POLITICALLegislation

Environment - The EU are bringing in a new legislation that the average CO2 emissions from new European cars must be cut to 130g/km by 2015.

Competition - legal restraints on competition within the EU car industry are expected to drop substantially over the next 5 years

Taxes and Duty- MOT, price increased. Road tax directly linked to amount of emissions

Subsidies- The Government has today met the automotive sector to discuss the help available to the stricken industry. Commenting, David Frost, Director General of the British Chambers of Commerce (BCC), said

ECONOMICRecession/Boom. Due to the current

economic crisis Mercedes along with other car manufacturers are finding it increasing difficult to sell cars and many have even closed plants.

Exchange Rate- Euro v £ Could make Mercedes more expensive in the UK

SOCIAL The social factors can be broken down according to the following

demographics: Age Gender Income

Which age group are interested in the Mercedes company? Mercedes products are mainly targeted at middle aged people. They

are not very popular with youngsters as the brand is expensive and is very hard to get insurance on at such a young age.

What Social class are most likely to purchase Mercedes cars ? Due to their relative expense, Mercedes are targeted at people of

middle to high incomes. Unlike Vauxhall, for instance, Mercedes doesn't offer different prices ranging from high to low so the products don’t really appeal to consumers with a low income.

SOCIALAre males or females more popular with the

Mercedes company?Mercedes products target are both males and females

. They design cars to fit both male and female specifications.

http://www.youtube.com/watch?v=MgVB5HRrhtM

Mercedes also needs to focus on trend. Mercedes is recognised as a quality, expensive,

corporate, upmarket and mature brand. So need to make sure there update with fashion, technology and social trends, such as the green movement, to maintain its image. This could be done through research and development .

Another factor Mercedes needs to think about is Advertising . Mercedes tend to promote there brand on Bill boards, Business

newspapers they also offer there own Mercedes magazines

TECHNOLOGICALSafety- Advances in technologies such as

shatter-proof windscreens, air-bags, crumple zones and collapsible steering columns have made it possible to manufacture safer cars. Safety sells

Plant Efficiency- New Production methods that improve efficiency.

E- commerceGizmos

SWOT ANALYSISStrengthsStrong brand nameOwners clubSuccessful F1 teamGood Resale ValueGood relationship with

the government

WeaknessesPrice

SWOT ANALYSISOpportunitiesDevelopment of new

modelsEnvironmentally

friendly cars

ThreatsThe current economic

crisisStrong competitorsNew entrants into the

market

RIVALRY AMONG FIRMS

THREATS OF NEW ENTRANTS

THREATS OF NEW ENTRANTS

BARGAINING POWERS OF

BUYERS

BARGAINING POWERS OF SUPPLIERS

PORTER'S 5-FORCES ANALYSIS

RIVALRY AMONG FIRMSThe rivalry among firms in the same market as Mercedes-

Benz is highly intense.The main competitors within this segment include:

BMW AUDI JAGUAR ASTON MARTIN ALFA ROMEO

Rivalry has led to firmsproducing similar range ofvehicles, as well as expandinginto new products or services e.g.financial services, alcoholic products etc.

THREAT OF NEW ENTRANTSSegment is at low risk to the threat of new entrants.This could be down to the following reasons:

PRESTIGE: existing companies have set up their prestige over several years of providing quality products in the market.

MATURE/SATURATNIG MARKET: the segment is at a saturated point where growth isn't as high as the rest of the market.

SET-UP COSTS: the set up costs are high in this segment.

CUSTOMER BASE: consumers within this market are likely to have developed tastes for specific brands

THREAT OF SUBSTITUTESMercedes-Benz has numerous substitutes that it has to be

weary of. These include:

ALTERNATIVE TRANSPORT: this includes means such as buses, trains, motorbikes and planes.

ALTERNATIVE PRESTIGE PURCHASES: because Mercedes-Benz vehicles are considered luxury products, they also have to be cautious of other prestigious products that consumers could buy instead of ‘fancy’ cars. These include: Designer Clothing Expensive/Collector’s Furniture Holidays Luxury Homes Art e.g. Paintings, Sculptures etc. Jewellery Boats/Yatches

BARGAINING POWER OF SUPPLIERSThe bargaining power of suppliers is influenced by

numerous factors. These include the position of rival suppliers, the quality of goods and services supplied; the demand for goods and services; and the supply of goods and services.

