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Mercedes- Benz Case Study 3

Question 1

What is the decision facing Mercedes?

The Mercedes car is a benchmark of safety, luxury, and precision engineering of its cars.
They are well known for producing a luxury vehicle. However due to the increase competition
on the luxury car industry and changing consumer attitude about the Mercedes brand, the
marketing strategies of this well-known luxury car brand eventually has to be change.

First and foremost, the decisions facing by Mercedes now is to change their target
market. For years, Mercedes car mean luxury and status to the worldwide. Thus, the target
customers are for those whom are affordable or rich level society. Now, this well-known luxury
car marker are attempt to entering hybrid car market which is more real life style oriented and is
focused more on moderate price, gasoline savings and corresponding reduced co 2. The goal or
objectives are very different from the previous goal that they had when producing a luxury car.
This change may expand their consumer range however it also may lead to losing out their
customer that they have now. This is because the luxury car consumer may not be interested to
hybrid car as the petrol price is not an issue to them.

Moreover, they are also facing a hard decision as to select which market strategic to be
implemented when entering into the market. There are already existing competitions in the
hybrid car market. Thus, to be success in the hybrid car market, Mercedes has to compete with
other well-known hybrid car maker such as Honda and Toyota. It is rather a hard challenge for
the luxury car maker to overtake them as they already have existing market or consumer to
support for their hybrid car over year. The table below shown are the Hybrid car sales f in US for
2009. The sales of Toyota and Lexus brand hybrid cars alone passed the two million mark in
2009. Ford is beginning a hybrid sales surge, and will soon be closing in on 50,000 units sold.

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(Hybrid car sales figures in US for 2009)

Other than that, the main concern of the Mercedes is to maintain the luxury image that they have
for years. It is an image or benchmarked for the Mercedes and need to superior. Therefore, it is
needed for them to positioning Mercedes in the hybrid market without damaging its luxury
image.

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Question 2
What factors are important in understanding this decision situation?

There are some factors that are important in understanding the decision situation that
facing Mercedes. One of it is Mercedes must know the consumers demand and needs. This is the
most important factors in order to make their product can be sell in the market. Consumers
nowadays are pretty smart in selecting cars for their own. They have a very high demand in
terms of high efficiency, affordable cost, reliable, stylish and comfortable car. Therefore, the
consumers will look for the best options that are available in the market. Mercedes have to come
out with a product which suits the needs of the consumers. Consumers usually interested to not
only a high efficiency and reliable cars but also a comfortable and affordable cars. What is the
most important thing is the cars must have style and sporty.

Other factor is the quality of the vehicles. Mercedes have to come out with a high quality
design of a vehicle. Mercedes have to make their design of the cars more efficient and reliable.
Not only the body of the cars but also the engines because consumers are very concerned about
the performance of the cars. Mercedes is well known as luxury cars therefore the performance
and the quality of the cars should worth the price.

To make Mercedes more success and reliable product in the market, Mercedes had
focuses on innovation of the design of the vehicles. Concerning on environmental effect,
Mercedes come out with superior hybrid car. Due to the awareness of the consumer about global
issue especially responsibility to the environment, hybrid car will drag consumers attention.
Nowadays, many consumers are looking for a famous brand name product which can give them
symbol of status. This attitude of customers will increases the sales volume of Mercedes because
Mercedes-Benz Company is not just provide hybrid automobile it’s also provide a cars with a
status symbol.

Since buyers these days are more interested in purchasing cars of latest technology and
models. Mercedes-Benz Company is also developing new and modified products to appeal the
present markets. By improving the design that already existed, which is upgraded the design to
be more efficient and power will meet the needs of the consumers. Mercedes is stressing on new
models, better quality and other minor innovations to attract the new customers as well as to

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maintain the old customers. As a result, Mercedes has introduced the concept of hybrid cars that
greatly reduce fuel consumption. Consequently, it will achieve several consumers’ goals in
purchasing car.

