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Why Mercedes Benz is unlikely to expand into Africa and Japan

Mercedes-Benz, the luxury brand of Daimler AG, has adopted a multinational strategy in its current incarnation. It has branches virtually all over the world, but Japan and Africa are notable exceptions. On the surface, this may seem curious, given that Japan has long been known as a nation with a strong tradition of producing cars and is also a highly industrialized nation with a great degree of wealth. Africa is part of the developing world, along with India and China, which means that it is poised to offer a fairly extensive market for new cars to meet unmet demand. But there are sound infrastructure and cultural reasons that Mercedes-Benz has chosen not to extend its outreach into those nations.

First and foremost, Japan is already dominated by its own car manufacturers, including Toyota, Nissan, Mitsubishi and Honda, along with many others. Japan pioneered the revolutionary JIT (just-in-time) inventory system, in which car manufacturers would cultivate close, exclusive relationships with suppliers, enabling them to keep a lean supply chain and order only what they needed. "No longer were the preceding processes making excess parts and delivering them to the next process" (Kaban system, 2012, Toyota). Because of the close-knit relationships that existing Japanese manufacturers have with Japanese car companies, it would be very difficult for Mercedes to encroach upon these bonds, particularly as an outside 'foreign' company. Japan has a notoriously insular culture and a foreign manufacturer attempting to penetrate one of the nation's most beloved industries and gain traction amongst suppliers used to engaging in exclusive relationships would be a near-impossibility.

Even finding workers who would be willing to forego employment in Japan's most choice automotive factories would be unlikely, and to attract workers Mercedes would likely have to pay them more than their competitors and might not attract the top tier of employees, given how many other job opportunities existed within the automobile sector. In terms of Japanese demand for Mercedes-Benz's cars, the image of Mercedes is that of a luxury automobile with sleek, German engineering (Finklestein 2002). However, although the Japanese car market does have a place for vanity cars, given the size of Japan and the nation as a whole there is a limit to how much consumers can store and buy flashy 'second' vehicles. The trend has been to smaller, electric cars to reduce crowding on the roadways as well as gas consumption. "Toyota has sold more than 315,000 Toyota Prius cars in 2010 in Japan, thus making your hybrid car best-selling model in the domestic market over the past 20 years" (Toyota Prius: The best-selling car in Japan. 2012, Science Ray). The Prius is also the beneficiary of government-subsidized research, which Mercedes would lack, another disadvantage relative to Toyota in terms of expenditures (Toyota Prius: The best-selling car in Japan. 2012, Science Ray).