Mercedes-Benz Company Analysis & Recommendations

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History• Mercedes Benz Thailand was first registered as Mercedes Benz Marketing

Thailand company in 1998• The company’s goal is to establish import and to deal with Benz automobile

business, which used to be controlled by “TAAP” (Thonburi Automotive Assembly Plant Co., Ltd)

• At the beginning, they emphasized on Branding and Marketing before going full scale on importing and selling cars.

• They merged with the Benz Daimler Group and the Chrysler Group in 1999. The name of their joint-company was changed to Daimler Chrysler, which also sell Chrysler and Jeep.

• In 2007, the company’s was renamed again to Mercedes Benz Thailand after the Daimler AG sold 80.1% share of their stock to the Chrysler Group.

StructureDaimler AG

(The world’s largest manufacturer of Mercedes Benz vehicle in Germany).

Mercedes Benz Thailand (MBTH)

Mercedes Benz Leasing Thailand (MBLT)

Mercedes Benz Manufacturing Thailand (MBMTh)

Mercedes Benz Thailand (MBTh)

• MBTh provides: marketing and selling, research and development, maintenance, repairs, and after sales service.

• Mercedes Benz(Thailand) LTD., has a network of 31 authorized dealers that were established throughout the country. There are 17 branches of authorized dealers located in Bangkok, and about 14 branches located in countryside.

• Most car parts and accessories are imported from DAG and DSEA (Daimler in South East Asia).

• Cars that are completely imported will be charged with extremely high tax of about 169-300%.

• Cars that are assembled in Thailand will be charge with lower tax of about 94-189%. Therefore, MBTh emphasizes on this type of market.

Mercedes Benz Leasing Thailand (MBLT)

• MBLT was found in 1996 as one of the leading financial firms that provides financial services for Mercedes Benz cars in Thailand.

• They aim to support the business of Mercedes Benz Thailand by providing credit to Mercedes Benz distributors in Thailand and other services such as:

• Hire Purchase – which allows their customers to purchase Benz cars with a down payment of some proportion and pay the rest by installments with same rate

• Operating Lease - this service allows customers to rent Benz cars with the exact price and period of time. The cars will need to be returned at the end of the deal.

• Finance Lease - the cars will be rented to customers with fixed price and duration. After that period of time, customers can decide to own the cars at a price, subtracting depreciation cost, set by the finance officer.

Mercedes Benz Manufacturing Thailand (MBMTh)• MBMTh was founded in 1998 as the firm that company that provide importation,

assembly, and distribution.• The Product line of MBMTh can be categorized into:

Hatchback

A- ClassB- Class

E- Class EstateCLS- Shooting Brake

Sedan

C- ClassE- ClassS- Class

CLS- Class

Sport

SLK- ClassCL- ClassSL- ClassE CoupeC Coupe

Off-Road

G- ClassM- Class

Van

VitoViano

MB100

Supercar

SLS- Class

Porter’s Five Force Model

Industry CompetitorsThe Intensity of Rivalry

Threat of New Entrants

Bargaining Power(Suppliers)

Bargaining Power (Buyers)

Threat of Substitutes

Industry • The industry competitive structure is consolidated• The growth rate of the market shows that the demand

condition is increasing dramatically in the past 4 years• The increasing of the industry growth rate encourage the

rivalry and competition for market share and revenue

Intensity of Rivalry

Intensity of RivalryIndustry growth

2009

2010

2011

2012

7,700

10,137

10,500

15,200

30,800

40,548

42,000

60,800

Value ( ฿ Millions) Units of cars sold

Source: Bangkok Post, Bangkok Biz, Manager

Market Growth Rates 2009-2012

2009 2010 2011 2012CAGR 6.59% 31.65% 3.58% 44.76%Market Value 30,800 40,548 42,000 60,800Units Sold 7,700 10,137 10,500 15,200Thailand GDP Growth Rate -2.3% 7.8% 0.1% 5.5% *

2009 2010 2011 20120

10,00020,00030,00040,00050,00060,00070,000

30,80040,548 42,000

60,800Market Value ( ฿ Millions)

