Mercedes Benz C300 marketing strategy and competitive analysis

Mercedes Benz C300 Marketing Plan

Mercedes Benz Presentation

Current Marketing Situation

Mercedes Benz Market

Mercedes Benz Target Segments

Mercedes Benz Product Review

Mercedes Benz Competition

Mercedes Benz Distribution Channels

Marketing Strategy

Product Strategy

Price Strategy

Distribution Strategy

Promotional Strategy

Budget

The following pages will focus on discussing Mercedes Benz's marketing situation. The company's financial situation will also be presented bellow. The beginning of the paper is centered on the company's history, on its present situation, and also on future trends that the company is expected to follow. For a more developed view on the company's situation, a presentation of the worldwide car industry will be discussed. Other than this, the paper continues with an analysis on the company's market, its market segments, and its competitors. A SWOT analysis will also be presented. The company's marketing strategy will be analyzed in terms of product, price, distribution, and promotional strategy. The conclusion will summarize some of the recommendations that will be discussed throughout the following pages.

Introduction

Although the car industry has reached its peak in mature markets like North America, Europe, and Japan, the expansion process of this industry still continues due to emerging markets like China and India. With North America being the largest national market, it is expected that China will soon become the second largest national market, outnumbering Japan. It is also expected that the following decades will be characterized by a significantly increased production.

Another characteristic of car industry's future is related to flexibility and diversity. Experts state that microelectronics will be very common in the future. The energy conservation issue, which is present, or at least it should be, in every aspect of our lives, will determine certain changes in the car industry as well. These changes refer to alternative fuel. Currently, there are more and more hybrid vehicles. They present a series of obvious advantages for the environment, but there is also a downside regarding their price, which is about $3,000-5000 higher than the price for regular vehicles. However, it is clear that both car producers and their customers will be affected by this issue.

Specialists also state that in the future vehicle producers will use different materials like improved plastics or composites that are supposed to reduce vehicle weight, fuel consumption, and will also allow for new designs to be produced.

Another future trend in the car industry refers to a more visible implication of the European Union in the car industry. The assets of the top ten multinational vehicle producers represent 28% of the assets of the world's top 50 companies, 29% of their employment and 30% of their total sales (EMCC, 2004).

Mercedes Benz Presentation

Mercedes Benz is a German automotive company and one of the most prolific companies worldwide. The company was founded in 1871 by Karl Benz and in 1890 by Gottlieb Daimler and Wilhelm Maybach. Currently, the company is a division of Daimler AG, and the company's headquarters are located in Stuttgart, Baden-Wurttemberg, Germany.

The company's creator, Karl Benz, holds the patent for the motor wagon, and is also responsible for introducing the first four-stroke engine (Wikipedia, 2007). Even more, Karl Benz is considered to be the inventor of the modern automobile. Due to the World War I, the economic period that followed determined Benz's and Daimler's companies to sign an Agreement of Mutual Interest that was supposed to be valid until the year 2000. In 1926, the two companies decided to merge, becoming Daimler-Benz.

After the merger, the company started to be known as Mercedes-Benz, after one of its previous car models. Due to the merger, the newly formed company needed a new logo as well, logo that needed to incorporate the names of the two former companies that merged into Mercedes Benz. This is when the three-pointed star was chosen to represent the new company, representing the ability of the company's motors on land, air, and sea use. This image was completed with the traditional laurel wreath symbol. The company's current logo also includes a plain ring that was first used in 1937.

Over the year, Mercedes Benz participated in a series of alliances. One of these alliances was a distribution agreement with the American Studebaker-Packard Corporation that Mercedes Benz entered in 1958. This agreement allowed Mercedes Benz to enter the U.S. market by using Studebaker's dealer network. The agreement was active on the U.S. territory until 1963 only.

Mercedes Benz is one of outsourcing's promoters, by taking its production in several world areas like: South Africa, Thailand, Malaysia, United States of America, Argentina (where the company opened the first factory abroad, producing buses, trucks, and vans), Brazil, India, Nigeria, United Kingdom (where the SLR model is built at the McLaren Technology Center), Egypt, Austria (where G-Class is produced), China, Turkey, South Korea (where Musso and MB100 models are produced by Ssang Yong Motor Company), Federation of Bosnia and Herzegovina, and Mexico.

Regarding Mercedes Benz automobiles distribution, the company has dealerships in over 130 countries. The company operates through both a worldwide group of dealers and directly from the factory. For European customers, Mercedes Benz offers a distinct delivery option.

