Impact of Economic Recession on Automobile Industry

The assignment provides a comprehensive analysis of the effects of economic recession and Brexit on the automobile industry in the UK. It also delves into the rising competition within the sector and offers insights into the necessary strategies for expanding businesses in this field.

Introduction To
Marketing

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Overview of UK Car Manufacturing Market..............................................................................1
Main factors impacting the operations of Company...................................................................2
Marketing Performance and Strategy of Company.....................................................................3
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
The automobile industry plays a huge role in driving the economy of United Kingdom as
it contributes a large section in the GDP of the country. This industry is growing rapidly as it
helped in establishment of various companies and organisations that created opportunities of
employment for people of United Kingdom, helped in growth and development of country,
generated income and improved the life of people. This sector experienced downfall at the time
of Brexit as major factories and companies were shut down making people loose their jobs and
country suffer. To study the level of expansion this sector can experience through marketing
channel will be a major part of this report and the company selected for this report is Mercedes
Benz. It is a German based automobile company founded in 1886 and it manufactured world's
first car. What role is performed by the marketing team of Mercedes Benz to expand the
company all over the world is guiding light of this report.
MAIN BODY
Overview of UK Car Manufacturing Market
Over some years, United Kingdom was termed as a largest car manufacturer company in
the world. Cars manufactured in UK holds a prestige around the car as it is considered that these
cars have the best quality and best services, but the car manufacturing units in UK are mainly
foreign companies which suffered a backlash when economic recession happened, that is, Brexit.
Due to British exit from European Union, major industries including automobile were suffered as
companies were shut down which had a huge impact on the economy of the country. Major car
manufacturing companies in UK including Jaguar, Honda, Land Rover were shut down because
of it (Bacik, Gavurova and Fedorko, 2015).
But, this sector was able to stand up on its own by 2017 as the sector experience gain by
the end of year as it can reflected through this chart:
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(Source-An Overview of Automotive Sector Trends and the Possible Impact of Brexit, 2018)
From the above chart, it can be established, that by the year end of 2017, this industry
was able to made a turnover of £82 Billions and created a job opportunities for thousands of
people in manufacturing of these cars as well as in automobile industry. There were millions of
vehicles manufactured in the time-being and also exported around the world.
The automobile industry is rising again after the recession named “Brexit” and also
helping in constructing back the economy of United Kingdom by creating employment and
contributing towards economy as well (Baker, 2014).
Main factors impacting the operations of Company
Mercedes Benz is a German based automobile company. It deals in designing,
developing, manufacturing, marketing and selling of vehicles. The first car was created by Karl
Benz in year 1886. It was the first company all over globe who created a car and marketed in the
world as a vehicle manufactured by them was the first prototype which works on engine and can
take more than one people at the same time. This company is famous for the luxury vehicles they
make in order to satisfy their customers in the form of branding and quality of life they provide.
The company believes in innovation as the vehicles manufactured by Mercedes Benz
distinguishes themselves in the market due to uniques features they have. The company believes
in providing the best or nothing as it is the slogan of the company. The headquarters of the
company is located in Stuggart, Germany.
There are variety of factors that have a impact on the operations of Mercedes Benz. Some
of them are:
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Illustration 1

Price of Raw Materials: Manufacturing a car is not an inexpensive process as it contains
variety of products which are very costly in nature. Mercedes Benz does not compromise with
any of their products and raw-materials and because of that they are willing to pay any price for
the right equipments. Also, the price of raw materials needed in the manufacturing of a car
involves variety of products, like, steel, natural rubber, aluminium and various other products
and are very costly, so, these factors contribute a major impact on the operations of Mercedes
Benz (Campbell, Martin and Fabos, 2018).
Interest Rates: To carry out the huge operations that goes under the manufacturing of
cars, the expenses rates take a hike, to meet with the expenses of major automobiles plants,
Mercedes Benz often end up taking loans, which have an impact on the operations as now the
company has to spend and utilise their resources effectively and efficiently in order to gain the
perspective of market and meet with the various interest rates.
Engine Production: The main work to create efficient vehicles for a global organisation
like Mercedes Benz involves series of steps and one of the major operation involves creation and
production of engine as this is the major part that comes in the manufacturing of a car. The
creation of engine involves engineers, innovators and top management to come together and
create a product that will distinguish the product in the market. This step involves collaboration
and many a times it is not possible to get the desired outcome due to change in opinion of people
and it increases the processes and cost of production for Mercedes Benz.
Marketing Performance and Strategy of Company
Mercedes Benz desires to expand their operations in the market of United Kingdom, and
in order to achieve that there are plenty of factors that they need to analyse in the market in order
to expand their operations in the vast country like United Kingdom. In order to achieve that,
Mercedes Benz marketing team needs to prepare PESTLE Analysis, STP Analysis, Marketing
Mix and SWOT Analysis of their organisation. This is done to prepare a strategy that can be used
while expanding with the help of various micro and macro elements surrounding the
environment of the business (Gopaldas, 2015).
