A

Report On

Study of Logistics Case Study: Smart Cars

Submitted by Arvind Verma

Roll No 27 PGDM(Telecom Management & IT)

Symbiosis Institute of Management Studies, Pune

INDEX 1. EXECUTIVE SUMMARY 2. ABOUT MCC SMART AND ITS PRODUCTS

a. VISION b. Mission c. History of Smart d. Segmentation, targeting and positioning e. Product line f. Safety features g. Smartstart- finance options h. Smart Service i. Ansoff’s model j. BCG Matrix

3. QUALITATIVE APPROACH a. Smart Product Concept b. Smart Manufacturing and supply chain Concept

i. Smart plant in hambach- factory within factory ii. Future challenges for Supply Chain

iii. Sourcing in 21st century iv. Sourcing system

c. Smart Distribution Concept d. Smartville production

4. QUATITATIVE APPROACH a. Investments b. Technical data samrt cars c. Smart car price list

5. MARKET PLACE AND COMPETITORS a. Perception maps vis-à-vis competition b. Compact cars rating 2003

6. RECOMMENDATIONS AND FUTURE TRENDS a. Trends b. Recommendations

7. REFERENCES

EXECUTIVE SUMMARY The present MCC smart GmbH was founded in April 1994 in Bienne in Switzerland as a joint venture between the then Mercedes-Benz AG, Stuttgart and Schweizerische Gesellschaft für Mikroelektronik und Uhrenindustrie AG (SMH), Bienne. Following the 100-percent takeover by the then Daimler-Benz AG in November 1998, the business activities were transferred from Bienne to Renningen in January 1999. Parallel to this the former Micro Compact Car AG was renamed Micro Compact Car smart GmbH.

The tiny car looks like something used in a sci-fi movie for personal transportation on the elevated highways of Planet Xenia. The Smart, as it's called, is a two-seater intended principally for tooling through crowded streets. Five feet shorter and a foot narrower than the new Volkswagen Beetle, it's nearly as lithe and easy to park as a motorcycle. Three of them, nose to the curb, can fit in a single parallel-parking space. The factory in which the Smart is assembled is in France's Alsace-Lorraine region hard by the German border. It's not quite as odd as the car but is definitely different: a windowed cruciform structure connected by enclosed conveyor lines to a surrounding cluster of more conventional buildings.

The factory complex is smartville, the production center for Micro Compact Car smart GmbH. (The lowercase "s" is a corporate affectation.) MCC was born of a meeting of minds in 1994 between Mercedes-Benz and Nicolas Hayek, the creator of Switzerland's Swatch. Today the operation is wholly owned by DaimlerChrysler, for which Swatch is likely thankful. The German-American parent has poured at least $2.5 billion into the project to date and doesn't figure to book the first euro of profit until 2004. Still, the mere prospect of breakeven is significant, since this is a car the automaker was often rumored to be junking. Although the Smart is said by some to be like driving a telephone booth, it has slowly gathered a crowd of enthusiastic owners who need to maneuver in the madness of traffic in big European cities.

Now that we have entered a new millennium we have begun to take a closer look at the quality of urban life. We would like to see less traffic and more mobility, more open spaces and less built-up areas.

MCC (Micro Compact Car),a subsidiary of Daimler-Chrysler, have come up with a logical and practical solution to this problem - the New Smart City Coupe.

The Smart is more than a car; it is a totally new concept in motoring being both innovative and immense fun to drive.

The Smart is revolutionary, making the most of any available parking space - at only 2.5 metres long and 1.51 metres wide coupled with an excellent turning circle, parking anywhere is made easy. The interior is amazingly spacious, with the passenger seat set back a little to improve the driver's vision, and enough luggage space for the golf clubs or weekend shopping.

Engineered by Mercedes-Benz, the 599cc, three cylinder Suprex turbocharged engine is situated at the rear. The output is 44 bhp on the Pure, 60 bhp on the Pulse, and 54 bhp on the Passion models. Fuel consumption is low at approximatly 48 mpg around town, 67 mpg out of town making an average of 56 mpg. Acceleration is reassuringly responsive with the maximum speed governed to 84 mph.

