Daimler AG Case Study Analysis
Added on 2020-01-16
23 Pages6816 Words888 Views
Business DevelopmentFinanceLeadership ManagementMechanical EngineeringEnvironmental SciencePolitical Science
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Daimler AG business strategyStudent’s name:Instructor’s Name:Class Name and Code:University:Date of Submission:
2Table of ContentsIntroduction................................................................................................................................3Recent History............................................................................................................................3Reasons for choosing Daimler AG............................................................................................4Daimler AG Company Analysis................................................................................................5Daimler AG Internal & External Environmental Analysis........................................................5PESTLE ANALYSIS.............................................................................................................5Porters’ five forces.................................................................................................................8The BCG Matrix..................................................................................................................11Ansoff Matrix.......................................................................................................................12Daimler AG SWOT analysis................................................................................................13Strategic advice........................................................................................................................14Conclusion................................................................................................................................15List of references......................................................................................................................16Appendix..................................................................................................................................19
3Introduction Daimler AG is an internationally recognised automotive corporation.it is among the leadingtruck and car manufacturer. Some of the vehicle brands produced by Daimler AG include:Maybach (this is a luxury vehicle brand), Smart (small hybrid cars) and Mercedes Benz.Information from Daimler AG (2007) reveals that commercial activity by Daimler isconducted under several brands some of which include: Fuso, Orion, Freightliner, WesternStar, Sterling, Thomas Built Buses and Western Star. Daimler also involves itself in financialservices and technological research work. The headquarters of Daimler AG are in StuttgartGermany. Maybach brand had initially been halted in 2012 but in the year 2015 it wasrevived under the brand name Mercedes Maybach (Daimler Ag., 2015). The MercedesMaybach is in the category of ultra-luxury automotive, an advanced edition of S-ClassMercedes Benz. Daimler sales in 2016 were 3 million vehicles (Daimler, 2017). GottliebDaimler and Karl Benz are credited for establishing the Daimler Benz company.Recent History According to EURO STOXX 50 (2015) Daimler is the 13th biggest manufacturer of cars andthe 2nd biggest manufacturer of trucks globally. Daimler AG announced intentions to mergewith Chrysler Corporation in 1988. The merger would cost Daimler Benz an excess of $35billion in the form of stock swap. The merger agreement included retention of brandidentities of the two companies separately (Neubauer et al., 2000). This in essence meant thatno Chrysler dealership would sell Mercedes brands and neither would and Chrysler car bearthe star emblem of Mercedes (Daimler AG, 2007). In the year 2000 DaimlerChryslerpurchased 34% ownership of Mitsubishi in the quest to strengthen its power in the growingautomobile industry. This initiative propelled DaimlerChrysler to become the 3rd biggestautomotive manufacturer globally, only trailing General motors and Ford motor corporations.In 2001 the company sold out Adtranz the rail system supplier in the interest of paying moreattention to the automotive business. The move to buy stakes in Mitsubishi was notproductive. In 2005 Daimler relinquished it share in Mitsubishi. In 2006 Chrysler reported
4$1.5 billion in losses. Following this Chrysler was in 2007 sold to Cerberus capitalmanagement. DaimlerChrysler was thereafter in 2007 renamed to Daimler AG.Reasons for choosing Daimler AGDaimler reported a growth in net income by 18% in 2016, 4th quarter for its Mercedes Benzbranded passenger vehicles. The overall earnings before taxation and interest, was $2.84billion in the 4th quarter of 2016. This was a 22% growth in comparison to earnings recordedin 4th quarter of 2015 (Rosevear, 2017). The AMG E43 design is among the highly profitableand highly styled models which have contributed to high margins and profits for MercedesBenz. Daimler has engaged in upgrading and styling new automotive models and face-liftingthe midsized E class car line. This initiative has been credited for increased margins andgreater preference in the market from consumers who initially consumed rival brands(Butterfield, 2005). There also have been a consistent growth in sales for the AMG model therefore increasingthe per unit margins. Daimler trucks did not perform well in sale but this was attributed to therecession in Brazil. Rosevear (2017) finds that Earnings from Mercedes Benz vans droppedby 38% although per-unit sales had grown. Daimler buses performed well in Europe butdismally in Argentina and Brazil. The favourable performance in Europe offset the decline inSouth America. The aggregate performance of Daimler busses was a growth of 6.1%. Thefinancial services sector of Daimler reported $421 million in earnings. This was a 1% growth.Daimler projects that Mercedes Benz vans and cars will increase slightly in sales in 2017.The company does not expect any significant growth in heavy track sales. Dieter Zetsche thecompany CEO said the earnings before interest and tax (EBIT), was projected to growslightly. The reason for this is that the higher margins from Mercedes Benz vehicles wouldoffset the drop in sales from vans and heavy tracks. Mr Zetsche is hopeful that the company’sinvestment in highly advanced technology such as in electric propulsion and autonomousdriving would earn them some significant returns as well (Rosevear, 2017).Daimler AG is a company of interest owing to the fact that it is a global leader in theautomotive industry. The company’s strategic move to revamp its image through introducingnew hybrid car designs has helped boost global presence and build a strong market appeal.The income accrued by Daimler AG appears to be steadily growing. Based on the strategicdecisions made by the company, it would be interesting to know in detail the company’s