PESTLE Analysis
PESTLE Analysis is used to study various macro-environmental factors that helps the
organisation in order to establish themselves in the market. These factors have a huge impact on
the company as it describes the environment in which the business is operating. These factors
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include Political, Economic, Social, Technological, Legal and Environmental Factors of an
organisation. Mercedes Benz is using this analysis to study the various environmental factors in
order to create a strategy that will help in expansion of their business.
Political: It refers to political aspects running in the country which can have impact on
the performance of the organisation. Mercedes Benz is an automobile company, and thus, they
face lot of political intervention in their operations. Here, Mercedes Benz operates in various
countries which suggests there every plan would be different for every country, the model of the
specific country, pricing strategy, type of car all will be different according to the country they
operate in. Also, the major increase in populism may lead to major instabilities but can work as a
trend if used in the right way(What is PEST Analysis, 2018)(Marketing mix of Marks and
Spencer, 2018).
Economic: It refers to economic reforms bought up in the country and their effect on the
operations of an organisation. Mercedes Benz is a global company and thus enjoy some
privileges out of it. But, Mercedes Benz is no stranger to economic recession in country due to
Brexit as spending power of the people suffered and as Mercedes is a luxury car people weren't
in a state to buy such an expensive car and due to it sales of Mercedes had gone down. Other
than that, taxation policies, from some years, Mercedes Benz has enjoyed low taxes and due to
that they were able to enjoy high profits and greater development. This factor can work as an
advantage for Mercedes Benz for expansion.
Social: It refers to social factors that have an impact on society and culture. It includes
people point of view towards certain products and services due to the culture they are bought in.
Mercedes Benz cultural environment in UK is quite different from their home country so they
need to work and study the social factors accordingly. The opportunity for Mercedes Benz is that
the people in UK can get influenced with the media and a great collaboration with the media will
help the company in creating a better image and expanding their operations.
Technological: It refers to innovative and unique technological advancements created by
company in order to get a competitive advantage in the market. Mercedes Benz being the first
car all around the globe enjoys some great brand image. This sector enjoys a lot of new
innovation everyday in order to get a competitive advantage, same goes for Mercedes Benz, in
order to get a competitive advantage, they should always try to create something new and expand
their operations accordingly.
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Legal: It refers to legal aspects flowing in the country. It is very important for a
Mercedes Benz to be aware of the legal factors they should know in order to grow and develop.
Over some years, data protection law has become a thing and companies use this to prepare
themselves of any theft of data that can take place. United Kingdom, is very strict in these laws
and it is a benefit for Mercedes Benz (Introduction to Marketing, 2018).
Environmental: It refers to the responsibilities fulfilled by an organisation towards
environment. These factors helps the company in creating a better brand image. For Example,
Climate in Paris have raised a stress level for the people and government of United Kingdom and
it will result in many environmental policies that will impacted on Mercedes Benz as well.
Segmentation, Targeting And Positioning of Mercedes Benz
Segmentation: Mercedes car is made and designed as luxury product in the UK market
for elite class people. It provides a profitable method of attracting young generation without
losing the brand prestige in the cut throat competitive world (Hair Jr and et. al., 2015). The
methodology can be applied of luxury product like Mercedes so that loyal customers can be
retained in the market and is able to pull young audience for the product to meet their emerging
needs in the market. Before making the product for the customers company do market
segmentation and search out their potential customers and frame certain strategies to pull them
towards it.
Targeting: Mercedes car is basically made or designed for elite class people living in the
society who are ready to pay more for better and innovate product who actually with stand on
their demand in the cut throat competitive world. The features and model are best as compared to
the other cars running in the market so business associates came up with luxury car with
advanced features for upper level customers. Organization designed the car to gain profits from
the customers as well as to retain loyal customers for longer time duration. Such cars are made
by analysing the current market scenario of the elite class customers as well as focusing on there
taste, quality, preferences, demand, colour etc. so that product can be designed accordingly
(Więcek-Janka, 2015).
Positioning: Mercedes car has gained huge market ratio in the global market and is able
to generate huge profits from the customers. The position of the product that is Mercedes totally
depends on the customer reaction. Suppose the Mercedes car is widely acceptable by the
advanced features, colour, mileage, music system, 3D headlights etc. then the product will
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flourish in the market. It will be on their priority level to use it. While if the product is not up-to
the satisfaction level it creates negative image about the brand in the eyes of the customer.
Marketing Mix
It is one of the most important part of any of the organisation that how they uses the
marketing strategy for increasing the sell of there company. It is helpful to achieve the target
which are predetermined by the company. In context of Mercedes, it is necessary that they must
know that what are the essential things which they need to focus while expanding there business
within the premisses of UK and for that Marketing mix will be helpful for them (Moutinho and
Huarng, 2013).