Transmission is via the unique 'Softip' (semi-automatic gearbox with six gears and no clutch) on the Pure/Pulse this is combined with a fully automatic 'Softouch' gearbox of the Passion model.

'Design your own Smart' - with many optional extras you can create a car that is as individual as you are. Options include; leather upholstery, radio/cassette/CD player, interchangeable coloured body panels, alloy wheels, air conditioning, rev. counter, baby seat, drinks tray and racks for bicycles and skis.

'Safety' - The Smart has been designed with the same levels of collision protection as the Mercedes-Benz 'A' Class. Onboard safety equipment includes; air bags for driver and passenger, integral safety seats, ABS brakes, 'Trust-Plus' (electronic traction and stability control), 'Tridion' safety cell, inertia seat belts with force limiters, with side airbags as an optional extra. All materials used are designed to give maximum protection in the event of a collision.

At every stage the Smart is designed to be environmentally friendly and at the end of its days it is nearly 100% recyclable.

In automotive manufacturing circles, the way the Smart is built has attracted as much attention as the vehicle. Though the Smartville complex may never be completely duplicated, it is a test bed for integrating a supply chain to the maximum, pushing production--and part of the capital expense burden--out to suppliers. Just about everything in Smartville is outsourced, from inventorying nuts and bolts

The supply chain are completely new in the market and go beyond such existing practices as supplier involvement, outsourcing and modular production in the industry. Modules such as complete frontor rear ends are pre-assembled on site and suppliers are involved in design and final assembly through coownership of the site, co-design and some major share in the manufacturing activities. Given the untraditional approach, MCC executives face some fundamental challenges including how to manage and control a supply chain in which MCC only adds some 15% of the operational value added. MCC can be seen as a pilot for implementing mass-customisation in an automotive supply chain.

ABOUT MCC SMART AND ITS PRODUCTS Vision To provide unparalled safety and comfort on the roads along with the options to choose from a lot of versions. Mission To become market leader in 2 door compact car in Europe by the year 2010 Smart is moving into the future with a new company logo and the new brand slogan "open your mind.". The brand slogan applies to the customers, the products and the smart corporate philosophy. smart cars are full of ideas and offer their drivers individual solutions. Drivers of a smart see the world with their eyes wide open, they are unprejudiced and open to new experiences. Last but not least "open your mind." also embodies the spirit of the company itself The unique selling points of the car are technology, design, customization, channels, safety, space (small size large interior) and environment. Micro Compact Car AG (MCC), a wholly owned subsidiary of Daimler-Benz (formerly a joint venture of Daimler-Benz and Swatch), is the company behind Smart. Together these manufacturers have developed what they call a new mobility concept that relieves the heavy environmental pressure caused by present traffic while still ensuring continuous individual mobility. Overlooking the period preceding the introduction of the car, MCC management could look back on many peaks: a completely new brand had been developed; pilot marketing of brand and product concept had raised high levels of customer awareness and interest in European markets; a production site of 68 ha. had been developed and constructed from scratch, a dealer and marketing organisation had been developed and was ready for product launch. Moreover, the supply-chain concept developed went beyond existing practices in the automotive industry on a number of points: Customers can contribute to the configuration of products; lead-times for cars are counted in weeks; suppliers have co-invested in the production location and have taken over shares of primary assembly beyond existing levels; the added value of MCC during production is approximately only a remaining 10% of the production cost-price; and suppliers and MCC are integrated in a sense that the premises of the suppliers adjoin the assembly hall of MCC. Overlooking the development and installation of the supply chain, all of which had been done since the first feasibility study of Mercedes in 1993 and the foundation of MCC in 1994, the management team realised it was facing a new set of challenges. How to manage, co-ordinate control and further develop such a supply chain when operational? This question is not only of relevance to MCC but to the Daimler-Benz Corporation as a whole, which has earmarked Smart as a strategic learning project. Moreover, the concept being brought to practice by MCC is generally accepted by leading car-manufacturers as of key importance to future industry developments. Manufacturers and suppliers therefore monitor the successes and failures of MCC, as the results will by and large mark the future organisation of their companies and of the supply chain.