The models produced by Mercedes Benz in 2007 are: A-Class Hatchback, B-Class Sports Tourer/Hatchback, C-Class Sedan, Sports Coupe and Wagon, CL-Class Coupe, CLK-Class Coupe and Cabriolet, CLS-Class 4 Door Coupe, E-Class Sedan and Wagon, G-Class SUV, GL-Class SUV, M-Class SUV, R-Class Sports Tourer, S-Class Sedan, SL-Class Roadster, SLK-Class Roadster, SLR-McLaren High Performance Coupe and Roaster. The range of vans produced by Mercedes Benz include: Vito, Sprinter, and Vario. The most successful trucks produced by the company are: Atego, Axor, Actros, Econic, and Unimog. The buses produced by the company are designed for Europe and Asia, mainly. Following environmental trends, Mercedes Benz introduced seven hybrid models at the 2007 Frankfurt motor show, including F700, a concept car that combines hybrid features with the DiesOtto engine.

In the United States Mercedes Benz's site reaches 3,803,240 sq m (966 acres), including a plant of 298,700 sq m. The initial investment in the entire location was of $400 million (MBUSI, 2007). Later, the investment expanded to $600 million. The U.S. plant is consisted of one expanded body shop, two paint shops, and two assembly shops, in which 4,012 employees work. Due to the expansion, the total annual production of the U.S. plant reaches 173,600 units. Currently, the plant produces M-Class, R-Class, and GL-Class models. Mercedes Benz U.S. International exports over $1 billion in finished product.

Mercedes Benz's new generation C-Class Sports models are considered to be "proof that dynamic styling, exceptional comfort and thrilling performance can go hand in hand with safety and practicality" (Mercedes Benz, 2007). The 2008 C300 Sport Sedan is expected to leave a strong impression in the customers' mind. The exterior of C300 is impressive, dynamic, sporty, fresher, and more youthful. As always, Mercedes Benz makes proves of its innovative abilities regarding safety, as C300 is equipped with both Anti-lock Braking (ABS) and Brake Assist (BAS). The front and rear suspension are improved, allowing for greater dynamism and handling. In terms of comfort, Mercedes Benz in known for making no compromises, as the C300 offers plenty of lateral support, and front seat Easy Entry function as standard. Even more, C300 offers at no extra cost an additional man-made leather upholstery option. The forecasted price of C300 Sport Sedan will reach $31,975.

Mercedes Benz Market

From a geographical point-of-view, Mercedes Benz is present on both internal and external markets. The company has an international presence that is continuously expanding. Mercedes Benz's market is strictly urban. The company's general market phase is the maturity one, while the luxury and sports vehicles market is in the growth phase. The company's international markets include: Europe - United Kingdom, France, Albania, Austria, Belarus, Belgium, Bosnia and Herzegovina, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, Gibraltar, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Lithuania, Luxembourg, Macedonia, Malta, Montenegro, Netherlands, Norway, Poland, Portugal, Romania, Russia, Serbia, Slovakia, Slovenia, Spain, Sweden, Switzerland, Turkey, and Ukraine; Asia, United States, Latin America, Africa, and Oceania. The most profitable international markets for Mercedes Benz are by far Europe and the United States. Emerging markets in Asia, like China and India, present great potential that could be exploited by the company.

Mercedes Benz Target Segments

Mercedes Benz's main segment of customers is consisted of male aged 45 to 55, with high financial possibilities, high education level, and high social position. The company's luxury models address especially businessman and celebrities, which are able to afford the company's products. Mercedes Benz's products are a symbol of tradition, luxury, safety, they inspire success. In terms of luxury products, the higher the price, the more appreciated the product is. And Mercedes Benz luxury vehicles make no exception. Customers that buy these products are trying to achieve or to prove a certain high status that is proven by the luxury car they drive.

One of Mercedes Benz's secondary customer segments is consisted of male aged 35-45 years of age, with increasing financial strength, high or ascending social status, and medium to high education level. The company's sports models and smart vehicles that are commercialized at smaller prices allowed Mercedes Benz to create a loyalty feeling among this segment of customers as well.

Another secondary customer segment that Mercedes Benz is trying to address refers to male aged 25-35, with medium to high incomes, medium to high social status, medium to high education level, and a quite sophisticated lifestyle. Through its C-Class models, Mercedes Benz is trying to build o position among younger customers that generally prefer BMWs over Mercedes. The 2008 C300 is expected to be very well received by customers belonging to this segment and to increase the company's customer number.

