Mercedes Benz: Business Analysis and Expansion in South Korea

This report examines Mercedes Benz's strategic plan to expand its business operations into South Korea. It begins with an introduction outlining the company's goals and the importance of a global market presence. The main body provides detailed information on Mercedes Benz, including its organizational structure, product range, and key features. It then delves into the business environment, discussing internal and external factors affecting the company, such as technological investment, economic conditions, and competition. The report applies analytical approaches like PESTLE and Porter's Five Forces to assess the political, economic, social, technological, legal, and environmental factors in South Korea, as well as the competitive landscape. It also highlights the application of appropriate data, such as sales figures and customer needs, to inform decision-making. The report concludes by summarizing the key findings and recommendations for Mercedes Benz's successful entry and growth in the South Korean market.

Business
Organizations in a
Global Economy

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Information’s of Mercedes Benz............................................................................................1
Discussion of business environment......................................................................................2
Applications of analytical approaches....................................................................................4
Applications of appropriate data............................................................................................7
Conclusion.......................................................................................................................................8
REFERENCES..............................................................................................................................10

INTRODUCTION
Business organization refers a way in which it is being structured and how such structure
can help them out in meeting their goals (Allen and Kraakman, 2016). Business organization in
global economy requires making an effective structure and strategy for competing with others
and making an effective position in the market. This present study is based o Mercedes Benz
which wants to expand its business and establish business in South Korea for increasing market
share and profit margin. For this it requires business and country analysis in a detailed manner
this study will show importance of using effective business analytical techniques like PETSLE,
Porter’s 5 forces and demand and supply scheme. All these techniques or models help it out in
analysing all business environmental factors and making decision accordingly. On the basis of
such analysis it also can make changes in its internal strategies for taking advantages of
opportunities present in market and accomplish all goals. Lastly, it will discuss using or applying
appropriate and relevant data like sales in different years, changing needs of customers and all
relevant to products and country which company want to sell.
MAIN BODY
Information’s of Mercedes Benz
Type and nature of organization: In the context of Mercedes Benz which is a German
automotive as well as subsidiary of Daimler AG it can be said that it is a well-known and
popular automotive company. It is mainly known for its qualitative and unique production of
both luxury and commercial vehicles. It operates and provides its products and services
worldwide. Its headquarter is in Germany (Lanzerath, Wunsch and Schön, 2017). It is also stated
that this company maintained its quality and durability and it is one of its main features which
makes it able to being in the market and attract customers to the great extent. For these features,
models and continuous improvement in quality it got awards. One of the main award which it
received is platinum plant quality award for its Mercedes’ Sindelfingen, Germany assembly
plant. It has several A class, B class, V class and other models in which some vehicles are known
as multipurpose vehicles. Rather, these it also produces a range and variety of vans, Vito and
Sprinter. For acquiring market share and increasing profit it wants to expand its business in other
1

countries and for that it has selected South Korea. It believes that for growing and attracting
global customers it is important to expand business and establish business in other countries as it
allows customers about its features and vision of company. By having a physical company in
other countries like South Korea it can meet customers face to face and can make them aware
about its effectiveness and attract them
Issues and factors affecting company: There are several problems which this company is
facing due to some internal as well as external business environmental factors. One of the main
internal factors which is its main weakness and creating some problems is: lack of technological
investment, lack investment in research and development, unclear positioning and unique selling
proposition. All these are creating some problems and due to lack of technical and research and
development investment, other companies are taking effective position in the market and
increasing competition in the market. It is lowering or reducing profit margin of this company
which is main problem of this company (Lü and et.al., 2018). It is also stated that there is a gap
in the products range which is sold by this company and this lack of choice and increasing
bargaining power of customers it can give a new competitor a foothold in the market. So, it can
be said that all these weaknesses and internal environment factors can create several other
problems like lack of opportunities, increasing threat of competition and others.
In addition, in the context of external business environmental factors it is also stated that
economic slowdown in Malaysia is the main factor which is decreasing buying power of
customers because of decreasing income as well as increasing unemployment rate. With this low
GDP rate, this company is finding problems in selling cars in such countries so, by expanding
business in higher GDP rate, it can take advantages of increasing profit margin and sales.
Discussion of business environment
Business environment is made up of 2 environments such as internal and external. In
internal factors, business needs to evaluate its own strategies, strengths, weaknesses and
opportunities and in external environmental factors it includes political, economic, social,
stakeholders’ needs, competition and others factors. By evaluating and analysing all these factors
company can make better decision and can take advantages of business expansion in South
Korea.
2