History of Smart Car smart in short

April 1994: Creation of company MCC Compact Microphone Bus with Bienne in Switzerland.

October 1995: First stone of the factory of Hambach in Lorraine.

September 1996: smart "Great Price of the Design 1996".

September 1997: Official presentation of the smart to the Show of Frankfurt.

October 1997: Official inauguration of smart-city by president Chirac and the Khöl Chancellor.

October 1998: Introduction of the smart on the European markets.

November 1998: Withdrawal of Nicolas G Hayek (Swatch) of the project.

January 2000: Launching of the model TDCI.

March 2000: Launching of the version convertible.

September 2000: Launching of the smart & Business with recoverable VAT.

2001 : New range

2002 : Crossblade/Face-Top spin city crossed

2003 : Model Year 2003 with ESP/Roadster and Roadster Cut

Segmentation Targeting and Positioning Segment: compact 2-door cars Target customers:

• Students • Old people • Business People • Working Ladies

Positioning: A highly customizable and safe compact car for city use Product Lines The smart fortwo coupé. The wide-opening doors of the smart fortwo coupé invite you to climb in. The high, comfortable seats give you excellent all-round vision. You’ll be surprised by the spacious interior -there’s more than enough room for your weekly shopping in the luggage compartment – and this extends even further when the passenger seat is folded forward. By now you’ll have realised that you’re driving the perfect city car. With a turning circle of just 8.7 metres the smart fortwo coupé is manoeuvrable and agile. It is economical, has extremely low running costs and very low depreciation. It’s no wonder the smart fortwo coupé and smart fortwo cabrio make their owners so happy. With the responsive suprex turbo engine and softip automated 6-speed transmission you can change gear without using the clutch. Not only are they great to drive, the smart fortwo coupé and smart fortwo cabrio offer outstanding design and safety too, with the tridion safety cell in black and silver. The coloured body parts – we call them bodypanels – are made of high-quality plastic. This means that they are flexible, resist minor knocks, don’t rust and look good for a long time.

The smart fortwo cabrio. Maybe it’s the way your hair blows in the wind, or simply because the world always looks better in the sunshine: smart fortwo cabrio drivers always turn heads. The touch of a button is all it takes to open the tritop convertible roof. Decide for yourself how much sun you’d like: From partly opened to total cabrio. Simply remove the roof bars and store them neatly inside the tailgate. Whether it’s sunshine or showers, you’ll always feel bright. That’s because you’re driving the least expensive cabrio in the world. You’ll enjoy the highest level of comfort as well as extra safety. The smart fortwo cabrio combines all the safety features on the city-coupé, and with its high strength steel roll-over bar, its just as solid a proposition. 1. Pure Whether you’re just nipping into town or heading off for a long weekend, you’ll

always be on the right track with the agile pure. The complete range of safety features including esp® with brake assist, ensures a safe trip home every time. With its wide opening doors, high seating position and spacious interior, the pure also offers a high level of comfort. The remote central locking incorporates a boot opening function and the electric windows add an extra touch of convenience. Also standard are the indicators with lanechanger function, which flash three times in response to a brief tap. The high-tech Mercedes-Benz engines in the pure keep you cruising comfortably at all times. They are exceptionally economical, leaving you more money to spend on the finer things in life – how about a holiday?

1. Equipment variations: The pure is available as a classic smart fortwo coupé or a sunny smart fortwo cabrio and comes with a black tridion safety cell. Choose from 50 bhp(smart fortwo coupé only) or 61 bhp engines.