5system of operation, decision making, management systems, vision and mission, future plansetc. This paper conducts an in-depth strategic analysis of Daimler AG Business strategy.Daimler AG Company AnalysisDaimler AG has reported a steady growth in its operating income and the earning per share.This is according to the income statement attached in appendix 1 (Morning Star Inc., 2017a).The company’s total assets have also increased consistently over the years since 2011(Morning Star Inc., 2017b). Daimler strategic areas of focus include: strengthening its corebusiness, global growth, take the lead in technological innovation and pioneer indigitalisation (Daimler, 2017). Daimler AG has four primary objectives which are:technological innovation and leadership, customer satisfaction, teamwork, and profitablegrowth (Daimler, 2016). For the future, Daimler has four main areas of focus and these are:Connectivity, electric drive, sharing and autonomous driving (Daimler AG, 2017). Accordingto Dr Zetsche, the four strategic trends have the capacity to turn the industry around. Successin this area is highly dependent on the company’s ability to intelligently link these trends.Daimler AG Internal & External Environmental AnalysisPESTLE ANALYSISThe pestle analysis according to Makos (2011) is the evaluation of the Political, Economic,Social and Cultural, Technological, Legal, and Environmental factors surrounding anyorganisation. Discussed below is a critical review of these six factors in relation to DaimlerAG.a)Political factors: The political aspects of the automotive industry are highly complicated andhard to get around. Most of the political activities around the western world may not directlyaffect the automotive industry since many of these companies are headquartered in thewestern regions of the world. According to Bossink & Blauw (2002) political situationsemerging from the developing nations are even harder to understand. Most emerging marketsmay won’t to arm twist established car manufacturers like Daimler AG. Some of the skewedactivities by emerging markets may include imposition of higher tariffs and taxes on theautomotive brands produced by the company and the demand for that company to openmanufacturing plants within its borders. This recently happened when Toyota planned to
6open a production plant in Mexico. The main objective was to export the cars into USA. U.S.president Donald Trump was however opposed to this idea saying that he would impose heftytaxes if Toyota went ahead to do so. The idea behind such a move is to have Toyota open theproduction plant in USA instead and hire U.S. workers. Such political activities derail thecompany’s penetration speed into emerging markets and hence affect its revenue growth(Apfelthaler et al., 2002). Even though Brexit and the election of Donald J. Trump as the newAmerican president may not immediately affect Daimler AG, Britain is more likely torenegotiate trade deals with Germany. The future with respect to the British market iscertainly uncertain. The current narrative of buy America and higher America adopted byDonald Trump is also likely to affect Daimler’s business in the US.b)Economic Factors: According to Matthews (2017) there are five economic signs thateveryone should watch out for in 2017 and they are: Brexit, China’s economic slowdown,Trump’s election as US president, Federal serve bank and global trade. Trump is likely tointroduce new tax policies on automotive manufacturers. The Economic slowdown expectedin China is likely to affect its purchasing power subsequently reducing imports. This in a waymay affect Daimler AG. The European Union appears to be at stake now. With Britain’s exitand reported discontent in some countries like Italy and France, the future of the Unionappear fragile. Political parties that support the European Union seem to be losing popularity.These political trends will definitely impact on the economy. There are some researchfindings suggesting that automotive companies are in recent times consuming large quantitiesof iron, steel, computer chips, rubber, textile and plastics. The automotive industry isdefinitely a market for many other market products hence contributing to increasedemployment even on other economic sectors. The political environment being central totaxation and trade policies, affects the economy fundamentally and the automotive industry isnot immune to this.c)Social & cultural factors: The cultural and social psychology in many societies is thatanyone driving a luxuries and high class car is viewed as powerful, noble and wealthy (Kraus& Keltner, 2009). Even though there are fundamental differences in cultures around theworld the globalisation effect has inherently influenced consumer behaviour and buyinghabits. Both the emerging economies and the developed world seem to agree on the symbolsof stature. The Mercedes Maybach model is globally accepted as a symbol of luxury andwealth perhaps. Most consumers would want to taste the feeling of class and elegance thatMaybach offers. This said however, there is a high likelihood that style and design of a carwill affect consumer preferences anywhere in the world (Mihic et al., 2013). This explains
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