Mercedes Benz Product Review

The table bellow presents the financial evolution of Mercedes Benz over the last three years:

Mercedes Benz Financial Evolution

06/05% change

Operating profit (loss)

Revenues

Investments in property, plant, and equipment

Research and development expenditure

Unit sales

Employees

Note: the values are expressed in millions of €.

The unit sales structure is the following: A-Class, B-Class - 23%; C-Class, CLK-Class, SLK-Class - 26%; E-Class, CLS-Class - 20%; S-Class, CL-Class, SL-Class, SLR-Class, Maybach - 9%; M-Class, G-Class, GL-Class, G-Class - 14%; smart - 8% (Daimler, 2006).

The unit sales structure is presented in the table bellow:

Percentage in total sales

A-Class, B-Class

C-Class, CLK-Class, SLK-Class

E-Class, CLS-Class

S-Class, CL-Class, SL-Class, SLR-Class, Maybach

M-Class, G-Class, GL-Class

Smart

Note: the values expressed in this table were presented in Daimler's 2006 Annual Report.

Mercedes Benz Competition

Mercedes Benz's strongest competitors are: Audi, BMW, Jaguar, and Lexus.

Audi was established in 1899 by August Horch. The first car was completed in 1901. Audi's four rings logo signifies one of Germany's oldest automobile manufacturers, and also, the 1932 merger between four formerly-independent motor vehicles manufacturers: Audi, DKW, Horch, and Wanderer. Currently, the newest models of Audi include: Audi A4, Audi A5, Audi R8, Audi TT lounge, Audi Q7 globe. Audi's target customer segments are similar to those of Mercedes. Audi has a very strong position on the Chinese market, still managing to be the leader. The company's strong position on this market is due to smaller prices for Audi's vehicles, since they are produced in China.

The BMW Group is consisted of three brands: BMW, MINI, and Rolls-Royce Motor Cars. The company successfully addresses the premium sector of the international automobile market. BMW's competitive advantage resides in the quality of its products. Also, BMW is preferred by younger customers over Mercedes Benz. On the 25-35 years of age customer segment, BMW has a very strong position, unlike Mercedes.

Jaguar was established in 1922 by William Lyons. Jaguar's most important market is the United States one, where customers are more loyal to local brands. Jaguar does not address the 25-35 customer segment, which is a positive situation for Mercedes Benz.

Mercedes Benz Distribution Channels

Mercedes Benz has a very well developed and diversified retailer network. The company's official suppliers include: the PRA, the SPRA, the PCA, the PFA, and the Stella Artois Championships. Besides the retailing system, Mercedes Benz vehicles can also be purchased directly from the factory.

SWOT Analysis

Mercedes Benz's strengths are presented bellow:

The Mercedes Cars Group is a technology leader in the automotive industry, which allows the company to set new standards for safety and comfort

Superior products and customer experience

Leading brands

Global presence and network

Operational excellence

High performing employees

Continuous portfolio diversification

High recognition on the market

Mercedes Benz presents the following weaknesses:

High prices that only a small percentage of the population can afford

Rigidity

Slow reaction to competition

Lacks the ability to address to younger customer segments

However, Mercedes Benz still has a series of opportunities that the company can benefit from, like:

Emerging markets in Asia, like China and India, which present great potential that has not yet been exploited

Production outsourcing possibilities - Mercedes Benz could follow Audi's example and start outsourcing its production process in regions like China and India, which would determine lower production costs that would allow the company to decrease its high prices and to become more competitive

The following threats must be taken into consideration by Mercedes Benz:

The company is facing very strong competition from Audi and BMW, especially. The company's competitors have been discussed above Mercedes Benz is losing ground on new markets in favor of its competitors

Objectives and Issues

The main objective for the next period for Mercedes Benz consists in consolidating the company's position in the United States and Europe. These are Mercedes Benz's most important international markets. However, the company's position on these markets is slightly threatened by aggressive strategies belonging to its strongest competitors, Audi and BMW. Unlike the other two companies, Mercedes Benz is more rigid and, therefore, it should increase its flexibility in terms of general company strategy, marketing techniques, and the vehicles that the company offers.

A secondary objective for Mercedes Benz consists in the attempt to address a younger customer segment that is consisted of male aged 25-35. This segment is basically owned by BMW, the leader on this customer segment. BMW is preferred by younger customer, as Mercedes Benz is considered to address older age categories. The price is also favorable for BMW, being lower than Mercedes Benz's prices. As a consequence, in its attempt to gain younger customers, Mercedes Benz will launch the C300 sedan, which is expected to address the younger segment of customers.