2. Wheels: Ready to take you for a spin, the 15“ steel wheels. 3. Rearlights: You’ll find the unique smart design in every detail, just look at the

rear lights. 4. Interior: In the pure the interior is finished in cool grey. You’ll find the switches

where they should be – comfortably within your reach. 5. Upholstery colour: Take a seat and feel at home. The pure’s upholstered in

tasteful scodic grey. 6. Specials: The 3-button key can remotely lock or unlock the car and opens the

tailgate on the smart fortwo coupé (or the soft top if you’re driving a smart fortwo cabrio). For added security, the central locking system also operates the electronic immobiliser.

2. Pulse The pulse is the right choice for those of a sportier disposition: with a dynamic appearance, sporty “coreline” alloy wheels with wide tyres and 3-spoke leather sports steering wheel with steering wheel gearshift. By choosing the pulse you can look forward to the responsive and torquey 61 bhp turbocharged engine, which is perfectly matched to the softip 6-speed gearbox. On the outside, the pulse is available with distinctive stream green bodypanels, whilst the interior offers a choice of upholstery, vibrant twister green or stylish twister bluegrey, each with semi-transparent highlight elements. The standard rev-counter and clock keep you up to speed with your engine and the time. Whilst the full-length glass roof lets in plenty of light, but filters out harmful UV radiation. In murky weather, the fog lights provide optimum visibility.

1. Equipment & engines: Driving fun is guaranteed in this smart fortwo coupé or the smart fortwo cabrio, with a sporty 61 bhp engine.

2. Wheels: Striking and sporty with the dynamic “coreline” alloy wheels (wide tyres, front 175/55 R 15; rear 195/50 R 15).

3. Dashboard instruments: Clock and rev counter with white backgrounds to match the other instruments.

4. Interior: This is thereason hands belong on the steering wheel. A 3-spoke leather sports steering wheel with gear shift enables you to change gear and steer at the same time.

5. Upholstery: The pulse is available with seats and door trim in a choice of cool twister bluegrey or vibrant twister green. For added opulence, you can always specify leather heated seats.

6. Specials: Guiding you through the poorest visibility are the fog lights. 3. Passion. If you’ re looking for exclusive features, the passion offers you everything you could possibly want. The stylish interior perfectly complement the fine leather steering wheel and gear lever knob, you can also specify full heated leather seats. The Air conditioning system means the interior temperature stays just as you want it. The powerful 61 bhp engine is coupled with the automatic softouch gear change function with a kickdown facility for safer and quicker overtaking. Wherever you go in the passion, you’re sure to stand out with stylish “styleline” wheels. Enhancing your comfort and safety, the comfort windscreen wipers automatically varies the speed of the windscreen wipers in response to the speed of your vehicle. Whilst the drive lock function ensures the doors are locked automatically while you’re on the move to keep out uninvited guests. The standard silver tridion safety cell perfectly complements the river silver bodypanels a colour exclusive to the passion. Of course you can let your personality roam free, with the choice of seven other exterior colours and the tridion safety cell finished in stylish black.

1. Equipment: Available as the classy smart fortwo coupé,or the chic smart fortwo cabrio: the passion is equipped with the 61 bhp turbocharged engine.

2. Wheels:The ultimate in style, elegant “styleline” alloy wheels (wide tyres, front 145/65 R 15; rear 175/55 R 15).

3. softouch: Change gear with zero effort. The fully automatic gear programme with kickdown function for even greater driving comfort.

4. Interior: The ultimate in style at the wheel. Steering wheel and gear lever knob are covered in finest leather, the instrument cluster is set off by a black background.

5. Upholstery: Choose from elegant bungee grey or distinctive bungee red.If you prefer a little more luxury, you can specify leather heated seats.

6. Specials: Air conditioning with exterior temperature indicator and frost warning. Your ideal climate 365 days a year.

4. Brabus BRABUS will thrill all individualists. Sporty, dynamic design elements, high-quality premium materials and wide tyres give the smart fortwo BRABUS an exclusive touch. The perfected technical tuning is sure to make everyone’s pulse race with the uprated 74 bhp turbocharged engine providing lively acceleration and propelling the

cars on to an electronically limited top speed of 94 mph (150 km/h) (where permitted).

