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Mercedes Benz Case Study

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Autor:  max86  12 May 2010
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Do you know what is world ranking of Mercedes-Benz in most famous brands? Do you know what is the situation of Mercedes-Benz in cars industry? Do you know the factors that affect the purchase decision of customers while buying cars?
Mercedes-Benz is a famous brand of luxury cars. These are German made cars and are known as status symbol of high class consumers. All customers have their own values and beliefs while purchasing a car. There are several factors responsible for the purchase decision. Car industry is growing very fast worldwide. There is a rapid change in trends and consumers preferences for comfortable, reliable, highly efficient and economical cars.
Mercedes-Benz company has to take care of consumers choice to maintain its position in the market and also for further growth in the car industry. The company is adapting new technologies and techniques to make its cars more famous among the customers. It is also introducing low priced luxury in the market. The company should take steps to know the exact consumer demand and needs so that it can provide them a suitable car.

Introduction & History
Mercedes - a Spanish girl’s name meaning ‘Grace’.
The Brand
Mercedes-Benz is a well known brand of luxury cars. These are German made cars with
classy European styling. Also it ranks as the world’s second most famous brand (after
Coca Cola). Daimler-Motoren-Gesellschaft (DMG) delivered its first Mercedes on 22 December 1900. After that the company started a dynamic development culminating in the inception of the global company DaimlerChrysler AG in the late 20th century. Today Mercedes-Benz is the most successful premium brand. Its technical perfection, quality standards, innovative impact and numerous car legends such as the 300 SL Gullwing are unique .

The Founders
Gottlieb Daimler and Carl-Benz are the founders of the famous luxury cars -
Mercedes’-Benz. His first four-wheeler, the Victoria, was built in 1893. The first
production car was the 1894 Benz Velo which participated in the first recorded car
race, the Paris-Rouen race. In 1895, Benz built his first truck.
In 1990, Daimler had produced a special car for Emil Jellinek. Jellinek named the car
after his ten-year-old daughter Mercedes. The new Mercedes was lighter and smaller
with 35 hp and a top speed of 55 mph.

Growth of Company
Mercedes-Benz launched their biggest and most prestigious car to date in 1930. The 770
Grosser was powered by an 8 cylinder, 7.6 litre engine. A car for the truly wealthy of
the world, it was quite an automobile for showing off in a world economy still reeling
from the Wall Street Crash of 1929.The cars of the 1930s produced great racing success
for Mercedes-Benz.
Now Mercedes - Benz has many models in the market ranging from $ 34,995.00 to
$151,150.00. The main competitors of the company are BMW and INFINITY.

Products of Mercedes-Benz Company

1. Passenger cars: safety and comfort from A to S class.
2. MPV
3. Vans
4. Camper Vans : Viano MARCO POLO and Sprinter JAMES COOK
5. Trucks
6. Unimog
7. Buses: Medio, Sprinter Classic, Citaro, Citaro G etc.

Organizational Chart

Business Analysis

Business analysis of Mercedes-Benz involves the detailed review of factors such as consumer demand, competition, new product development, production costs, marketing costs and profitability for each proposed new product.

Consumer Demand: Now a days, consumers are very smart in selecting a car. They look for the best option available in the market. Their demands are highly efficient, affordable cost, reliable, comfortable and stylish models cars. Some consumers also consider that the cars should be environment friendly.

Competition: Mercedes-Benz is facing a very strong competition from Japanese cars and also from domestic cars. Japanese cars has taken a considerable market share of Mercedes cars. For example: In India, government was providing Mercedes cars to its VIPs and VVIPs but now the place of Mercedes cars has taken by Toyota Corolla cars as these cars are more efficient and mechanically more sound.

New Product Development: R&D department of Mercedes is inventing new cars and also doing modifications in the old models to increase its market share and to attract the customers. For example, the latest cars of Mercedes company are Bionic cars. In April 2004, Mercedes deliveries to customers a new super sports car Mercedes-Benz SLR .

Sales: The Mercedes Car Group sold 1,226,800 vehicles in 2004 (2003: 1,216,900). For model life-cycle reasons, unit sales of the Mercedes-Benz brand were 2% lower than in the prior year, however. smart’s unit sales increased by 22% due to the launch of the smart forfour .

Production Costs and Profitability: The Mercedes Car Group is in trouble after a long slide in vehicle quality and profitability. Sales are slumping. Production costs are too high, especially in its native Germany. The Smart minicar line is bleeding money, and its Maybach super limousine is achieving half of targeted sales .