Intensity of Rivalry

2009 – 2012 CAGR: 18.92%

Source: Bangkok Post, Bangkok Biz, Manager

Competitors• There are 3 main companies that are dominate in this market in this

industry which control approximately 86% of the market share in year 2012; Mercedes-Benz, BMW and Volvo

Intensity of Rivalry

Mercedes-Benz48%BMW

28%

Volvo10%

Others14%

2010

Mercedes-Benz48%BMW

35%

Volvo12%

Others5%

2011

Mercedes-Benz39%

BMW35%

Volvo12%

Others14%

2012

Source: Bangkok Post, Bangkok Biz, Manager

Positioning of key players

Intensity of Rivalry

Classic PrestigeComfortable driving experience“The Best or Nothing”

Ultimate PerformanceSporty“The Ultimate Driving Machine”

Safe and comfortable drive“Volvo for Life”

Intensity of RivalryExit barrier for automotive industry

The exit barrier for this industry is considered very highCapital investment• There would be huge capital invested in both building the brand equity and the constructing

the manufacturing plant• For manufacturing plant, there are few companies that invested in manufacturing base in

Thailand due to the fact of complexity in cooperate and signing contract with the Thai government • Mercedes-Benz manufacture in Daimler Manufacturing• BMW manufacture in BMW manufacturing Thailand• Volvo manufacture in Thai-Swedish manufacturing

Cost and penalties• Cost of establishing the authorize dealers network • High redundancy cost • Cost of hiring the labor • Employment contract• Severance cost

• Penalty fee• It would be difficult to exit if the firm have already sign a contract with the suppliers

Intensity of Rivalry : Trends

• Downsizing is now the trends where manufacturers use a smaller engine but yet more efficient or introducing a small yet luxury segment(ex. BMW series 1, Mercedes CLA)

• BMW no longer sending out there famous straight six, instead there offer more efficient four-cylinder engine• Downsizing has become the flavor of the decades

• Most of the highline luxury car manufacturer has introduce hybrid technology

• To save the environment and to introduce a fuel efficient vehicles and use sustainable materials as part of manufacturing

• The new technology to serve the environmental issue and downsizing the car.• This cause the SUV market to decrease down

Intensity of Rivalry

High entry barrierFew dominants players in market• It is very difficult to enter to this industry (luxury car) since the

players such as Mercedes-Benz and BMW had already dominate the Thai market

Capital requirement• Capital requirement of building the brand of luxury car, in term of

expense and time consume, is very high• Cost of constructing the showroom• High marketing expense to create the brand identity toward Thai

customersEconomy of Scale (EOS)• Car production is difficult to reach the economy of scaleTax• Tax policy of imported car is very high (317%)

Threat of New Entrants

Threat of New EntrantsGrey dealers, Low entry barrier (Exceptional new entrant) Permission and requirements• To open a grey dealer, no official permission from the selling brands require Implementation cost• The cost of establishing the grey dealer is relatively low• No standard format require• Gap in the law allows grey dealer to import the automobile with a lower tax

rate around 210%-300%• Some dealers sell the car on credit (Dealer receive money before handing the

actual car to the customer)Economic instability of Europe • The depreciation of EURO currency make it cheaper to import the cars

Threat of New EntrantsCompetitive strength of Grey dealers Tax benefits• Grey dealers have the ability to import with lower tax rate and take fewer

timeCustomization• Availability of customized options for customer to choose• Ex. Harman Kardon Stereo, Special Leather seats, mirror roof

Better operating system • The operating system is flexible• No standard price, focus more on price competitiveness• No requirement for after sale service

Bargaining Power (Suppliers)The bargaining power of suppliers is higher over Mercedes-BenzFew suppliers and substitutes• Product that suppliers sell to Mercedes-Benz has few substitutes

and is vital to the manufacturing process• Raw material such as Advance alloy steel, carbon fiber are

imported from the European countries• It is very important to maintain the relationship with the suppliers.

