous
factors. These include the position of rival suppliers, the quality of goods and services supplied; the demand for goods and services; and the supply of goods and services.
Mercedes-Benz’s suppliers provide them with an array of raw
materials required in car manufacturing, including metals, leather, electronics, paints and rubber.
Additionally, since Mercedes-Benz prides its products on their
quality, suppliers could increase their bargaining power through emphasizing the superiority of their goods.
BARGAINING POWER OF BUYERS Mercedes-Benz deals with two types of consumers, each with
their own bargaining stance:
COMMERCIAL: these are large scale buyers e.g. companies who
purchase fleets. Their bargaining power can be increased by the scale of business they could offer the company and the presence of alternatives.
INDIVIDUAL: these are personal buyers. Their bargaining power is
usually less than that of their commercial counterparts, however, the strength of rival brands and provision of substitutes are key factors that can affect their buying position.
PORTER’S GENERIC STRATEGIES These are the three strategies that
businesses apply to achieve and maintain their competitive advantage.
When applied to Mercedes-Benz’s target
market, it shows the positioning of both their direct and indirect competition.
Strategic Scope The strategic scope shows the size and composition of the
target market. In Mercedes-Benz's case, the vehicle market in the UK is worth £33bn in new cars and £35.1bn in used cars. Of this, Mercedes-Benz have a low market share, however, this is compensated by the revenue generated through their medium to highly priced products. The overall market contains various specifications of vehicles,
of which Mercedes-Benz is represented in all of them. This means that across the board, the firms market share will differ from range to range.
Strategic Strength Strategic strength looks at the core competency of the
business.
The core competency refers to how well the firms conducts it
'basic' trading roles. Michael Porter (1980) pointed out 3 values that made up successful core competency: Provides consumer benefits Not easy for competitors imitate Can be applied to a variety of products and markets
Of the core competencies, the two methods that are used
are: Product Differentiation Product Efficiency
MERCEDES GENERIC STRATEGY Through utilising Porter's generic strategy, we have been able
to identify that Mercedes-Benz's generic strategy targets the following market: NARROW MARKET - Mercedes' consumers fall within the
minority of the market i.e. those of higher incomes, who want a luxurious product to associate with their lofty status.
DIFFERENTIATION FOCUS - Mercedes' strategy to distinguish
them from rivals is one of differentiation, through providing both a luxurious vehicle, as well as one that is up to par with the latest performance figures.
MERCEDES-BENZ GENERIC STRATEGY D IFFE R E N T IA T IO N Classic/Rare Vehicles & Indirect Competition
NARRO W
BRO AD
Cheap & 2nd Hand Cars
Electronic Cars, Reliant Robins etc.
Mercedes & Direct Competition
C O M P E T IT IV E A D V A N TA G E
C O M PE T IT IV E S C O PE
C O ST
STRATEGIC FIT Strategic fit refers to how a firm adapts its business practices
to deal with changes in the external environment. As the motor-vehicle market is currently in a slump, it is
essential that Mercedes-Benz react appropriately to maintain their competitiveness in the market.
STRATEGIC FIT Taking into account Mercedes' strengths, it is well equipped to deal with the current changes in the external environment.
Their strong brand name ensures that up-and-coming professionals will always aspire to own a Mercedes car to adopt the prestige associated with the brand. This will stay constant even throughout times of economic upheaval.
Additionally, the good resale value of their products will mean that buyers will not be as worried about the depreciation value of the car should circumstances force them to sale it on.
Lastly, the businesses good relationship with the government and EU will mean that they could rely on tax reductions and stimulus packages should production be heavily affected by the motor vehicle crisis.
On the downside, the price will still be a hindrance when trying to attract new custom, especially given the hardship experienced when trying to obtain finance from creditors.
PRODUCT SUGGESTION We would suggest that Mercedes-Benz
considered developing a product that would be suited to today's economic climate and social trends.
Such a product would be relatively cheap
(although not so cheap as to compromise their luxury status), have low running costs and be highly eco-efficient.
E co n o m y
R e ce ssio n
Pro d u ct
S u ita b le Price
In fla tio n R e d u ce C o sts
N o t exp e n sive ra n g e
In te re st ra te s S m a lle r C a r Le ss S a vin g s D ifficu lt to g e t Fin a n ce .
S m a lle r E n g in e
ADVANTAGES
Ø The new product has wider target market. Ø Attract consumers with a high, as well as middlelow incomes. Ø Smaller engine will help reduce petrol cost. Ø Insurance will be cheaper Ø Has a lot of potential to be successful.
DISADVANTAGES Ø May compromise Mercedes-Benz's luxury product status. Ø Research & Development into product could be costly, as well as manufacturing costs. Ø May replace existing products in their range portfolio.