As there are many competitors in the market such as Ferrari, Honda, Toyota, BMW and
the others, Mercedes-Benz company come out with promotion mix strategies in order to drag
attention of the consumers in the target market as well as compete with their competitors.
Mercedes do promotion of its product by advertisement, public relation and personal selling
which are more intense distribution, aggressive promotion and competitive pricing. By these
huge promotions, Mercedes can provide product information continuously and increase
awareness of company product to target market. In other hand they can keep the brand name
fresh in the public’s mind.

Seeing that these day customers do not wish to spend much money for luxury car the
company has introduced low priced cars. Therefore middle and low income level customers can
also buy these cars and can feel rich. Furthermore, Mercedes-Benz has show-rooms at easily
approachable locations. Customers can easily go to show rooms and have a look on various
products and models of company. Mercedes also has service stations at approachable locations.
Since, the products of the company are available at almost everywhere in the world, this can
convince the consumers about the product and create a good reputation of the company. All of
the above efforts make Mercedes product are much more reliable in the market.

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Question 3

What are the alternatives?

Owning luxurious car like Mercedes-Benz is one of the psychological needs of most
people in the competitive market and living environment nowadays. Promotion has to be carried
out in order to convince people to buy Mercedes-Benz, especially the hybrid models. Before they
promote the model to customers, they have to clarify the products strength in term of quality,
luxurious, and comfort. What make Mercedes hybrid car different compared to other hybrid
models like Toyota and Honda, are the brand, quality, and luxury. On the other hand, the term
“hybrid” is innovated from the concept of environmental friendly and fuel consumption. With
the model luxury and environmental friendly, it creates higher status than those afford normal
passenger or hybrid car. This is why those affordable people are recommended to buy Mercedes-
Benz hybrid cars due to its unique and luxury.

A weakness of the company and sales strategy is the characteristic that contributes
disadvantages to the company. It has become the major factor of deteriorating company sales and
decreasing the profits. Hence, the Mercedes-Benz company has to identify and eliminate it by
means of good strategy planning and management. The company itself has to develop a sales
strategy which is associated to worldwide market because the Mercedes-Benz models are well
known and distributed to numerous countries. Low interest loan can be provided by the company
to attract more customers. Car shows and advertisements should be done periodically to
acknowledge customers about the benefits of owning Mercedes-Benz hybrid car. The battery
aided function of these hybrid models has significantly reduced the emulsion of hazardous gases
to the environment.

The Mercedes-Benz company has to search for opportunities or external chances to make
greater sales or profits. Besides sales, the company can develop a hybrid models renting to the
market. Renting service is one of the methods to boost the profit. By renting the hybrid models to
customers and corporations, the Mercedes-Benz brand will be able to enhance and retain the
corporation’s status. Moreover, it can be the “mobile advertisements” where the cars are driven
everywhere and witnessed by the people around. The higher fuel efficiency of the hybrid
function may become the real choice of many corporations because nowadays environmental
issues are highly reviewed. With the name of Mercedes-Benz hybrid car, it is the dual type

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model that comprises of luxury and environmental friendly. Since the environmental issues are
highly reviewed, the dual type Mercedes-Benz model has to potential to be priority demanded in
the market in long term perspective. On the other hand, the research and development of new
types of model, like Mercedes-Benz truck and lorry, in order to meet long term perspective and
market demands.

Besides understanding its own product and sales strategy, the company has to identify the
threats, which means the external factors that could cause trouble in the business. The common
factors that become the treat of the business are the competitors, low demands, and employees.
The greatest competitors of Mercedes-Benz for the hybrid model are Toyota and Honda which
belonged to Japanese. Many people prefer Toyota and Honda hybrid models because those
companies offer lower purchasing price compared to Mercedes-Benz. In this case, Mercedes-
Benz should come out with a quality assurance strategy and luxury status to overcome its
competitors. High technology could be invested into the research and development of Mercedes-
Benz hybrid cars, for better quality and more environmental friendly. Hence, the worldwide
advertisements should be invented and enhanced to let people in the world the witness the luxury
and quality of the Mercedes-Benz hybrid cars. Promotion and loans can be given to attract more
customers to purchase the models. Moreover, the company should arrange the work organization
where the job designs, departmentalization, delegation, span of management, and chain of
command are implemented in order to make the organization run smoothly and efficiently. With
the proper management of organization, employees are motivated in specific job which is the
essential of producing quality product, like Mercedes-Benz models.