1. BRABUS front spoiler and radiator grille: The front spoiler ensures the smart fortwo BRABUS hugs the road. The radiator grille has a wider opening for maximum cooling performance.

2. BRABUS alloy wheels: Get ahead of the rest with the sporty 16“ BRABUS Monoblock VI alloy wheels (wide tyres, front 175/50 R 16; rear 205/45 R 16). The polished aluminium double-six-spoke design will let others know that you’re driving no ordinary small car.

3. BRABUS exhaust with heat shield: From the track to the road – with its dual pipe central exit and distinctive heat shield, the BRABUS sports exhaust is sure to take your breath away.

4. BRABUS side skirts: Great for a dashing appearance. The design of the side skirts complements the sporty look of the smart fortwo BRABUS to perfection.

5. BRABUS sports seats: Ready, steady, go! The leather upholstered sports seats will hold you in place through the most twisty roads. With seat heating and integrated side airbags, they’ll also keep you warm and safe when the going gets tough.

6. The BRABUS interior with 3-spoke leather sports steering wheel and steering wheel gearshift. An absolute VIP lounge of a cockpit.

Safety features 1. The tridion safety cell. The tridion safety cell protects its sensitive contents like the hard shell of a nut. The steel structure is additionally reinforced with high-strength steel at the strategically important points. The tridion’s longitudinal and transverse members activate the cr umple zone of the other vehicle involved in the accident and distribute the impact energy evenly over the safety cell. 2. The wheel as a buffer. smart has reinvented the wheel... as a safety element. If another car hits your smart fortwo from the side, the compactness of the smart fortwo is a great advantage. Thanks to the ultra-short wheelbase, the other car will almost always hit a wheel, allowing the suspension components to deform and absorb some of the crash energy. In the event of a head-on collision, the front wheel performs as a crumple zone to help absorb the impact energy. In the Euro NCAP crash tests, the tridion safety cell remained rigid even at an impact speed of 40 mph against a deformable barrier, allowing both doors to be opened easily. 3. The crash boxes. The smart fortwo coupé and cabrio each have 2 crash boxes: The front box is reinforced with transverse members and slip tubes, while the rear box has an aluminium support. These parts and the bodypanels shrug off knocks at up to 2 mph with virtually no sign of

damage. In a collision at up to around 9 mph, they serve as a crumple zone and prevent the tridion safety cell from being damaged. The damaged crashboxes are modular and can be replaced quickly. The plastic materials used on both the exterior and interior are shatterproof for added safety. The fuel supply will be stopped in the event of a crash, and the central locking system will unlock automatically. 4. The sandwich-type construction. Sitting higher means staying on top in tricky situations. Thanks to the sandwich-type construction and raised seating position, the passengers are usually outside the direct danger zone in the event of side impact, and the driver enjoys a significantly better view. Smartstart – finance options smartstart Protection - finance gap. If your smart is written off by your insurer and the claim payment doesn’t cover your repayments, finance gap simply pays the difference up to £10,000. smartstart Protection Plus - invoice gap. If your insurer declares your smart a total write-off and pays out less than the original invoice price, invoice gap will pay the difference up to £25,000.smartstart Assurance will take care of your payments if you are made redundant, taken ill or suffer an accident that prevents you from working. There are 4 levels of cover to choose from. This is only a brief summary of cover; please ask your retailer for full terms and conditions, including exclusions. Perfect smart. Perfect payment plan. smartstart continues the smart philosophy of convenience, flexibility and simplicity. We offer a range of payment options so you can pick the one that is best for you. If you wish to own your smart at the end of the contract, there are two options to choose from – smartstart Hire Purchase and smartstart Contract Purchase. The right choice for you will depend on your personal circumstances and requirements. If you would rather hire than buy, we also offer smartstart Operating Lease - which means at the end of the contract, you can simply hand your smart back. We also offer smartstart Repair & Maintenance – a regular fixed monthly payment that can be added to any finance agreement. It covers your routine servicing and maintenance costs, allowing you to budget confidently and avoid any out of the blue repair bills. smart service Should a problem arise with your smart, we’ll make sure it’s quickly back on the road. Swift repairs are made possible by the modular design of your smart and the modern diagnosis systems which we employ. smart workshops are manned by highly qualified personnel, and state-of-the-art technology and paperless workshop organisation ensure

