Mercedes Benz is a leading brand in the luxury car segment dealing across the world based in Germany. The global competitors of the company are Audi and BMW, both the companies are based in Germany as well. The report analyses the issues faced by Mercedes Benz which has led to a decrease in the sales and revenue of the company. Further, the report analyses the marketing mix, Ansoff matrix of the company to understand the operational management of the company. The report also suggests methods to improve the operational management of the company such as the application of total quality management, Six Sigma, etc. in the management. Furthermore, the report provides some methods by which the competitors like Ferrari and BMW can use to gain the market share of Mercedes Benz.
Overview of Mercedes-Benz
Mercedes-Benz is a Germany based luxury vehicle manufacturer. The brand was established in the year 1926 by Karl Benz and Gottlieb Daimler. The company operates in many parts of the world providing the best in class luxury vehicles. The slogan used by the brand is, "the best or nothing". The company deals in various segments of automobiles such as trucks, buses, vans, cars, etc. The company shows great concern towards the environment and continuously indulge in the research and development to innovate cars and vehicles which can be an alternative to the pollution causing fuel-based vehicles. The focus of the company is on the innovation, development, and sales of passenger and luxury vans, buses, cars, and services. The brand reported revenue of 17,274.5 crores Euros in the year 2018-2019. The earnings of Mercedes in the year 2018-2019 before the interest and taxes have increased by 29% as per the statement. The company has an employee size of 298,683 employees as per the record of March 2020. The company has a group unit sale of 3.3mn, group EBIT of 4.3 billion, adjusted EBIT of 10.3 billion. Net profit was estimated to be 2.7 billion, the company has a dividend proposal of 0.90 Euros (Major Markets, 2019).
Issues faced by Mercedes Benz.
The company is known for its best in class luxury vehicles. However, the sales and image of the company have been affected and the three-pointed stars have been tarnished a little as the customers are unsatisfied with the performance of the company and are slowly moving to the competitors such as BMW and Audi. The company has registered many complaints about the quality of vehicles and many models which were structured in the year 2001 have been returned for improvement, the cars had issues with batteries, brakes, alternators, etc. (Iyer et.al, 2013). The image of the company needs to be improved so that the reputation of the company can be fixed as the best in class luxury car producers. Some of the analysts also suggest that the reason for the detraction from the core business is the several undertakings of the company. The current CEO, Dieter Zetsche is focused to improve the brand's image, increase productivity, with optimum quality of the products being produced.
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Companywide operations improvement strategy for Mercedes Benz
Along with the improvement in productivity and sales, the company wants to achieve its goals with a sustainable business strategy. The goals of the Mercedes Benz are discussed below (Ott, 2013).
- Mercedes has a commitment to CO2 neutrality and making goods transportation and mobility sustainable.
- The customer experience needs to be improved with the products as well as after-sales services.
- Electric driving is a priority to make the environment healthier.
- To improve in the field of automated and autonomous driving.
- The pace of innovation is to be increased to compete with the competitors and support the agile culture and growing competition.
Total Quality management
Mercedes Benz is striving to produce the best in class and quality vehicles in different segments. The aim is to meet as well as exceed the expectations of the customers, total quality management is the management principle is the practice to improve the operational strategy of the company to meet its objectives and goals. The first concept in total quality management includes customer focus; which is the act or process of determining the needs and wants of customers and provide innovative solutions to the wants and needs. The benefits of customer focus are various such as an increase in revenue, the effectiveness of operations, and improved customer loyalty. The second principle of Total quality management is continuous improvement; it is evident that the business operates in an environment, internal as well as external. The environment is subject to continuous changes therefore, continuous improvement is expected to maintain the quality of the product. The company must use the cycle of Plan-Do-Act to keep a check on the changes and its implementation in the businesses.
Human resources play a vital role in total quality management in the suggestions, contributions, and decisions. The employees are provided with quality tools and training for improvement. Quality tools; the company must provide quality tools to the employees; this helps to make them distinguish between access quality and quality control. Product Design is the next important requirement of total quality management, the company needs to focus on design which will meet or exceed customer's expectations, in the automobile sector expectations are measured based on safety, toughness, and sleek model. The technical requirements must be measured appropriately to convert the generalized items into specific requirements. Supplier Quality, the least important aspect of total quality management is managing the supplier's quality. The suppliers are the external source and must be managed well to maintain the quality of the product as even if the technology used for the production is optimum, goods of less supreme quality can affect the entire process.