Product: It mainly refers to product which organisation is looking to sell within the specific
area. In context of Mercedes, they must ensure that they will be able to deliver the product
on specific period of time. The product which they mainly targeting to launch within UK is
Benz C- Class.
Price: The price determines that what should be the price while selling the product within the
targeted market. In context of Mercedes, they are adopting premium pricing strategy which
means they are charging the additional amount of money in exchange of offering premium
quality UK. This pricing policy is based for higher class of people who can afford to buy
the products (Scarborough, 2016).
Place: It is the most important area for any of the organisation that which area they are focusing
to expand their business. In context of Mercedes, they are mainly targeting those cities
where higher class of people stays and if they can be able to target that area then they can
easily expand their business within UK.
Promotion: While talking about Mercedes, they believe in aggressive promotion. So, while
entering into UK market they are planing to promotion with the help of TV, Social media
billboards etc. This can help the company to enter in the market of UK easily (Pappas,
2017).
SWOT Analysis
It is an analysis based on the elements of a company's internal and external environment.
It consist of Strengths, Weaknesses, Opportunities and Threats, where, Strengths and weaknesses
are derived from the internal environment of an organisation whereas Opportunities and Threats
are derived from the external environment of an organisation. Mercedes Benz used SWOT
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analysis to evaluate their own strengths and weaknesses and various opportunities and threats
available in the environment. This analysis is used so that they can expand their operations in the
market of United Kingdom.
Strengths: One of the major strength of Mercedes Benz is that it is a global brand and
enjoys a good reputation in the market. This will help the firm in setting up the operations and
assured success due to the image enjoyed by them. Other than that, Mercedes Benz has set up
variety of factories around the world to limit the cost is an added strengths of company.
Weaknesses: The weaknesses of the brand here is that the cost of products offered by
Mercedes Benz is very expensive and requires high maintenance costs which makes less people
to choose the brand (Shaw, 2012).
Opportunities: The opportunities available to Mercedes Benz is increasing demand,
people are demanding the vehicles of Mercedes Benz because of the brand value attach to it.
Also, the new vehicles of Mercedes Benz are electric cars which have a new segment and have a
huge demand which will be beneficial for the brand.
Threats: One of the biggest threat experienced by Mercedes Benz is the increasing
competition. Everyday the competition is rising limiting the market share occupied by the
Mercedes Benz due to new innovative and less costly cars available to people is a major threat to
company.
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CONCLUSION
From the above study it can be concluded that the automobile industry of United
Kingdom is rising and experiencing lots of positive changes. This segment did experienced a
economic recession in the form of Brexit as major industries were shut down, but, the industry
was able to get over with it soon. If an organisation needs to expand in this sector, then, they
have to get a proper knowledge about the various micro and macro factors surrounding in the
environment they are working.
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REFERENCES
Books and Journals
Bacik, R., Gavurova, B. and Fedorko, I., 2015. The analysis of the impact of selected marketing
communication factors on the online consumer behavior. Journal of Applied Economic
Sciences. 10(7). pp.999-1004.
Baker, M. J., 2014. Marketing strategy and management. Palgrave Macmillan.De Mooij, M.,
2018. Global marketing and advertising: Understanding cultural paradoxes. SAGE
Publications Limited.
Campbell, R., Martin, C. and Fabos, B., 2018. Media essentials: A brief introduction. Bedford/St.
Martin's.
Gopaldas, A., 2015. Creating firm, customer, and societal value: Toward a theory of positive
marketing. Journal of Business Research. 68(12). pp.2446-2451.
Hair Jr and et. al., 2015. Essentials of business research methods. Routledge.
Moutinho, L. and Huarng, K. H., 2013. Quantitative modelling in marketing and management.
World Scientific.
Pappas, N., 2017. Effect of marketing activities, benefits, risks, confusion due to over-choice,
price, quality and consumer trust on online tourism purchasing. Journal of Marketing
Communications.23(2). pp.195-218.Scarborough, N. M., 2016. Essentials of
entrepreneurship and small business management. Pearson.
Shaw, E. H., 2012. Marketing strategy: From the origin of the concept to the development of a
conceptual framework. Journal of Historical Research in Marketing. 4(1). pp.30-55.
Więcek-Janka, E., 2015. The Essentials of Marketing Research. Publishing House of Poznan
University of Technology.
Online
Introduction to Marketing. 2018. [Online]. Available
through:<https://study.com/academy/lesson/introduction-to-marketing-definition-and-
applications.html>.
What is PEST Analysis?. 2018. [Online]. Available through:<https://www.visual-
paradigm.com/guide/strategic-analysis/what-is-pest-analysis/>.
Marketing mix of Marks and Spencer. 2018. [Online]. Available
through:<https://www.marketing91.com/marketing-mix-of-marks-and-spencer/.>.
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