maximum efficiency and transparency. It’s not only its low fuel consumption that makes your smart one of the most economical cars around. Short stays at the workshop, low maintenance and repair costs and a low insurance rating mean you can rest assured that your smart won’t strain your wallet. smart warranty and smart warranty plus: Quality pays. We’re convinced that your smart will provide you with lasting pleasure, and back this up with a 2-year warranty with unlimited mileage, plus a 6-year warranty against rusting through from the inside to the outside. Smart warranty plus enables you to extend the manufacturer’s warranty in many countries. assistance and optional smartmove assistance plus: The international smartmove assistance service provides round-theclock breakdown assistance free of charge. In some countries you can expand and extend this cover with smartmove assistance plus, which offers a broader scope of breakdown services and assistance in the event of accidents, theft and personal emergencies. smartstart Insurance is a fully comprehensive motor insurance policy especially designed for smart owners.Cover includes:– New car replacement - during first year of registration if repairs exceed 60% of market value, subject to your smart being owned by you or your spouse/domestic partner – 24 hour accident and claims service – 90 days automatic cover for most of mainland Europe for temporary visits (up to 3 months in any one trip) smartstart Insurance is administered by DaimlerChrysler Services Insurance Solutions Limited, independent insurance intermediaries, member of the General Insurance Standards Council.

Ansoff’s Model

Diversification Strategy:

Small Trucks business

Small Buses for city use

M arket developm ent Strategy: Selling in N ew Location s outside Europe

M aking 4 seater cars

N ew M arket

Product Development Strategy: Spending Continuously on

research and development

M arket Penetration Strategy: Establishing more distribution

centers

Advertisements, promotions

and Test Trials

Providing more services

Providing free accessories

offering highest degree of

customization

Current M arket

New Product Current Product

BCG MATRIX s

STAR The smart fortwo Brabus

QUESTION MARK

CASH COW The smart fortwo coupe Pure

DOGS The smart fortwo coupe pulse The smart fortwo coupe passion

Market Growth

HIGH

LOW

LOW HIGH Market Share

QUALITATIVE APPROACH Smart Product Concept The Smart Product Concept is based on a spaceframe. The spaceframe is produced first and all components, as interior or exterior trim is assembled to the frame. Finally, the body pannels are applied. The frame is color neutral, that means it is always black. The color comes with the pannels. One central marketing idea of the Smart is, to make changing pannels so easy, that every customer can change the colors of his car, so to say before leaving for the evening dinner. Smart Manufacturing and supply chain Concept The extension of smartville, the smart production facility in Hambach in France, which was started 2001, continued in 2002. MCC smart will invest a total of around 80 million euro in this site by the end of the year, securing the jobs of around 2,000 employees (MCC France: 750, system partners: 1,250). The money invested in 2002 will mainly flow into the production of the new smart roadster, which will also be produced in smartville. The Smart Plant Layout 1,800 staff manufacturing top-quality product Only 4.5 hours assembly time per car Approx. 2,500 orders per week 35-hour week introduced Scarcely two years after the innovative MCC plant went on stream, smart production at Hambach in France is at a high level in every regard. More than 400 vehicles are being built every day in a two-shift operation. Following the relaunch of marketing and sales activities in early 1999 incoming orders in the second quarter of 1999 showed a clear increase to 2,500 cars per week. This means that more than 30,000 orders were received for the City-Coupé in the first half of the year, and more than 50,000 in total since the market launch. The size of the workforce in smartville - as the production plant is called - has also increased. The 35-hour week which was introduced with effect from June 28, 1999 was one of the factors in the six-percent increase in the workforce at MCC and the individual system partners. Some 1,800 workers are currently employed at smartville.

