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International growth strategies bring a number of challenges for business organizations. They not only have to analyze the business environment in the new markets, but also formulate effective international marketing strategies which enable them to compete in a competitive and profitable way (Cadle, Paul, & Turner, 2010). International expansion may become a disaster if an organization tries to penetrate the market without a careful analysis of the external environment as well as of its own internal strengths and competencies (Frederic, Agnes, & John, 2011). A company can either choose to export its products in the new markets or setup its manufacturing units keeping in view the feasibility of its business in those markets.
This paper acquaints the reader with the international marketing strategies of DaimlerChrysler for its Smart Car brand which is to be introduced in a new Asian market. The major focus of the paper is to analyze all the environmental forces which can affect this international expansion and recommend strategies which can help the company in choosing the most attractive target markets to export these cars.
DaimlerChrysler & Smart Car: Overview
Daimler AG (formerly DaimlerChrysler) is a German multinational automobile manufacturer. Established in 1994, Daimler has become one of the most recognized brands in the Global automobile industry. Since its inception, Daimler has introduced a number of cars for its worldwide customers. It is specialized in producing all types of car brands, including luxurious cars, racing cars, personal or family cars, small size cars, etc. This variety of cars enables it to target all the income groups and classes of the society. The most successful car brands of DaimlerChrysler include Mercedes Benz, Dodge, Smart, Chrysler, and Jeep.
'Smart' is the brand name given to the mini or small size cars which DaimlerChrysler has been producing for a specific target market for more than one decade. The 1st Generation Smart Car, Smart City-Coupe (now renamed as Smart Fortwo) was introduced in late 1998 in the local market. With the passage of time, DaimlerChrysler AG has penetrated the potential markets in other countries with a variety of latest smart car models. The United States was 37th target market in which DaimlerChrysler successfully penetrated as a part of its international expansion strategies. However, it has not fully captured the Asian region which can be a potential market for its Smart Cars brand. The company can establish its presence in the attractive Asian markets by promoting its brand with the strengths of its core competencies and competitive advantages (Smart, 2012).
The Competitive Advantage of Smart Cars in Asia
DaimlerChrysler is a well-recognized brand in the world's automobile industry. Its top brands have won the consumer's trust and loyalty with astonishing designs, fuel efficiency, and excellent performance on the road. Among other highly appreciated brands of DaimlerChrysler, Smart car has its own place. Smart car is currently being sold in Japan, China, Hong Kong, India, and Indonesia. These are among the most potential markets in the Asian region. Smart has made a large number of brand lovers in these markets in a very short period of time. The biggest competitive advantage of Smart car which DaimlerChrysler uses as a weapon against its competitors is the wide variety of cars in this single automobile category (Kurtz, MacKenzie, & Snow, 2010). Smart Forfour, Smart Roadster, Smart Crossblade, Smart Fortwo, and Smart Fortwo ED are the few smart car models which are manufactured and sold in these markets and have a high level of acceptability among their consumers (Smart, 2012).
Through its competitive advantage of wide product line, Smart Car has greatly contributed towards improving the financial performance of the company (Paley, 2006). Moreover, DaimlerChrysler uses Hydrogen Fuel Cell technology in its cars which significantly improves their fuel efficiency and ensures a smooth performance on the road. Smart car can greatly benefit from its competitive advantage in the new Asian markets where it intends to penetrate in the near future. There are various Asian markets which are still unreached or partially targeted by DaimlerChrysler with its mini Smart car category. To find the most feasible countries and markets for its international expansion in the Asian region, DaimlerChrysler will have to analyze the entire business environment of the region along with the specific environmental forces which are different for each Asian country (Kurtz, MacKenzie, & Snow, 2010).
PESTLE Analysis for Smart Car
DaimlerChrysler intends to strengthen its position in the Asian region by targeting more potential markets for manufacturing and export of its smart cars. The company has already captured the Chinese and Japanese markets which have been giving it high sales revenues and rapid business growth, especially for the last 5 years. India, Indonesia, Thailand, Malaysia, Pakistan, Korea, Turkey, and Kuwait are also attractive markets for its expansion strategies. Keeping in view the high level of demand in these countries, DaimlerChrysler can increase its export of smart cars in their unreached markets (Frederic, Agnes, & John, 2011). This section presents a complete environmental analysis of these Asian markets in the light of PESTLE Analysis which can help the company in predicting whether its car will be successful in the new markets or not.
1. Political Forces:
Each of the Asian countries has different political environment than other countries. The political stability and governmental patterns in a country largely affect the way automobile companies run their businesses (Lancaster & Withey, 2007). DaimlerChrysler intends to export its smart cars in new potential markets in Asia. Therefore, it will have to analyze what are the political situations in these markets. Japan, China, Hong Kong, and Indonesia has sound political environment for foreign investors. The governments of these countries encourage new investors from all over the world to come and set up their manufacturing plants or export their manufactured products in their markets (Frederic, Agnes, & John, 2011). There are also some South Asian and Middle Eastern countries which have comparatively poor political conditions. Setting up manufacturing plants in these countries can bring severe challenges and environmental issue for Smart Car (Jenny & Scammon, 2010).
DaimlerChrysler will also have to analyze the Export policies of all the target countries before setting up its business in their markets. It is because a government can put ban on the import of foreign products any time, which can badly hamper the whole business setup at once. Therefore, it is imperative for DaimlerChrysler to analyze the political behavior of the present government as well as predict positive or negative response of the new government in every target country (Lancaster & Withey, 2007). It will help DaimlerChrysler to judge its sustainability and long-term success in that country. The Law and Order situation in a country must also be favorable for the foreign investors if the DaimlerChrysler wants to establish a strong presence in that country (Kotler, Brown, Burton, Deans, & Armstrong, 2010).
2. Economic Forces:
The Economic environment constitutes all those forces which have a direct or indirect impact on the income and expenditures of a business organization. If DaimlerChrysler has to target more than one country at a time to export its Smart Car, it will have to analyze the economic forces for all those countries separately. Japan, Indonesia, and China have a stable economic environment which greatly facilitates the foreign investors in reducing their expenditures and increases sales revenues (Frederic, Agnes, & John, 2011). On the other hand, India, Pakistan, Hong Kong, and other countries in the South Asian region have comparatively critical economic conditions. In order to set up its business in the Asian region successfully, DaimlerChrysler will have to make feasibility analysis for all the markets individually (Lancaster & Withey, 2007).
The economic forces which can impact the export of its smart cars in the Asian countries include exchange rates, inflation, unemployment, GDP growth, and the overall industry patterns. In this international expansion strategy, the strongest economic force for the export of smart cars will be the exchange rates of target countries (Lancaster & Withey, 2007). DaimlerChrysler can make its exports profitable if the exchange rates of these countries are stable and favorable for the home currency. The second economic force is rate of inflation in the target countries. A high rate of inflation can make the costs of doing business higher for the business which negatively impacts the profitability (Kotler, Brown, Burton, Deans, & Armstrong, 2010).
For this export strategy, inflation will increase the administrative, management, transportation, and legal charges for DaimlerChrysler. The GDP growth rate will also give a true picture of the industry patterns which can help DaimlerChrysler to predict the demand and supply situation in each target country. Although DaimlerChrysler cannot control these economic forces, but it can mold its business operations to best fit the consumer requirements and industry patterns in order to make high sales revenues and achieve success in the new target markets (Paley, 2006).
3. Social and Demographical Forces:
The major target market for smart cars in the Asian region is the youngsters and the salaried class. Smart…[continue]
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