The two major rivals on the Chinese market are BMW and Audi. As a consequence, BMW has cut its retail prices in 2005 for its three and five series sedans by 12% or 13%, which caused a decrease of $12,048 for BMW 530i (Xinhua News Agency, 2005).
As specialists in the field have predicted, since 2005 the Chinese luxury and sports vehicles market has diversified, and so did the competition. Due to production outsourcing, a greater number of premium sedans have started to be produced in China, due to lower manufacturing costs. The Chinese premium sedan sector is dominated by Audi, which sold approximately 50,900 units in 2004. However, in the past few years the price of import premium sedan has exploded because of the increased car import license. This situation favors the local producer Audi, whose prices were considerably lower than those of import sedans.
As one can easily observe, Mercedes Benz is not yet a strong competitor on the Chinese Market. However, there is still room for improvement, as China has a tremendous market potential that has not been explored yet. Luxury sedans only account for 8% of the total auto market in China. Since Mercedes Benz entered this market in 2005, the company did not have enough time to create a strong position on this market. However, the release of the 2008 C300 should be considered as an opportunity that must be taken advantage of so that the company establishes a stronger presence on this market. It is expected that Daimler will raise its output of Mercedes Benz E-Class and C-Class sedans to 25,000 units and will open a new workshop located in Beijing.
Current trends on the sports and luxury vehicles market predict that this market segment will increase even more in the following years. Experts state that the luxury segment will account for 17% of the car market by 2012. In order to increase its market share, Mercedes Benz puts at its clients disposition a series of benefits, like free car washes, airport parking up to 30 days, and free Mercedes loaners, since "the luxury segment is all about service, personalization and building a world-class guest experience," as Garth Blumenthal, one of the company's managers, has stated.
Regarding Mercedes Benz, the company's officials have stated that 2004 was the best performing year in terms of sales volume with 221,610 units sold (Danziger, 2007). This increase in sales was due to the new entry near-luxury C-Class model, which was sold at a price of $26,000-$54,000. Compared to 003, unit sales for C-Class models have increased up to 5%, accounting for 31% of the total volume sold in the United States by Mercedes Benz. Experts say that the new model of C-Class is better for the long-term success of the company and the brand as well. It seems that more customers have been gained due to C-Class models, which are more affordable.
Mercedes Benz's brand positioning strategy relies on building a player image across a more expansive range of potential car buyers, instead of excluding the brand.
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
Operating profit (loss)
Investments in property, plant, and equipment
Research and development expenditure
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
C-Class, CLK-Class, SLK-Class
S-Class, CL-Class, SL-Class, SLR-Class, Maybach
M-Class, G-Class, GL-Class
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.
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
Global presence and network
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
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…
Sources Used in Document:
The automotive sector - what future? (2004). European Monitoring Center on Change. European Foundation for the Improvement of Living and Working Conditions. Retrieved November 12, 2007 at http://www.eurofound.europa.eu/emcc/content/source/tn04005a.htm?p1=sectorfutures&p2=null.
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.