Mercedes-Benz’s suppliers provide them with an array of raw materials required in car manufacturing, including metals, leather, electronics, paints and rubber.

Additionally, since Mercedes-Benz prides its products on their quality, suppliers could increase their bargaining power through emphasizing the superiority of their goods.

BARGAINING POWER OF BUYERSMercedes-Benz deals with two types of consumers, each

with their own bargaining stance:

COMMERCIAL: these are large scale buyers e.g. companies who purchase fleets. Their bargaining power can be increased by the scale of business they could offer the company and the presence of alternatives.

INDIVIDUAL: these are personal buyers. Their bargaining power is usually less than that of their commercial counterparts, however, the strength of rival brands and provision of substitutes are key factors that can affect their buying position.

PORTER’S GENERIC STRATEGIESThese are the three strategies that

businesses apply to achieve and maintain their competitive advantage.

When applied to Mercedes-Benz’s target market, it shows the positioning of both their direct and indirect competition.

Strategic ScopeThe strategic scope shows the size and composition of the

target market. In Mercedes-Benz's case, the vehicle market in the UK is worth £33bn in new cars and £35.1bn in used cars. Of this, Mercedes-Benz have a low market share, however, this is compensated by the revenue generated through their medium to highly priced products.

The overall market contains various specifications of vehicles, of which Mercedes-Benz is represented in all of them. This means that across the board, the firms market share will differ from range to range.

Strategic StrengthStrategic strength looks at the core competency of the

business.

The core competency refers to how well the firms conducts it 'basic' trading roles. Michael Porter (1980) pointed out 3 values that made up successful core competency: Provides consumer benefits Not easy for competitors imitate Can be applied to a variety of products and markets

Of the core competencies, the two methods that are used are: Product Differentiation Product Efficiency

MERCEDES GENERIC STRATEGYThrough utilising Porter's generic strategy, we have been

able to identify that Mercedes-Benz's generic strategy targets the following market: NARROW MARKET - Mercedes' consumers fall within the

minority of the market i.e. those of higher incomes, who want a luxurious product to associate with their lofty status.

DIFFERENTIATION FOCUS - Mercedes' strategy to distinguish them from rivals is one of differentiation, through providing both a luxurious vehicle, as well as one that is up to par with the latest performance figures.

MERCEDES-BENZ GENERIC STRATEGYCOST DIFFERENTIATI

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Cheap & 2nd Hand Cars

Electronic Cars, Reliant Robins etc.

Mercedes & Direct Competition

Classic/Rare Vehicles & Indirect Competition

STRATEGIC FITStrategic fit refers to how a firm adapts its business

practices to deal with changes in the external environment.

As the motor-vehicle market is currently in a slump, it is essential that Mercedes-Benz react appropriately to maintain their competitiveness in the market.

STRATEGIC FIT Taking into account Mercedes' strengths, it is well equipped to deal with the

current changes in the external environment.

Their strong brand name ensures that up-and-coming professionals will always aspire to own a Mercedes car to adopt the prestige associated with the brand. This will stay constant even throughout times of economic upheaval.

Additionally, the good resale value of their products will mean that buyers will not be as worried about the depreciation value of the car should circumstances force them to sale it on.

Lastly, the businesses good relationship with the government and EU will mean that they could rely on tax reductions and stimulus packages should production be heavily affected by the motor vehicle crisis.

On the downside, the price will still be a hindrance when trying to attract new custom, especially given the hardship experienced when trying to obtain finance from creditors.

PRODUCT SUGGESTIONWe would suggest that Mercedes-Benz

considered developing a product that would be suited to today's economic climate and social trends.

Such a product would be relatively cheap (although not so cheap as to compromise their luxury status), have low running costs and be highly eco-efficient.

Economy

Recession

Inflation

Reduce Costs

Interest rates

Less Savings

Difficult to get Finance.

Product

Smaller Engine

Smaller Car

Suitable Price

Not expensive range

ADVANTAGESThe new product has wider target market.

Attract consumers with a high, as well as middle-low incomes.

Smaller engine will help reduce petrol cost.

Insurance will be cheaper

Has a lot of potential to be successful.

DISADVANTAGESMay compromise Mercedes-Benz's luxury

product status.Research & Development into product could

be costly, as well as manufacturing costs.May replace existing products in their range

portfolio.