Benefits and Limitations of Diversifying Product Range

This strategic management assignment requires students to discuss the benefits and limitations of diversifying a company's product range. It involves analyzing how this strategy can help attract more customers, expand operations in various markets, and increase sales and profits. The assignment also touches on the importance of segmenting the market and targeting specific customer groups. A thorough understanding of strategic management concepts is necessary to complete this assignment successfully.

Strategic Management

TABLE OF CONTENTS
EXECUTIVE SUMMARY:............................................................................................................1
INTRODUCTION:..........................................................................................................................1
MAIN BODY:.................................................................................................................................2
Analysis of the organisation’s strategic position using relevant key performance indicators
(KPIs)..........................................................................................................................................2
Analysis of the organisation's strategic direction........................................................................3
Critical evaluation of the organisation's strategy........................................................................5
CONCLUSION :..............................................................................................................................6
RECOMMENDATIONS :...............................................................................................................7
REFERENCES ...............................................................................................................................8

EXECUTIVE SUMMARY:
In this report it is shown that the strategy followed by Mercedes Benz for growth and
development in the market. An analysis is done on firm present strategy and how it can grow and
develop in the market by applying different strategies. Also, it has shown that how company KPI
is been used in developing strategies. In this report analysis is done on organisation current
strategic direction. Moreover, critical evaluation of the organisation's strategy is described with
help of SAF framework. In the last some recommendations will be provided to company for
developing strategies for growth and development.
INTRODUCTION:
Business needs different strategies for continuous growth and development in the market.
Strategies are modified and implemented according to the market condition. These strategies
ensure that business can survive for long term (Hill, Jones and Schilling, 2014). Besides this, a
strong strategic management is required to develop different strategies. Generally, strategies
developed are for expanding business operations in various markets. This helps an organisation
to gain more market share and customers. For undertaking the present report, organisation
selected is Mercedes Benz. Firm belongs to auto-mobile sector and is operating in all over the
world. The existence of company on global level requires effective strategic management.
Mercedes Benz present strategy is to improve product quality. Along with this, it has
focused on increasing market share by targetting a particular segment. Its financial situation is
better and much stronger than previous year (Rees and Smith, 2017) The sales of company have
increased by 9%. It has delivered over 3.3 million vehicles in a year. Total profit earned was 10.9
billion Euros. Moreover, the auto mobile sector is growing rapidly in the market. It has booming
at high rate due to flexibility in trade between countries and variety of products available. But, on
other hand, many companies are focused on developing eco-friendly products to protect the
environment. This is the reason there has been decline in growth in recent scenario. Also, the
competition in this sector is getting intense. Mercedes Benz is a MNC having a stable market
share in auto mobile sector. There are many other companies operating in this like BMW,
Volkswagen, Toyota, etc. that are giving tough competition to Mercedes Benz. (Moutinho, and

Vargas-Sanchez, 2018). Therefore, an analysis is done on firm’s present strategy and the way it
can grow and develop in market by applying different strategies.
MAIN BODY:
Analysis of the organisation’s strategic position using relevant key performance indicators
(KPIs)
Mercedes Benz is a German company that is owned by Daimler Group and is known for
its high quality and performance products. It is one of the largest volume selling auto makers in
the world in sedan, racing cars, etc. It has sold over 18, 80,100 cars in 2015. Besides this, it has
gained a strong market share in industry by developing high quality products (Goetsch and
Davis, 2014). Company’s key performance indicators stated the measures through which it is
able to grow and develop in market. Also, it is very important for business to identify its KPI so
that it can gain strong competitive advantage over rivals. KPI shows how firm focuses on certain
measures to achieve its goals and objectives. Moreover, it helps in evaluating the strategic
position of company in industry. KPI can be related to customers or products. It can also reflect
on firm’s financial or strategic performance. Generally, KPI are used by top management to
develop strategies. An effective KPI will focus on improving the business process so that
product’s quality can be improved. Moreover, KPI importance is it helps to monitor company
performance with its goals so that proper actions can be taken. KPI of Mercedes Benz are :-
High quality product - The products of company are of very high quality. This has attracted
large number of people (Gamble and Thompson, 2014). Moreover, because of this company is
able to grow. The main purpose is also to improve product quality so that customers can be
retained. So this KPI has enabled company to build a strategic position of high quality product.
Brand awareness – It is having a strong brand awareness in the market that enables them to
become MNC. Also, it has given them a competitive edge over others. Due to brand awareness
Mercedes Benz is able to maintain customer base. This indicator has enabled company to attracts
more customers.
Diversified range of products – Company is having a variety of products available to
customers. It produced sports, sedan, SUV cars, and is now also engaged in buses and trucks.