Businesses are subject to disruptions such as climatic change, natural disasters, cyber-attacks, power outrage, etc. The disaster can not be delayed or denied, it can only be managed and recovered as these events are unplanned and have the destruction causing capabilities which must be managed. Disaster causes various losses such as damage to the brand's image, revenue loss, customer dissatisfaction, etc. Mercedes Benz decides to plan an effective disaster recovery plan so that the disaster recovery time is least which can also reduce the harm caused to the business (Adderly et.al, 2018). For example, the disaster in Japan caused harm to the company in various means such as the loss of supply chain, customer dissatisfaction, loss of revenue, etc. The most important aspect of disaster recovery is the communication plan. The communication plan for the disaster recovery must be clear for the employees, the employees must be aware of the person and place to report in case of any emergency. The role of people may change during the disaster; this policy must be clearly explained in the communication plan, the remuneration schemes during the disaster may change which must be explained to the employees.
The roles of employees during and post-disaster recovery can be re-established, the extra work may be announced such as workstation settings, assessing data loss, if any, etc. Data Continuity; in the times where the data is of prime importance, cyber-attacks are a common threat. The data continuity plan of a business reflects its resilience towards the cyber attack disaster which may impact the company's image and trust of the customers. The documentation of the data must be exact and appropriate, the backup of the servers must be scheduled at a cloud or off-site for the insurance of backup copy which must not be affected by a local event.
The power supply must have alternative options in case of failure or power outrage. The return on investment of power generators or related technology must be evaluated before the investment. The assurance of a certified engineer is also required to manage the power outrage in such a big sized business. The alternative power supply must be available and capable to manage the power outrage of minimum as well as the maximum duration of weeks or months as it may be required during a natural disaster. A continuous internet connection is also required as the data is managed through an online source. The recovery plan must include plans for malware, equipment failure, key staff unavailability, and natural disasters.
Six Sigma is a management strategy which is used for quality improvement, it was introduced to the business world by the company, Motorola. It utilizes statistical methods to establish the structure of the business to eliminate waste and errors from the system of working. The method works to determine, analyze, and eliminate all the activities and causes of errors and mistakes to minimize the waste and improve the quality and productivity in the operations.
The Six Sigma in Mercedes Benz must be focused on three aspects, understanding the Voice of Customers; this provides the cause and parameters for improvement. The second important pillar is to determine the critical quality characteristics which would define the improvement process and its success (Zhou et.al, 2016). The last pillar of the Six Sigma strategy is the value of marketing, the marketing is the act of converting the needs of the customers into their wants by providing innovative solutions to their needs and wants. Applying Six Sigma in the business boost customer satisfaction as the principle of Six Sigma works on the customer focus and requirement in the business. Compliance is also managed in the organization as an important factor for success. The Six Sigma is a five-stage strategy for improvement namely, define; the problem or the cause which restricts the growth of the company, measure the factors and its role, analyze the alternatives, Improve the process with the best alternative, and control the process.
The continuous interaction between the brand and the customer which is offered by the company and accepted by the customer is called customer engagement. Customer engagement is the measure of a company's success in establishing customer's interest and loyalty towards the company and its products (Meire et.al, 2019). Mercedes Benz has experienced less customer loyalty due to the decreasing quality and standards of vehicles which must be improved to improve the overall conditions of the business. Customer engagement can be measured through various means such as purchase frequency and upgrade, the more the purchase frequency of a customer, the higher would be the customer satisfaction and vice versa, repeat purchase rate is also used to measure the customer engagement. Customer engagement can be increased through various customer loyalty plans. Mercedes offers reward plans to the customers also called the loyalty accelerator in which the company provides various options such as credit up to three months on the next purchase, rebate on insurance, discounts in service charges, etc. The company needs to offer some new loyalty plans to gain customer loyalty which is somehow tarnished due to the poor-quality supply of vehicles.
Advice on how BMW and Ferrari can gain market share from Mercedes Benz.