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Question 4
What decision(s) do you recommend?

The Ferrari buyer will feel is the honour to have it which is Ferrari can represent their
status. But bear in mind that how many consumers afford to purchase Ferrari compare to
Mercedes? On the other hand, Honda and Toyota have the much lower price compare to
Mercedes. Although there is the quantity of Honda and Toyota that in market, most consumers
still don’t think that Honda or Toyota able to represent their status if they able to have one
Mercedes.

As they quoted, if a person can afford the car, fuel prices not a problem anymore. But, as
the resources are become fewer nowadays, I believe that more consumers (doesn’t care the
status) are more worry about the resources which is decreasing significantly. As well as the
exhaust gas (such as carbon monoxide CO, carbon dioxide CO2, hydrocarbon CxHy and etc)
which produce by the combustion of fuel (patrol), will contributes to green house effect and
global warming which become the main issue nowadays. As responsible living on the Earth, all
of us should care about the earth compare to the fuel prices. Hence Mercedes intention to make a
fuel efficiency car is highly recommended.

In the other hand, as a responsible living on earth, government also play an important role
in saving the earth. Producer of hybrid car or eco-friendly car can apply from government to
have some special preferential by launching eco-friendly car. Meanwhile, government also
should have take action to support eco-friendly products automatically as well.

But Mercedes shouldn’t have the intention to make economic car because the cost will be
lowered in order to so, which may indirectly leads to the lower quality. Beside, the target
customers of Mercedes are on those with prestigious or wealthy customer. Hence, it is
unnecessary for Mercedes to produce economy car, but maybe lower a bit the price to certain
class of Mercedes car which it’s still elective which can broaden their market in many countries.

The problem with a hybrid car or known as eco-friendly car is, the efficiency and the
quality is not fully explored yet since hybrid car only been introduced few years ago. Or in other
word, the price is not meet with the requirement. Which mean the consumer might unable to

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satisfy their needs by purchase a hybrid car for high price. For example, if a consumer can have a
luxury car which run fully base on fuel which the quality is much better than hybrid car with
alike price, and yet the function and the system is favourably than the hybrid car, which choice
will consumer basically make? Of course the answer mostly lies on the luxury car which run
fully base on petrol. This issue not only bump into Mercedes, but every brand of car maker in the
market which try to produce hybrid car. In order to positioning Mercedes for the hybrid market
without damaging its luxury image, Mercedes should put more efforts on research and
development (R&D) toward the eco-friendly car, either hybrid car or electric car before they try
to launch it.

Another problem is most of the consumers not yet fully geared up to accept a hybrid car.
In other words, these eco-friendly cars thingy are still too new fangled and it’s in preliminary
state where consumers still doubt the reliability and performance of the hybrid car. Hence,
Mercedes should have more campaign, explanation and promotion toward it in order to create an
atmosphere with favourable reception of the eco-friendly car.

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Question 5
What are some ways to implement your recommendations?

There are several ways to implement the recommendations in the marketing strategies in
the Mercedes Hybrid market. At the present time where the gasoline and diesel are
overwhelmingly predominates the transportation energy market, but the amount or quantity is
significantly decreasing while the price is increasing in contrast. This has increased chances for
the new technologies like hybrid to be the substitution of the alternative fuels which will provide
a better environment.

How much you can save while petrol price increasing? Higher gas prices are acting as a
catalyst for automakers and consumers to find alternatives to the traditional gasoline internal
combustions engine. Mercedes should anticipate on the green technologies like hybrid that will
lead to dramatic growth, particularly with lower consumption of diesels, over the next several
years. Hence, several supporting measures for the hybrid market to be fully implemented into are
government’s support and marketing techniques.