This is because, it would be very difficult for Mercedes-Benz to backward integrate to the sourcing process

Not authorize• Mercedes-Benz Thailand is not authorize to select the supplier by

themselves without the permission from the head company

Bargaining Power (Buyers)The emerging of Japanese cars in the mind of consumers:The bargaining power of Mercedes-Benz towards the emerging of Japanese car in the mind of customers is consider to be low Perception• In the past people think that European cars are better than Japanese cars in terms of quality

and service provide to customers• Nowadays, the perception has been change. Japanese car provide better quality of the car

they produce with great before and after services, also the maintenance cost is much cheaperPrice• With affordable price that comes along with standard quality, customers choose to buy what

is worth for their money (value)Eg. Camry Hybrid, Honda Accord, Nissan Teana etc.

• There are some series of Mercedes-Benz car that are risky to be takeover by the top Japanese car models

Eg. A-Class and C-Class• People can use the money they have to pay for one standard Mercedes-Benz C-Class (฿2,250,000) to buy the top series of Honda Accord with full options and still have money in their pocket.

Bargaining Power (Buyers)Strong brand image in luxury cars industry :Mercedes-Benz has higher bargaining power in terms of the strong brand image in luxury cars over the consumersTop of mind• The brands that stand out of the customers’ minds when thinking about luxurious cars are

Mercedes-Benz and BMW• Mercedes-Benz has a long history in Thai automotive industry

The first Mercedes-Benz that had been import to Thailand is in the year 1920, it is owned by King Rama 5 at that time

Convenience• There are only few brands in the luxury cars industry in Thailand that have many authorize

dealers and showrooms to provide services to customers such as Mercedes and BMW• Mercedes-Benz has 17 branches of its authorizes dealer in Bangkok and over 14 branches in

suburb area in Thailand, where other competitors has only few in the suburb area Eg. BMW has only 5 branches

• By having many dealers and showroom, this can be one of the most influencing factors that lead the consumers to choose Mercedes-Benz over the other brand if the buyers are considering about after sales service and maintenance

For eg. - The adequate of spare parts - The short maintenance queue

Threat of SubstitutesThe high switching cost:Value • People nowadays tend to have a habit of changing their car often.• This means people would have to resale their current car to be able

to buy a new one. • For Mercedes-Benz, the resale price is very low, the price of used

Mercedes-Benz are after 5 years of usage, the price decrease to approximately 40% of the real price.

Complexity• The switching cost is high because there are many process to buy

and own a car. For example to reserve, to wait for the car, to register for license plate, to transfer the ownership, etc..

Threat of SubstitutesThe substitutes products:Big Bike Motorcycles• People might switching from using cars to motorcycle because of bad

traffics• For High end car users like Mercedes-Benz, the motorcycle brand they

might buy should be luxurious brand Eg. Ducati, Harley Davidson, Kawasaki, etc.

• So these brand can be consider as the substitution for Mercedes usersSecond hand luxury cars• The price of second hand cars are more cheaper than buying a new car• For some brands, the price drop to around 50% of the official price

Eg. BMW, Lexus, etc• The conditions of the cars are reasonable compare to the price the

buyers have to pay

Threat of SubstitutesSubstitute productsAlternative prestige products• Mercedes-Benz cars are consider to be luxurious product, they

might be threaten by other prestigious products categories that consumers might choose to buy instead of “Luxury Cars”

• These products varies in many product categories;Eg. - Designer clothing (Chanel, Prada) - Jewelries - Luxury house

SWOT analysisStrengthsStrong brand image in luxury car category• People view the brand Mercedes-Benz as having an innovative engineering and

high capability• Mercedes-Benz had achieve many reward in safety perspective

Higher resale value• The resale price of Mercedes-Benz are relatively high compare to other luxury

brand because of the high demand and reliable of the brandStrong authorize dealer network• 31 Authorize dealers in Thailand• Mercedes-Benz also penetrate in the suburb area• 14 dealers located in suburb area

• Training program for sale representative in every dealersRelatively cheaper parts and maintenance feeFinancial advantage• Mercedes-Benz Thailand has vary source of fund from the Daimler company,

making it easier to manage the investment fund in the future

SWOT analysisWeaknessesStill considered expensive• Comparing to the major competitor like BMW, the price of