In the context of South Korea it is stated that it heavily includes multinational trade as well as
finance in their economy and that is why it got affected the most after economic or financial
crisis in 2008. Automotive industry of South Korea in which Mercedes Benz wants to operate
and expand its business is playing a significant role in improving economy of this country and
for making it stable and for more improvements it is supporting car manufacturers. There are
several brands which are playing a major role and can increase competition for Mercedes Benz
such as: Hyundai Motors, Renault Samsung and others (Shin, 2017). As per this it can be said
that there is requirement for Mercedes Benz to improve and bring innovations in its all models.
In the context of Mercedes Benz and its internal strategies it is found that its digital
marketing is one of the best strategy and key of its success. It digital marketing strategy is life
style oriented and in this strategy it focuses on presenting the more fun loving as well as
energetic side of this company. Mercedes has round 38 total plants in which 23 plants worldwide
are company owned plants. All plants are situated in strategic locations and that is why it mainly
targets developing nations and by keeping its operational cost under control it attracts middle as
well as high class of people and increases sales or profit margins. It makes an effective use of
multichannel approaches and by opening several stores at several places it makes its offerings
available to global customers. There is a swot analysis of Korean car manufacturer industry
which can help Mercedes Benz in increasing its own strengths accordingly such as:
Strengths
 Competitiveness in pricing strategies in
terms of skilled workforce and low cost
materials.
 There is diversified export markets for
companies (Rise of Koran Automobile
Industry: Analysis and Suggestions.,
2011).
Weaknesses
 Labour union issues.
 Immature raw materials
Opportunities
 Potential markets availability.
 On site production there is all
Threats
 Technological gaps in advanced
countries.
 Saturated domestic markets.
3

successful launches
Applications of analytical approaches
In the context of analytical approach it can be said that it refers uses of an appropriate process by
which companies break problems down into some elements which are required to be solved.
Each element which is broke down becomes easier to solve for company. It is stated that
Mercedes Benz wants to establish a business in south Korea so it is important to analyse business
environmental factors of South Korea and knowing all factors which can affect it and which can
help it in becoming successful.
PESTLE
Political: There are several political factors like taxation system, import duty and others and it is
found that it is one of the main factor as import duty for cars will be charged from 140% to 300%
based on the engine’s category and on the basis of car cost, tax will be calculated which may
increase overall cost of the company. So, it can be said that it can affect it in a negative manner.
On the other hand, it is found that government of South Korea has developed some policies to
promote car manufactures and it may be beneficial for this company.
Economic: Because of hike in interest rate in this industry it is stated that it may increase
process of oil and car which may affect sales of cars. Due to lack of income and high interest
rate, hike in car prices customers buying power can affect it in a negative manner. One of the
other reasons of hike in car prices is car industry uses aluminium, rubber, computer chips and
many other raw materials which increase the overall price.
Social: Standard of living of people of South Korea has increased and it can be beneficial for
Mercedes Benz as it can attract high standard living of people and increase its sales. Increase in
population can also increase in sales of car. It is also found that this company believes in
corporate social responsibility and because of this and considering all needs of customers it is
taking effective steps in making itself sustainable (Perera, 2017). It makes use of just in time,
total quality management and other approaches. All these approaches help it out in improving
4

quality of products, reducing errors, using natural resources to some extent, protecting needs of
the future generation and satisfying needs of current population. This skill and strength can help
it out in attracting customers of South Korea and retaining them with the company for the long
run.
Technological: Advanced technology and dependency on technologies can affect this company
in a negative manner because it is already stated that there is a lack of investment in technology.
It is increasing competition and also may snatch several opportunities from it. But it is found that
it is focusing on driverless cars which may attract customers and help it in increasing sales
(Mercedes Benz PEST Analysis, 2017)
Legal: This Company has the lawful protection to safeguard its intellectual property as well as
innovation which can help it out in increasing reliance of others on it. It gives high importance to
legal perspectives and legal contracts in order to prevent itself against lawsuit. So, it mat be
beneficial for it.
Environmental: Securing nature is one of the main priorities of all car manufacturers and people
are also becoming environmental protective. They prefer to buy products from company who is
sustainable and it is found that this company has promised to reduce carbon emission and
becoming sustainable. It can help it out in attracting customers and increasing sales.
So, from the above analysis it can be said that there are several factors which are in its favour
and can help it out in making business expansion successful.
Porter’s: It is important for company to analyse all factors which may increase competition and
help company in knowing actual market condition. It may be known by 5 factors such as:
5 Forces Intensity Explanation
Threat of new
entrants
Lower In the context of threat of new entrants it can be said
that entering in this industry is not easy. There is
requirement of heavy investment, fulfilling regulations
and all. And after entering in this market, competing
with popular brand is risky.
Suppliers’
bargaining power
Low There are several suppliers in this car manufacturing
industry so, this company has many options of
5