The smart production plant on the Europôle de Sarreguemines industrial estate in France, about 30 kilometers south of Saarbrücken (Germany), is one of the most modern car plants in the world. The plant, which was completed in October 1997, covers an area of 68 hectares. smartville is operated by MCC France SAS, in which DaimlerChrysler AG has a 75 percent holding. The second shareholder is the French state-owned company SOFIREM (Société Financière pour favoriser l'Industrialisation des Régions Minières) with a holding of 25 percent. Close co-operation with suppliers The smart's manufacturing process is just as unique as the product itself. The partnership model practised in Hambach embodies the logical development of the conventional manufacturer/supplier relationship. Thus the carmaker bears overall responsibility and is also the module system integrator, process manager and manufacturer. At the same time, however, each system partner also shares a considerable amount of responsibility. The advantage of this modern form of co-operation is that it motivates the partners to contribute to the success and the achievement of the corporate goals by means of their own input and ideas. System suppliers : Magna : Space Frame Unipart (Ymos) : Doors Surtema (Eisenmann) : Paintshop Bosch : Front Powertrain, Breaks, Lights Mannesmann VDO : Cockpit Dynamit Nobel : Plastic Body Pannels Krupp Hoesch : Rear Powertrain Efficient and quality-conscious production The production system, known as smart-Plus, is in the shape of a cross. This layout enables maximum flexibility with excellent quality. The smart production system is held in high esteem by relevant experts. Only 4.5 hours are required for the final assembly of a smart. The in-house manufacturing rate is less than six percent - a figure which is unsurpassed in Europe. The seven autonomous system partners provide 1,100 of the total of 1,800 jobs in smartville. These companies supply their modules which are pre-constructed in Hambach directly to the production line, which substantially shapes the efficiency of the production process and reduces inventory to almost zero. When the plant is operating at full capacity, smartville will provide some 2,300 jobs.

Excellent environmental compatibility As the world's youngest carmaker, MCC is also setting standards in terms of environmental compatibility at its plant in Hambach. Stringent regulations to protect water, soil, air and the surrounding landscape and also relating to energy saving and the protection of resources have been in force since production started. Environmental protection is also extremely high on the agenda in the development, use and also, ultimately, the recycling of smart cars. Bodyshop 137 Robots 108 Body Components 2,300 Welding Spots

Assembly shop 140 Assembly Stations Employees in Assembly: 150 Globalization and localization in the “factory within a factory”. The example of Micro Compact Car’s “Smart” -Plant in France

Smart Distribution Concept

The Smart distribution concept is based on sales towers, the Smart Centers, near or within the big shopping centers of this world. The customer should be able to see his car, to decide and than buy it and take it away immediately. 100 of those Smart Centers were planned. 40 are already under construction. The necessary investment for each center is envisaged with $ 2.5 - 3 Mill. In total $ 310 Mill. will be invested into the dealerships. Smartville production. To the left an orchard, to the right a corn field: This is the idyllic setting in which smartville nestles, and in smartville, even the buildings are ecologically compatible. All of our buildings at the industrial estate in the French town of Hambach are free of harmful substances such as fomaldehyde, CFCs and asbestos. The facade panelling is made from a material called Trespa, 80% of which comes from fast-growing European timber. Naturally enough, the company operates its own biological waste treatment facility, and a heat recovery system in the area of plastics processing. After all, an ecological car can only be produced at an ecological factory. Powder coating. This is regarded as the most environmentally-friendly painting method there is in the car industry. Powder coating uses 40% less energy than conventional painting methods, with zero solvent emissions. Paint slurry is a thing of the

past too. Surplus powder paint is collected and 98 % is reused for painting. This is just one example of the environmentally friendly production processes we employ in smartville.