Marketing Strategy

Mercedes Benz should try to change the general direction that the company's strategy must follow. The company's general marketing strategy is usually a traditional and rigid one. This why most people think that Mercedes Benz is a brand designed for older categories rather than for younger ones. Of course, it is always a good idea to promote a company's tradition and excellence in the field, but the strategy should not insist a great deal on this issue, it should not be centered on such values. Instead, the Mercedes Benz strategy should address more to younger people, as it must be appealing to younger categories as well. This issue must be incorporated in every aspect of the marketing mix.

Product Strategy

The product strategy to be followed by Mercedes Benz in the future should be centered on the C-Class models and especially on C300. The company should develop products that are more appealing to younger customer segments, so that it develops tradition and loyalty among these customers. The company should outsource an important part of its production in areas like China and India, where production costs are significantly lower. Lower production costs will allow the company to promote smaller prices for its vehicles. Products with lower prices will be able to address customers with medium to high incomes as well. This is another method through which the company can increase its customer numbers. This model was implemented by Audi on the Chinese market and it has proven to be quite successful, since Audi is the leader on the Chinese luxury and sports vehicles market. Also, Mercedes Benz should increase and diversify the free services offered to customers that purchase the company's products.

Price Strategy

Price related issues have been discussed above. As a conclusion, Mercedes Benz's new models should have lower prices, which would allow the company to gain competitive advantage over its competitors. The easiest way to do so is by outsourcing production to China and India. Lower prices would allow the company to expand its customer number and to have access to less developed international markets.

Distribution Strategy

Mercedes Benz has a very strong distribution strategy that relies on an extremely diversified retailer network. The waiting time for receiving a purchased car by the customers is extremely reduced. Therefore, the company should follow the current distribution strategy that seems to be successful.

Promotional Strategy

The promotional strategy should focus more on the younger segment. It is recommended to implement an aggressive promotional campaign. Through the promotional campaign the company should try to establish a more modern image in the mind of its existent customers and potential customers as well. The campaign should focus on the new C300, which should be linked to other C-Class models.

Budget

As mentioned above, the marketing strategy for Mercedes Benz should be an aggressive one. This will require increased resources in terms of time, human resources, and financial resources. It is recommended that the budget of the marketing campaign to be calculated as a percentage of sales.

Conclusion

Mercedes Benz is one of the most important players on the automotive market. The company has made proof several times of its innovation ability, which helped the company to become extremely successful and to maintain this level of success. I certain international markets, Mercedes Benz is the leader, while in others the company strives to go in line with the competition. The company's tradition and the quality of its products are responsible for the number of loyal customers that the company currently owns. However, there is still room for improvement, as there are certain customer segments in which Mercedes Benz is not one of the favorite brands, like the younger sector. In addition to this, emerging markets in China and India present tremendous growth opportunities that the company could exploit in terms of new customers and of production outsourcing.

Reference List

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Mercedes Benz (2007). Wikipedia, the free encyclopedia. Retrieved November 12, 2007 at http://en.wikipedia.org/wiki/Mercedes-Benz.

MBUSI Facts and Figures (2007). Mercedes Benz U.S. International. Retrieved November 13, 2007 at http://www.mbusi.com/pages/corporate_facts.asp.

Annual Report (2006). Daimler AG. Retrieved November 13, 2007 at http://www.daimler.com/dccom/0-5-7173-1-727149-1-0-0-0-0-0-9507-7164-0-0-0-0-0-0-0.html.

A thrilling performance (2007). Mercedes Benz UK. Retrieved November 13, 2007 at http://www2.mercedes-benz.co.uk/content/unitedkingdom/mpc/mpc_unitedkingdom_website/en/home_mpc/passenger_cars/home/products/new_cars/dcuk_verccoupe/features.html.

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Car Market Competition Moves up to Luxury Brands (2005). Xinhua News Agency. Retrieved November 1, 2007 at http://www.china.org.cn/english/BAT/119038.htm.

Woodyard, Chris (2006). Luxury dealerships soup themselves up. USA Today online. Retrieved November 14, 2007 at http://www.usatoday.com/money/autos/2006-11-15-luxury-cars-usat_x.htm.

Danziger, Pam (2007). On Mercedes Benz's Luxury. Small Business Network, Inc. Retrieved November 14, 2007 at http://www.smallbusinessadvocate.com/cgi-bin/articlesbybtsub.cgi?art=1111.