switching suppliers. So, there is low intensity of this
power.
Buyers’ bargaining
power
High There are always more buyers than sellers but there
are several well known brands in car manufacturers
which are providing similar features of products. So,
buyers have options and they may switch shops and
that is why it is high in power (Moreno-Izquierdo,
Ramón-Rodríguez and Perles-Ribes, 2016).
Threats of substitute Moderate There are some car manufacturers which are providing
high quality of cars to customers and they have
abilities to compete with brand if they have high
financial availability.
Competition rivalry High Competition in existing players in South Korea and
Malaysia is high as there are some well known brands
such as: Mahindra, Renault, Toyota and others.
Demand supply scheme: This analysis can help company in knowing the relation between
quantities of cars produces by this company for sell and quantity that consumers wish to buy. It
is stated that it target people who live in metro cities and are middle and high income group.
Figure 1 Mercedes Sales which highlights its overall results and effectiveness
Sources: (Sales of Mercedes Benz, 2017)
6

On the basis of above data it can be said that this company has several models of cars and in C
class of model it was the market leader which means supply of its products is high and according
to demand (Warren-Myers and Heywood, 2018). There is increment in selling of vehicles in each
year which shows demand is increasing and it has maintained a balance between demand and
supply.
Applications of appropriate data
There are some data of all other top 10 car manufacturer and models by which Mercedes can
identify its actual position in the market and accordingly it can make changes in its models and
prices for increasing sales.
7

Figure 2: April segment sales totals and Ranks
Sources: (Sales of Mercedes Benz, 2017)
On the basis of above data it can be said that in model C class it made increased in sales but in
the context of and D segment Mercedes was on 10th position. According to which it can be said
that there is requirement of making changes in prices, uniqueness, features and other elements
for increasing sales and attracting customers. If company makes appropriate changes by
investing in technologies, human resources then it can make an effective position and compete
with other well popular brands otherwise it may lose market share.
8

As compare to 2016, in 2017 sales of car of Mercedes Benz including Sprinter and
smart reported around 8.7% below. Which shows that there is requirement of mating changes
and other brands are providing better features of products and cars to customers.
Conclusion
From the above study it has been summarized that business environmental analysis played a
vital role as it allows companies in knowing all internal as well as external factors of the country
in which it wants to operate. By analysing all factors like political, technological, social,
competitive situations, it can take better decision of market entry and accordingly can change its
internal strategies. Al these analysis helped this company in taking competitive advantages by
making changes in own products and services according to analysis of porter’s five forces,
political and consumers analysis models. Further, this study has discussed roles of using
appropriate data of countries in which company wants to expand its business. It helps company
out in deciding market trends of the industry, consumers’ needs, and their buying behaviours. On
the basis of such analysis and country analysis they can make better decision and can attract
customers by making changes in its products, by making it innovative, changing in prices and
making it competitive which can help it out to increase profit margin. It has shown some factors
which company cannot control and is bound to fulfil such as taxation, legal requirements,
governmental policies, paying prices which are fix for raw materials and others.
9

REFERENCES
Books & Journals
Allen, W.T. and Kraakman, R., 2016. Commentaries and cases on the law of business
organization. Wolters Kluwer law & business.
Lanzerath, P., Wunsch, R. and Schön, C., 2017. The first series-production particulate filter for
Mercedes-Benz gasoline engines. In 17. Internationales Stuttgarter Symposium (pp.
851-865). Springer Vieweg, Wiesbaden.
Lü, X. and et.al., 2018. A comprehensive review on hybrid power system for PEMFC-HEV:
Issues and strategies. Energy Conversion and Management, 171, pp.1273-1291.
Moreno-Izquierdo, L., Ramón-Rodríguez, A.B. and Perles-Ribes, J.F., 2016. Pricing strategies of
the European low-cost carriers explained using Porter's Five Forces Model. Tourism
Economics, 22(2), pp.293-310.
Perera, R., 2017. The PESTLE analysis. Nerdynaut.
Shin, D.I., 2017. An exploratory study of innovation strategies of the internet of things SMEs in
South Korea. Asia Pacific Journal of Innovation and Entrepreneurship.
Warren-Myers, G. and Heywood, C., 2018. A new demand-supply model to enable sustainability
in new Australian housing. Sustainability, 10(2), p.376.
ONLINE
Rise of Koran Automobile Industry: Analysis and Suggestions. 2011. Online Available through:
<http://www.zenithresearch.org.in/images/stories/pdf/2011/Oct/ZIJMR/30_vol-1_issue-
6_%20Choong%20Y.%20Lee.pdf >
Mercedes Benz PEST Analysis. 2017. Online Available through:
<https://www.ukessays.com/essays/marketing/taxation-of-mercedes-benz-and-the-
automobile-industry-marketing-essay.php>
Sales of Mercedes Benz. 2017. Online Available through:
<http://www.cleanmpg.com/community/index.php?threads/54212/ >
10