QUANTITATIVE APPROACH Investments

Investment forecast total $ 800 Mill.

Investment into plant $ 480 Mill. (by end 1997)

Investment by suppliers $ 210 Mill.

Investment into development & tools $ 398 Mill.

Funding by European Community $ 98 Mill.

• Total fixed cost = DEM 2.4 billion ( German currency : DEM ) • Fixed cost = DEM 830 million (in developing and building a factory) • MCC invested approximately DEM 445 million, its suppliers and partners about DEM

385 million. • MCC invested DEM 700 million in the development of the car and in machinery and

DEM 550 million in establishing a dealer and distribution organization • Total investment before the launch of the car reached DEM 2.4 billion. • Full capacity of the plant is 200,000 vehicles a year

Technical data smart cars

Smartcar Price List

MARKET PLACE AND COMPETITORS

In 2 door car segment the main competitors are: 1. VOLLKSWAGEN NEW BEETLE 2. HONDA CIVIC 3. ACURA RSX 4. CHEVROLET CAVALIER 5. FORD FOCUS 6. MITSUBISHI ECLIPSE 7. TOYOTA CELICA 8. SMART CAR

SMART CAR- HIGH SAFETY & HIGH CUSTOMIZATION s

Safety

HIGH

LOW

LOW HIGH Customization

4

3

7

8 2

1

5

6

SMART CAR- HIGH QUALITY DESIGN & HIGH TECHNOLOGY s SMART CAR- LEAST LEAD TIME & HIGH AFTER SALE SERVICES

Design

HIGH

LOW

LOW HIGH Technology

4

3

7

8 2

1

5

6

Lead times

HIGH

LOW

LOW HIGH After Sales

4

3

7

8

2 1

5

6

2003 Compact Passenger Cars Rating

Frontal Star Rating based on risk of head & chest injury

Side Star Rating based on risk of chest injury

Make &

Model Driver Passenger Front Seat Rear Seat

Rollover Resistance

Rating

Micro Compact Cars smartcar 2-DR

2003 Acura RSX 2-DR. w/SAB

Not Tested

2003 Chevrolet Cavalier 2-DR.

2003 Ford Focus 2-DR.

2003 Ford ZX2 2-DR.

2003 Honda Civic 2-DR.

2003 Honda Civic 2-DR. Hatchback

2003 Honda Civic 2-DR. w/SAB

2003 Mitsubishi Eclipse 2-DR. HB.

Seat too Small

2003 Pontiac Sunfire 2-DR.

2003 Porsche Boxster 2-DR w/SAB

Not Tested Not Tested Not Tested Not Tested Not Rated

2003 Toyota Celica 2-DR

Seat Too Small

2003 Volkswagen New Beetle 2-DR. w/SAB

RECOMMENDATIONS AND FUTURE TRENDS Trends With depletion of oil reserves and increase in pollution levels all over the world, governments and communities are awakening to the several benefits of ELECTRIC VECHILE technology:

• They are non-polluting and quiet. • They can be charged easily, saving owners the need to queue at gasoline stations. • EVs are mostly charged at night, when power consumption is low, thus making

more efficient use of our Power Plants. • They are easy to service and maintain. • Most EVs are compact in size and are easy to drive, maneuver and park in

congested cities. • EVs have a very low operating and maintenance cost.

Electric Vehicle transportation is more than a vision for the future REVA cars are an Excellent example of small and compact electric cars. Apart from elcctric car the trend is towards hybrid cars which run on gasoline as well as solar or electric energy Recommendations:

• MCC should start the manufacturing of compact buses and trucks to further easy the traffice on the roads. Small size of such buses and trucks will enable them easy to dirve, meanover and park.

• The company should work on the elcetric cars because that will attract

enviornment lovers and will significantly decrease the operating costs

• MCC should make its positioning very clear to the Target market segment which includes students, business people and working ladies along with the old people

References

Philip Kotler; Marketing management www.smart.com www.bbc.com www.yahoonews.com www.reva.com