Mercedes-Benz is around 12% higher• Customer’s perception• Most of the Gen Y still have the perception of “Old” toward

Mercedes-BenzSlow delivery time• It can take a long period of time in delivering the product to

customer after they purchase• Many models debut in Thailand very late after the official global

debutAvailability• Some Mercedes-Benz models are not available in Thailand

SWOT analysisOpportunitiesNew market emerge • Thai people current, became emotionally attach luxury brand especially Gen Y

whose purchasing power is increasing(sale of C-class increase by 7% in year 2012) • GDP increase by 5.5%, people have more purchasing power and spend more on

unnecessary productsTrend of clean energy• Would lead to major opportunity if Mercedes-Benz can provide the right

technology (hybrid)Politic• Government support the authorize dealers by increase the tax of imported car by

15%, since they would receive more tax revenue from those dealersThai currency appreciate and Euro depreciate• The cost of production reduce• Higher profit margin

SWOT analysisThreatNew entrants(Grey dealers)• The total revenue of all grey market dealers increase by 15% in 2012• Grey dealers have higher ability in acquiring new models of luxury car

earlier than the authorize dealersConversion of Authorize dealers• Some authorize dealers converse themselves to grey dealers in order to

serve the demand of other luxury brand apart from Mercedes-Benz • Poor dealership structure (unnecessary regulation from the mother

company)• Take longer time for Diamler Crysler to import the new models

Public transportation• The BTS sky train is expanding all over Bangkok• Although the target group of Mercedes-Benz who have enough money to

afford the luxury car still consider using public transportation instead, due to the fact of traffic problem in Bangkok

7Ps• Mercedes-Benz did not only provide the sales of their luxury

cars, but also the before and after sales services• The Ps 1. Product 5. People

2. Price 6. Process 3. Place 7. Physical Environment 4. Promotion

7Ps of Mercedes-BenzProductProduct availability• Mercedes-Benz offer the product that suitable for every age rage and

every genders• Ex. A-Class aim for female user, S-class aim for high level executive and SLS model aim

for high end level users

Technology• Mercedes-Benz introduce many technologies and safety innovation that

have become common technology that apply in other brand several years later• Antilock Braking system(ABS) first introduce in 1978 by Mercedes-Benz

• Mercedes-Benz also offer an outstanding technology in advancing the security and convenience determination• Tele Aid mbrance technology connect smartphone with the • vehicle system in the purpose of navigation system and use • as the car’s key

Product (cont.)Brand• The brand equity of Mercedes-Benz toward Thai people is very

highBrand value associated with Mercedes-Benz are:• Innovative• Luxury• High society• Reliable• Royal

Warranties• Mercedes-Benz Thailand offer 3 years warrantee with no mile limit• This offer is standardize throughout all authorize dealers

7Ps of Mercedes-Benz

PriceMercedes-Benz current price (25 March 2013)

• Mercedes-Benz use “Premium Pricing” strategy

• Keeping the price high to build the perception of favorable brand in consumers mind

• The cheapest model of Mercedes-Benz car is the “A-Class” model

฿1,890,000 • The most expensive model is the “SLS-

AMG” model฿24,999,000

Place • Currently there are 15 authorized dealers in Bangkok and another 15

authorized dealers around Thailand • On big main cities like Korat, Phuket, Huahin and Chiangmai • Daimler Thailand try to maintain the standard by create semi-annual

check up and competition to win award for the dealers

PromotionMercedes-Benz has various promotion to promote their campaign. • Mercedes-Benz and Kasikornbank offers credit card to Mercedes-Benz loyal customers• During motor show Mercedes-Benz also offer financial promotion for customers who ordered

their cars at motor show. • Financial promotion include 0% interest for sixty months , free insurance, and extra discount. • Mercedes-Benz Thailand also promote themselves by emphasizing on digital marketing. • Mercedes-Benz Thailand also claims that their Facebook activities is very active such as

having their customers to ‘tag’ or ‘check in’. • Mercedes-Benz Thailand have done various campaign to promote themselves such as CSR

projects, exclusive dinner for Mercedes loyal customers, lucky draw at motor show, and also regular golf event.