SWOT Analysis:

Strengths of the Mercedes company are as follows:
1. Famous brand name.
2. Dynamic strategies for the success in the market.
3. Introduction of low-priced luxury cars for middle income level consumers.

The main weaknesses of the company are:
1. High price of cars that is not affordable by all income level consumers.
2. Lack of sporty look in the cars as many consumers now like cars having sporty look.
3. High cost of maintenance and high cost of spare parts.

Mercedes have new opportunities in the following areas of market:
1. Mercedes has new opportunities in the market if it designs cars according to the young consumers also as they do not like big, mature looking cars and they like sporty looking cars.
2. Easy availability of spare parts in the market
3. Special designer cars for women.

1. Availability of low cost and more efficient domestic and Japanese cars in the market

Porters Five Forces
Porter has identified five competitive forces that shape every industry and every market. These forces determine the intensity of competition and hence the profitability and attractiveness of an industry. Based on the information derived from the Five Forces Analysis, management can decide how to influence or to exploit particular characteristics of their industry. Porter’s five forces for Mercedes-Benz Company are:
1. Bargaining power of suppliers: Suppliers of Mercedes supplies various parts of the cars such as engine parts and mounts, steering and transmission parts etc.
2. Bargaining power of customers: customers have a wide option of cars in the market. Some of these cars are low cost and high efficiency cars. Therefore consumers bargain for the price and quality of cars.
3. Threat of new entrants: new entrants could change major determinants of the market environment (e.g. market shares, prices, customer loyalty) at any time. There is always a latent pressure for reaction and adjustment for existing players in this industry.
4. Threat of substitute: there are many other luxury cars and other cars in the market. These cars are good on gas and have very attractive functions at comparatively low cost.
5. Competitive Rivalry between Existing Players: there are many car companies in the market. This force describes the intensity of competition between existing companies in the industry. High competitive pressure results in pressure on prices, margins, and hence, on profitability for every single company in the industry.

Marketing Four P’s

Marketing four P’s are: Product, Place, Promotion and Prize. These variables are also known as marketing mix. They are the variables that marketing managers can control in order to best satisfy customers in the target market.

1. Product: Mercedes cars are high quality luxury cars. Main products of Mercedes are: B-Class, C-Class, S-Class, E-Class, SLK Class, SL Class, CLK Class, R-Class, G-Class, Vans, MPV, Camper Vans and Trucks. Mercedes now have high price as well as low price products with big model cars to small sporty looking cars. It also has service stations at approachable locations.
2. Place: Mercedes-Benz is a well known brand of luxury cars in the world. The products of the company are available at almost everywhere in the world.
3. Promotion: Mercedes do promotion of its products by advertisement, public relations and personal selling.
4. Price: Initially Mercedes-Benz was known to be an expensive luxury car that was out of range for middle class and lower class consumers. But now Mercedes have introduced low-priced luxury cars also in the market. Company also offers special gifts with the purchase of a car.

Brainstorming Diagram for Marketing Plan of Mercedes-Benz

The Product/Market Opportunity Matrix

The product/market opportunity matrix identify four alternative marketing strategies to maintain and/or increase sales of business units and products: market penetration, market development, product development and diversification. Mercedes-Benz company more concerned about market penetration and product development strategies.

Market Penetration Strategy: The market of cars is growing and not yet saturated. Mercedes-Benz seeks to expand the sales of its present products in its present markets through more intense distribution, aggressive promotion and competitive pricing. The company tries to increase its sales by attracting non-users and competitor’s customers and raising the usage rate among current customers.
Product Development Strategy: These days, many new cars with latest technology and designs are coming into market. These new cars are good on gas, more comfortable, more reliable and have stylish look. Mercedes-Benz company is also developing new and modified products to appeal the present markets. It is stressing on new models, better quality and other minor innovations to attract the new customers as well as to maintain the old customers.

Critical Success Factors
Critical success factors are defined as events, circumstances, conditions or activities that require special attention because of its significance. Critical success factors for Mercedes’ are:

Environmental Factors
1. High price of Mercedes-Benz cars: price is most important factor for consumers while buying cars followed by reliability, handling and performance, and fuel consumption. Price of Mercedes’ cars are quiet high that makes these cars out of range for many social groups.
2. Domestic vehicles: Increasing popularity of domestic cars also affected sales of Mercedes’ cars. These domestic vehicles are comfortable and less expensive as compared to luxury cars.