Due to various range of products a large number of people are connected with it. So this has
provided choice to people to choose product (Meyer, Neck and Meeks, 2017).
Mercedes Benz has divided its strategy into four areas that are :-
Core- They want to reinforce its economic base by making stable profits and focusing on core
business values.
Case- It stands for connected, autonomous, services and electric. So company wants to be a
leader in all these elements.
Culture- They have focused on transforming their organisational culture by making their process
in creative way. Also, they have modified employee role to work in energised way.
Company – The organisation wants to grow in the market by grabbing opportunities. This is
done by redesigning and restructuring their plan and policies (Rees and Smith, 2017).
Thus, overall strategic position of Mercedes Benz is good but they further improvements
in strategies so that it can survive for long term.
Analysis of the organisation's strategic direction
Mercedes Benz has captured a large market share by increasing its brand awareness. It
has focused on improving brand image rather than their products. This has helped to achieve its
goals and objectives. Strategic direction of firm describes the path by which goals are achieved.
It shows the course of action taken by firm. By following a specific strategic direction, business
can achieve its goals (Trigeorgis and Reuer, 2017) A strategic direction consists of strategies,
tactics, etc. that have to be followed. It provides a long term advantage to company developing
an effective strategy.
Strategic plan of Mercedes Benz aims to expand its operations in various countries. It has
focused on entering into manufacturing buses and trucks to further strengthen its global position.
Moreover, its objectives is to diversify their products in three segments. Along with improving
the quality of cars, it has also emphasised on producing buses and trucks (Chen, Delmas and
Lieberman, 2015). For this, Mercedes Benz has developed a method through which it can
achieve goals by implementing strategy. Moreover, company has used Ansoff matrix in this.

Ansoff matrix- It is a tool that provides a framework to management. It helps in developing
strategy by segmenting the markets. It allows business to enter into market by following a
specific strategy. It divided market into four segments:
 Market development-It shows how business can grow in the market by expanding its
operations in different markets with existing products (Wheelen, Hunger and Bamford,
2017) It allows business to develop strategies on how to enter into new markets. By using
this, Mercedes Benz can enter into the markets like China where it is having a vast
number of opportunities for growth. Moreover, it will help in increasing their customer
base and generating revenue.
 Market penetration- It allows business to focus on exiting products and market so that
its market share can be effectually maintained. By implementing the same, business can
have a strong competitive advantage over its competitors (Meyer, Neck and Meeks,
2017). Generally, it is followed when firm is not having enough resources to implement
any other strategy. Mercedes Benz can achieve its goals by strengthening its position in
the existing market. It can make efforts to increase the brand awareness so that it will
become easy to maintain a stable position in market.
 Product development- In this, businesses focuses on developing products in existing
markets. It is followed when business wants to diversify its range of products. It is done
by identifying the needs of people and producing products to fulfil them. It is basically
followed by big organisations (Bettis, Ethiraj and Mitchell, 2016). Mercedes Benz has
developed products like buses and trucks. This has helped them to increase its global
presence. They are able to earn high profits that has enabled them to compete with rivals.
 Diversification – It is the most risky strategy that is followed by business. It allows
business to enter into new markets with new products. Before developing this strategy, a
complete market analysis is done. This helps in getting a view on the needs of people and
present market condition. If this strategy is successful, business can grow at a high rate.
Mercedes Benz is able to diversify its operations in the markets like India with products
such as buses and trucks (Michael, Storey and Thomas, 2017)

BCG matrix – It is a framework that states that with increase in market share more cash will be
generated. It is divided into four segments that shows company market growth along with its
market share in relation with competitor (BCG matrix, 2010). Market growth describes industry
attractiveness whereas market share describes competitive advantage. The four segments are as
follows :-
 Dogs – It shows low market share with low growth rate. It results in not generating any
cash. Mercedes Benz have focused on areas where there is no growth opportunities
(Morschett, Schramm-Klein and Zentes, 2015). It has started reducing business
operations in that areas.
 Question mark- It describes high growth rate but low market share. Thus, chances of
generation of cash is also low. Company is finding those markets in which market growth
is high. They have made efforts to grow but has not been successful.
 Stars – It is having high growth rate and market share. Therefore, it generates and
consumes large amount of cash. There is both inflow and outflow of cash. Organisation
has focused on increasing profits and competitive advantage in the markets in which it
already exists (Gamble and Thompson, 2014). For this efforts are made to reduce cash
outflow so that revenue can increased.
 Cash cows – It shows high market share and low growth rate. This results in generating
more cash rather than consuming it. It describes market leader in industry. Mercedes
Benz have implemented strategies in those market where they are already having large
market share. It has helped them to increase that thus resulting in more sales.
Critical evaluation of the organisation's strategy
Every business strategy should be evaluated in order to measure its performance. It helps
in evaluating whether goals and objectives has been achieved or not (Bettis, Gambardella and
Mitchell, 2014). Also, with this performance can be monitored. For this SAF framework is used.
It helps in formulating effective strategies.