People Dealer• Dealer send representative to meeting at head quarter every two months to know updates about

the market, trend and the corporate plans and events. • Offer Dealers Trip once in a while, to tightens each dealers relationship and relationship of dealers

and Daimler Thailand’s staff.

Sales service• Sales manager meeting at Daimler Crysler head quarter every month, to inform new

promotion/ads campaign also to let every dealer’s sales management plans goes on the same direction

• Reward for 30 top sales person and 5 sales manager that generate most revenue to go to Germany trip without any costs.

Mechanic • MBCC (Mercedes-Benz Competence Centre) new program of recruiting mechanic staffs for

company. MB Thailand joined with Samutprakan Technical College seeks for students that are interested and trained them, they also provide wages for the students.

• STAR Assist training, a service program that provide customers 24 hrs assistant for any car problem• Specialized mechanists training for head mechanic of every dealer, to get information up to date

ProcessService Parts

Service Work& Maintenance• Pool of experts, qualified and specializes in

servicing vehicle at a fair price

Genuine Parts• Produced precisely according to specifications,

can rely on spare parts being genuine

My Service• Let you choose service appointment and options

of your choice and is most convenient to you

Accessories and Collection• Offers individual, stylish and special accessories,

provided to suit the needs of every individual

Dealer Search• Offers wide range of additional services and are

always willing to help

Genuine Engine Oil• Lubricates, reduce wear-and-tear and helps to

protect the environment and it is perfectly aligned to your vehicle

Service 24 hour – “Star Assist”• Comprehensive assistance available24 hours a

day• Operator fluent in both Thai and English

Proven Exclusivity• Trading services for pre-owned cars, carrying

same standards worldwide, also including a 2 years warranty

Physical Environment• Mercedes Benz showrooms’ environments are very exclusive,

modern, with high technological equipment, which give a prestigious and luxurious feeling.

• The colors used in showroom are metallic colors such as black and gray.

• The showrooms from authorized dealers look nicer in term of physical looks of the showroom, professional salesperson, and also provide full service.

• Food and beverages are provided • Magazines relating automobile

BMW Strategy • BSI 6 years warranty or 100,000 km, free maintenance• Implemented a different marketing mix to sell cars to different

socioeconomic segments, especially on premium segments. • They does not compromise and cater to any other segment in the market.

Its global marketing strategy underscores the selected premium target market only

• Promotes on hybrid energy, give them eco friendly image• Environment friendly production, improve efficient use of material

and recycling policy

RecommendationsCustomers’ benefitsSecond car purchase benefits• Provide benefits for second car purchases from the same authorized dealer,

it would help strengthen the relationship of customers and the authorized dealer

• Leads to more frequent communication (trading information about new cars as well as probing them into buying)

• The benefits given for second car purchase would be in terms of insurance, from assuring the car from 3 years to 5 years for both cars upon the second purchase.

RecommendationsCustomer Relationship ManagementThe advantages in retaining current customer • Create positive word of mouth • Increase brand loyalty and equity • Create emotional benefits and make customers feel superior when

purchasing from authorized dealer Can by implemented by • Lounge- providing lounges in high- end department stores that only

Mercedes Benz drivers buying exclusively from authorized dealer can enter, by showing a member cards. Similarly to Siam Paragon Lounge, Wisdom Lounge

• Activity- create value adding activities to promote a close community, which would later benefit in a larger customer base that supports purchasing from authorized dealer

Eg. Private parties for past purchasers of Mercedes inviting Public Figures and Press

RecommendationsMaintaining Relationship with Dealers• Specify contract to prevent authorized dealer to convert to

grey dealers• Currently, the average period in positioning as a authorized

dealer is 2 years• Longer contract with the authorized dealer

• Help in sharing the renovation cost• Shorten period of time in importing new car models to

compete with the grey dealers