Behavioral factors
1. Attitude of consumers: many consumers believe that Mercedes’ cars are status symbol. They feel rich if they buy Mercedes-Benz cars. This attitude of customers increases the sales volume of Mercedes’.
2. Attraction of small sporty cars: consumers are showing their interest in small sporty and stylish cars. This interest has decreased their interest in buying Mercedes cars.

Managerial Factors
1. Dynamic Strategies: management of Mercedes-Benz is aware of consumers’ interest towards low priced, high efficiency, sporty and stylish cars. That is why they have changed their strategies. Now Mercedes is also introducing low priced small cars in the market.

PEST Analysis

A scan of the external macro environment in which the firm operates can be expressed in terms of the following factors:

1. Political factors: it includes government regulations and legal issues and defines both formal and informal rules under which the firm must operate. The company follows federal and state fair employment laws under that prohibit harassment and protect employees against discrimination on the basis of race, colour, sex, national origin, age, religion, marital status, ancestry, pregnancy, and disability in regards to selection, hiring, promotion, transfer and compensation .

2. Economic factors: It affects the purchasing power of the potential customers and firm’s cost of capital. As there are many competitors, like BMW, in the market, it affects the economic growth rate of the company as compare with other car companies.

3. Social Factors: It includes the demographic and cultural aspect of the external macro environment. These cars are status symbol for many customers. Now the company has introduced low priced cars, therefore middle and low income level customers can also buy these cars and can feel rich. On the other hand, young customers do not show much interest in Mercedes cars as they think that these cars made for mature people and have old look.
4. Technological Factors: R&D department of the company is quiet efficient and work continuously to meet the customers demands. The company has introduced the concept of bionic cars that uses a diesel engine that produce 140-horsepower and uses selective catalytic reduction (SCR) technology to greatly reduce fuel consumption . To realize the Mercedes-Benz bionic cars, the engineers at the Mercedes-Benz Technology centre have the first time looked for a specific example in nature which not only approximates to the idea of an aerodynamic, safe, comfortable and environmentally compatible car .

The Pyramid of Consumer Behavior

Micro Consumer Behavior
(Individual focus)

Experimental Psychology: appearance of cars is a very dominating factor while taking a decision to buy a car. Young people like sporty looking and stylish cars while mature people like cars having decent looks.

Clinical Psychology: Mercedes cars are status symbol for customers. Low income level and middle income level customers feel rich after buying a Mercedes car.

Human Ecology/Micro economics: Many consumers still do not wish to spend a lot of money on cars just for status symbol. They look for the efficiency, reliability and technology of cars as well as for the designing of cars.

Social Psychology: low income level and middle income level consumers after buying a Mercedes car start feeling like they are richer in their social group.

Sociology: Customers, who buy Mercedes cars, feel a bond between them and high level institutions.

Semiotics/Literary Criticism: Customers takes a considerable effect of advertisements and from articles. Negative writings about a product decreases the interest of customer in the product.

Demography: It includes age, sex, income level of customers. Young generation like small sporty cars whereas old generation like cars having mature looks. Income level is also a very important factors while buying a car

History: History and reputation of Mercedes cars is very good and attracts the customers.

Cultural Anthropology: This is not a major factor while taking a buying decision for Mercedes cars as the brand is famous all around the world

Macro Consumer Behavior
(Social focus)

Product Life Cycle

Mercedes-Benz is a world’s second famous brand name (after Coca-Cola). These are German made luxury cars. A brand promotes an identity and an image that sets it apart in some way from its rivals.

The building of Mercedes-Benz as a successful brand allows its maturity stage of the product life cycle to be extended indefinitely.

Levels of Needs in Maslow Hierarchy

Maslow has divided its needs from Lower Level to Upper Level needs in five stages. Mercedes-Benz satisfies three levels of needs i.e. safety needs, belongingness needs and ego needs. Some of its safety features includes Power door locks, Anti theft, Vehicle stability control system, Traction control, ABS brakes, Driver Airbeg, front Side Airbag, Passenger Airbag, Side head curtain bags, Power windows etc. For example, Few cars have the "solid" feel of a Mercedes-Benz. At highway speed, the 2005 Mercedes-Benz E320CDI centred nicely and was unaffected by crosswinds or passing trucks .
Some people love Mercedes Benz and it satisfies their belongingness needs. Others buy it for status or prestige.

Upper Level Needs

Self Fulfilment,

Prestige, Status, Accomplishment

Love, Friendship, Acceptance by others

Security, Shelter, Protection

Water, Sleep, Food

Lower Level Needs

Relationships of Components in Semiotic Analysis of Meaning

Semiotic examines the correspondence between signs and symbols and their role in assignment of meaning .