 Suitability - It shows whether specific strategy will be suitable for company or not. The
suitability is observed by analysing external and internal environment. Mercedes Benz
current strategy is diversification (SAF framework, 2018). It also suits company as it is
multi national company and it requires operating for long run. So it is necessary to
execute business operations in different countries.
 Acceptability – In this the results are measures on basis of risk and stakeholder reactions.
Returns are calculated by using various methods such as cost benefit, profitability
analysis, etc. (Hill, Jones and Schilling, 2014). Risk is calculated on basis of non
financial and financial terms. The stakeholders of Mercedes Benz will be benefited with
this. It will help company to earn more profits by attracting large number of people. Also,
organisation will be having generate more cash. The market value of firm will increase
leading to becoming a strong competitor in industry. Moreover, it will create a distinct
image of Mercedes Benz.
 Feasibility – It shows that whether business is having enough resources to implement a
particular strategy or not. It describes capability of business that includes machinery,
manpower, material, etc. (Rees and Smith, 2017). Implementing this strategy is quite a
risky task. But Mercedes Benz is having enough resources to meet requirements is
present strategy. It is already having stable income man power, materials to expand in
different market. Thus, it is accepted that company will be able to implement its strategy
of diversification.
CONCLUSION :
This report has given a brief overview of how Mercedes Benz has able to develop and
implement its strategy that has resulted in its growth and development. Moreover, company has
diversified its product range in different markets that has enabled them to increase brand
awareness. It has focused on diversification. BCG and Ansoff matrix are been used by company
to develop effective growth strategies. This has helped them to grow. Through this, they are able
to improve quality of product. Every business strategy should be evaluated in order to measure

its performance. It helps in evaluating whether goals and objectives has been achieved or not.
For this SAF framework is used by Mercedes Benz.
RECOMMENDATIONS :
From above analysis it is concluded that Mercedes Benz needs some improvements in it
strategies. This will enable them to remain survive in the market for long run. For this there are
some recommendations that can be followed by them. It is described as below :-
 Company should focus on markets where it is having poor market share and customer
base (Moutinho, and Vargas-Sanchez, 2018). They must develop several strategies on
how it could grow in that market.
 Mercedes Benz should increase its brand awareness in order to make its global presence
stronger. It should develop effective marketing and promotional strategies for this. It will
help in increasing brand awareness as well as maintaining customer base. Moreover, it
will help in rising sales and profits.
 Organisation can also improve its product quality so that it will help in retaining
customers. For this they can use technology to make changes in it process and methods
(Goetsch and Davis, 2014). This will help in reducing cost as well. Apart from this,
company can provide new services to people. It will be beneficial in attracting more
customers.
 Mercedes Benz can identify needs of people so that products can be produced. It will help
in diversifying product range and providing variety of products to people. Furthermore, it
will help in attracting large number of people.
 They can segment the market and then target customer. It will be helpful for company to
provide different products to each one (Trigeorgis and Reuer, 2017). This will help in
expanding its operations in various markets. Thus, there will be more sales and profits.

REFERENCES
Books and Journals:
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Bettis, R.A., Ethiraj, S. and Mitchell, W., 2016. Creating repeatable cumulative knowledge in
strategic management. Strategic Management Journal, 37(2), pp.257-261.
Chen, C.M., Delmas, M.A. and Lieberman, M.B., 2015. Production frontier methodologies and
efficiency as a performance measure in strategic management research. Strategic
Management Journal, 36(1), pp.19-36.
Gamble, J. and Thompson, A.A., 2014. Essentials of strategic management. Irwin Mcgraw-Hill.
Goetsch, D.L. and Davis, S.B., 2014. Quality management for organizational excellence. Upper
Saddle River, NJ: pearson.
Hill, C.W., Jones, G.R. and Schilling, M.A., 2014. Strategic management: theory: an integrated
approach. Cengage Learning.
Meyer, G.D., Neck, H.M. and Meeks, M.D., 2017. The entrepreneurship‐strategic management
interface. Strategic entrepreneurship: Creating a new mindset, pp.17-44.
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management and entrepreneurship. Strategic entrepreneurship: Creating a new mindset,
pp.45-65.
Morschett, D., Schramm-Klein, H. and Zentes, J., 2015. Strategic international management (pp.
978-3658078836). Springer.
Moutinho, L. and Vargas-Sanchez, A. eds., 2018. Strategic Management in Tourism, CABI
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Rees, G. and Smith, P. eds., 2017. Strategic human resource management: An international
perspective. Sage.
Trigeorgis, L. and Reuer, J.J., 2017. Real options theory in strategic management. Strategic
Management Journal, 38(1), pp.42-63.
Wheelen, T.L., Hunger, J.D. and Bamford, C.E., 2017. Strategic management and business
policy. pearson.
Online:
SAF framework, 2018. [Online] Available Through :
<https://blog.oxfordcollegeofmarketing.com/2018/02/25/evaluating-strategic-options-using-
saf-strategy-model/>
BCG matrix, 2010. [Online] Available Through:
<http://www.netmba.com/strategy/matrix/bcg/>