Mercedes Benz - Competitive Forces and Competitive Strategy

Mercedez Benz Ayodele Samaiye Hawaii Pacific University Abstract The intensity of
competition in an industry is neither a matter of coincidence nor bad luck. Rather,
competition in an industry is ill rooted in its underlying economic structure and goes well
beyond the behavior of current competitors. The state of competition in an industry depends
on five basic competitive forces i.e. entry, threat of substitution, bargaining power of
buyers, bargaining power of suppliers, and rivalry among current competitors. (Porter,
1980) Daimler Chrysler's strategy rests on four pillars: global presence, strong brands,
broad product range, and technology leadership. The objective of this analysis is to
investigate how the organization needs to form its strategy in order to develop opportunities
and protect itself against competition and other threats.
Company Introduction Mercedes Benz is firmly established as an independent brand within
one of the world's leading car companies- DaimlerChrysler AG. DaimlerChrysler is a product
of Daimler and Chrysler companies. Daimler motor company however came into existence
as a result of the creation of a recognized internal combustion vehicle by Gottlieb Daimler.
Daimler Chrysler's strategy rests on four pillars: global presence, strong brands, broad
product range, and technology leadership-Daimler being the first man to create a
recognized internal combustion vehicle and the first to incorporate a practical transmission
system. The company has a super network that ensures the flow and exchange of
information from various departments within and between the company and it's strategic
partners.
Competitive Forces The strength of the competitive forces in an industry determines the
degree to which this inflow of investment occurs and drives the return to the free market
level, and thus the ability of firms to sustain above-average returnsThe five competitive
forces-entry, threat of substitution, bargaining power of buyers, bargaining power of
suppliers, and rivalry among current competitors-reflect the fact that competition in an
industry goes well beyond the established players. All five competitive forces jointly
determine the intensity of industry competition and profitability, and the strongest force or
forces are governing and become crucial from the point of view of strategy formulation. The
bargaining power rivalry is what keeps Mercedes-Benz on the run, as such that it can keep
ahead of BMW and others, who are always there and always threatening their market
share.
Power of Customers Buyers compete with the industry by forcing down prices, bargaining
for higher quality or more services, and playing competitors against each other-all at the
expense of industry profitability Differentiation Differentiation of product has enabled
Mercedes Benz to beat down the power of its customers by offering them basically the same
product (engines) at various prices under various models and class.
Innovation The versatility of Mercedes Benz enables it not only to produce a wide range of
vehicle ranging from cars to trucks but it has also employed a Superior Engineering
Technology in relation to other automobile manufacturers and made available the existence

of a worldwide after sales service. This diversity of product programme permits consumers
to make wide variety of choices and has been a determining factor in the choices made by
consumers who decided to buy a Mercedes Benz product and making them a household
name.
B)Power of Suppliers 1)Alliances The proliferation of suppliers coupled with the super
network established ensures the flow and exchange of information between Mercedes Benz
and it's strategic suppliers worldwide.
2)Growth Mercedes Benz is not relenting in it's effort at the proliferation of it's suppliers
because it ensures a constant and cheap supply of parts.
Rivalry of Competitors Rivalry among existing competitors takes the familiar form of
jockeying for position-using tactics like price competition, advertising battles, product
introductions, and increased customer service or warranties.
Threat of New Entrants New entrants to an industry bring new capacity, the desire to gain
market share, and often substantial resources. Prices can be bid down or incumbents' costs
inflated as a result, reducing profitability. The threat of entry into an industry depends on
the barriers to entry that are present, coupled with the reaction from existing competitors
that the entrant can expect Differentiation Product differentiation means that established
firms have brand identification and customer loyalties, which stem from past advertising,
customer service, product differences, or simply being first into the industry E)Threat of
Substitutes 1)Differentiation Mercedes Benz employs a Superior Engineering Technology in
relation to other automobile manufacturers.
Diversity of product programme permits consumers to make wide variety of choices.
The versatility of Mercedes Benz enables it to produce a wide range of vehicle ranging from
cars to trucks has made them a household name.
Reference: Edmondson, G.(2003). Stockholders, Automobile industry and trade,
Consolidation and Merger of Corporations, Mergers, Automobile industry executives. Motor
Vehicle Manufacturing, Issue 3851, p54, 3p, 3 graphs, 3c.
Taylor, A.(2003). Mercedes hits a pothole owner complaints are up. Resale values are down.
And competitors are gaining ground. Is Mercedes-Benz losing its shine? Automobiles, luxury
cars, revenues and earnings, Pg 140, Vol.148.
Porter, M. E. (1980). Competitive strategy: Techniques for analyzing industries and
competitors. New York: Free Press.