The three-pointed star is to symbolize Mercedes ambition of universal motorization --"on land, on water and in the air". Over the years, various small additions were made in the symbol. In 1916, the points were surrounded by a circle, in which four small stars and the word Mercedes were integrated, or alternatively the names of the DMG plants at UntertÑŒrkheim or Berlin-Marienfelde.
In November 1921, DMG applied for legal protection of utility patents for any new variations on their trademark and lodged with the patent office a three-dimensional three-pointed star enclosed in a circle -- which included the design intended for use on the radiator grille. It became a registered trademark in August 1923 .


(Image) (Meaning)
Hierarchies of Effects

Hierarchy of effects a fixed sequence of steps that occurs during attitude formation; this sequence varies depending upon such factors as the consumer’s level of involvement with the attitude object . It is defined as “The HIGH-INVOLVEMENT HIERARCHY”, “THE LOW INVOLVEMENT HIERARCHY” and “ZAJONC’S MODEL OF HEDONIC CONSUMPTION”. Cars are considered to have high involvement of consumers. In this, first the consumer forms beliefs by accumulating knowledge (beliefs) regarding relevant attributes. Next, the consumer evaluates these beliefs and forms a feeling about the product (affect). Over time, a person integrated information about alternative car brands and formed a preference for one kind. Finally, on this evaluation, the consumer engages in relevant behaviour, such as buying the product.

HIGH Involvement

Consumer Decisions

Consumer Decisions are characterized as habitual decision making, limited problem solving and extended problem solving. Habitual decision making is the result of a consumer’s habit to buy a product and it is more in case of necessities. Limited problem solving requires a little search. Extended problem solving involves extensive search high risk and involvement . The decision to buy a Mercedes-Benz is the result of extended problem solving. Because before buying a car, consumer will search into its different attributes and would compare with the other competitive brands like BMW.

Low Cost Products More expensive Products
Frequent Purchasing Infrequent Purchasing
Low Consumer Involvement High Consumer Involvement
Familiar Product Class and Brands Unfamiliar Product Class and Brands
Little Thought, Search or Time Given to Purchase Extensive Thought, Search and Time Given to Purchase

Key Factors in Organisational Consumer Behaviour

Consumers have several distinct goals in purchasing cars. Generally, these organizational buying objectives are important: availability of product, reliability of seller, consistency of quality, delivery, price and customer service .

1. Product Availability: Mercedes-Benz has show-rooms at easily approachable locations. Customers can easily go to show rooms and have a look on various products and models of company.
2. Seller Reliability: It is based on fairness of allotting items in high demand, honesty in reporting bills and shipping orders, and reputation.
3. Consistency: Buyers, these days, are more interested in purchasing cars of latest technology and models. Customers go to the company that have reliable, comfortable, highly efficient and affordable cars.
4. Delivery: Most of the car dealers give delivery on the spot when they receive required payment for the car. Sometimes customers have to wait if they demand any special features, colour and model of car.
5. Price: These days many customers do not wish to spend much money for luxury cars as they are attracted towards Japanese cars and low priced but latest technology domestic cars. Mercedes-Benz has introduced some low-priced cars in the market to target these customers.
6. Customer Service: This is a very important factor to attract a new customer and to maintain old ones. Mercedes-Benz has service stations at most if its show room locations. But still customers complaints that they do not get the spare parts very easily.

Comparison of BMW and Mercedes-Benz

Consumer satisfaction rate for 2002 Mercedes-Benz E 320 Sedan is decreasing as compare to 2002 BMW 5 Series 540i Sedan .
2002 BMW 5 Series 540i Sedan 2002 Mercedes-Benz E 320 Sedan
General Information
Estimated Market Price N/A N/A
Invoice $46,750.00 $45,059.00
List Price $51,200 $48,450.00
Vehicle Class Luxury Luxury
Overall Satisfaction Rating 96% 87%

Reliability Percentrank For Mercedes-Benz

A model's Reliability Percentrank is a ranking of that model's Reliability Score relative to all other Reliability Scores for the given model year and age range. The percentrank was computed using the Percentrank function of Microsoft's Excel 2002 and, as the first part of the compound word percentrank suggests, is a value between 0.00 and 1.00. If a model's Reliability Percentrank is near 0.00, it has a very low Reliability Score, and if a Percentrank is near 1.00, it has a high Reliability Score .

Analysis of Decrease in Sales Units


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