Market share is the pie chart that shows different slices in different sizes as the share of different companies in the field competing for the sales. The market share of luxury cars is owned by three German players; BMW, Audi, and Mercedes Benz. The Mercedes Benz is the leading player followed by the other two. There are several ways through which the companies can take over the market shares of Mercedes Benz. The primary important task to gain the market share is to Understand the Competitor; Mercedes has the unique feature of sustainable growth and development focusing on the environment. Electric cars are the demand of the future which is well understood by the brand (Rego et.al, 2013). To gain market share Ferrari and BMW must invest in the research and development for the best in class luxury electric cars for the customers.
Offering competitive or less prices for the same or better-quality luxury vehicles can be the second strategy used by the companies to gain market share of Mercedes Benz. Customized cars are also a large market share owned by companies. The referral programs can be offered to the customers which will increase the sales as well as customer engagement of the companies. It has also seen in the reports that the number of deaths in road accidents has increased, the companies can show the corporate social responsibility to manage the loss of the customer by providing insurance.
Understanding the competitors' (Mercedes Benz) Marketing Mix
Product Strategy: The portfolio of Mercedes has a wide range of products in different segments such as SUVs, Sedans, sports cars, etc. The company deals in the premium range of cars, buses, trucks, etc. The company deals in various ranges such as passenger cars, heavy equipment, and light commercials. Some of the models in the portfolios are GLA, GLE, GLS in the SUV segment. Mercedes Benz is also focusing on electric cars as a sustainable option in the future (Steenkamp, 2017).
Pricing Strategy: The brand deals in the luxury car segments valuing the quality more than the price of the product. Hence, the price of cars is always on the higher end. The company offers cars in the range of $30,000 to $1,00,00 and above. The company offers a niche of competition and features in the luxury car segment.
Place (distribution strategy): the company has a strong distribution network for sales, research, and production. The Mercedes Benz cars are available all across the world. The company is currently targeting the younger generation by making the design and pricing more approachable along with the wide network of distributors.
Promotion: the traditional method of advertising is not used by the luxury car dealer. The brand awareness is generated through various customer engaging activities like trips and tournaments, for example, the Mercedes Trophy, is a tournament of gold which is played on an international level, the winners of the tournaments get the chance to win Mercedes Benz in different locations (Tridhoskul, 2014). The social media presence of the brand is also widely distributed and developed to gain customers from all the segments. Online marketing is also used for the promotional strategy.
It is also known as the product or market expansion grid. It is a strategy that is used by the brands for analyzing and planning their strategies. The strategies under the grid are market penetration, product development, market development, and diversification. The Ansoff matrix for Mercedes Benz is discussed below (Loredana, 2017).
Market Penetration: The company has made a significant market share in the regions of Europe and targeting the largest international market in recent decades, "China". The company has established the manufacturing hubs in China itself for providing the market products at less prices. The company is also using the brand name of Mercedes Benz with Bharat Benz for penetrating the Indian premium automobile sector.
Product Development: The company is known for the sustainable design and innovation of the products, along with the new designs the company is also targeting towards reducing the fixed costs and achieving economies of scale. The company has decided to develop ten new electric cars by the end of 2025 (Buss, 2016). Ferrari and BMW need to complete the goals of Mercedes to gain market share in the global competitive scenario. The profit margins can also be decreased with the successful execution of the plan and innovative designs increasing the profit margins of the company.
Market Development: The company has successfully gained market shares in various countries in different segments. The company is developing the international market as well as protecting the German plants. The company has established service centers in Hungary, and cylinder engines in Poland. The market expansion is focused on consumer and their needs.
Diversification: The brand has set a plan for the global development of sustainable cars in the luxury segments as well as the service centers are also planned for gaining a diversified market.
The report has analyzed various operational management strategies in Mercedes Benz management. The company is facing issues such as a reduction in revenue and sales, complaints about the quality of the product. The report provides various strategies that can be implemented to improve the operations management of the company such as the application of various principles of total quality management, preparing disaster recovery plan, communication plan, etc. Further, the report has a various aspect of the Mercedes Benz business which can be used by the competitors to understand and compete with the operational plan of the Mercedes Benz.
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