First, government support is very advantageous to be successful with its hybrids.

Government’s role, measures, regulations and incentives are recommended in promoting the
hybrids to the country. Since the vehicle and fuel market is a global market, national
governments should not only facilitate networking inside their countries, but also on a
transnational level which actually already happened, for examples Kyoto Protocol in Japan and
European Commission Directives in Europe where these countries are concernedly green. Those
measures are like financial incentives which can play an important but only complementary role.
Tax reductions in Green Vehicle Taxation can be one of the measures which should be bound to
a certain degree of market penetration of corresponding clean vehicles and fuels. For examples,
countries like The Powershift Programme in UK, Californian Zero Emission Vehicle
Programme, CNG-Liverpool in Australia and US Clean Cities Programme have offered a
package of support measures for the Clean Transport Fuels market which has been included into
the legislation for new taxation system.

Moreover, the modern trend for voluntary agreements between the public authorities or
government which try to forge alliances with manufacturers can help in to set the technical

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agenda for country future developments like green technologies. A programme with public
support can be directed to include more radical technologies as well as incremental
improvements in conventional technologies which are favoured by manufacturers like Mercedes
hybrids. Examples are “Memorandum of Agreement’ within the Californian ZEV- programme
and voluntary agreement between FLAT and the Italian government. Hence, Mercedes company
can get subsidies from the government for customer on the new Mercedes hybrid vehicle
purchase or for switching to Mercedes hybrid vehicle. This will definitely help in promoting the
Mercedes hybrid and creating awareness on how grave the government urge on to be green.

Whereas, the marketing technique is playing a vital role here where to positioning the
alternative green technology of Mercedes hybrid as modern technology that has much to offer for
the individual with the aid of segmentation. Segmentation and target market is guided by its
philosophy of ‘right car in the right place’. For example, from a research of marketing strategies,
the Toyota has employed both demographic and psychographic form of multiple segmentations
and targeted its market on that basis. For example, it has segmented all the countries across the
globe as its market and focused market such as US as well. The prices are ranged and the
economy class cars are targeted to lower and middle level income people and the luxury cars are
targeted to higher middle and higher income group people. Hence, Mercedes company can forms
segmentation with a variety of product attributes it targets different age group and professional
groups of people. For example, for sport people it has sport cars. For environmentally sensitive
people it have Mercedes hybrid S400 or ML450– environmentally green car. Thus, it is elective
for the Mercedes Company to make smaller, cheaper and environmentally friendly’s Mercedes
five-seat GLK compact SUV which can broaden their market in many countries.

Additionally, Mercedes Company should improve their hybrids in term of reliability and
the maximum distance per gallon petrol can achieve with further research and development
(R&D). There can set a target where the maximum distance can achieve per gallon of petrol by
comparing it with other competitors like Lexus HS 250H which can pull downs of 34miles per
gallon which is highest record for a hybrid car. Besides, Mercedes Company can hold a
competition which offers great prizes to the students or engineers outside where it’s about how to
improve the efficiency on the hybrid energy or more. With these, Mercedes Company can get
unexpected ideas from the others instead of their own organization. The Mercedes Company can
also hire or offer a job for the winner which will help the R&D department to boost up.

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On the other hand, in order to boost the ability of the Mercedes hybrid car market which
competes with the luxury car maker, several steps are being suggested. There is necessary for the
public educational efforts about the advancement in green vehicle are very important. This is
essential to assure that local retailers are committed to the programme and their enthusiasm or
reluctance about the new technology is crucial. Satisfied users are most important where they can
spread their experiences and the “word of the mouth” weights more than any marketing
campaign. Hence, can held surveys on aiding them to spread their words.

In addition, vehicle buyers’ guide with the easy accessible information about the vehicle
economies should be provided too. In principal, hybrid vehicle tend to have lower fuel costs and
maintenance, but higher vehicle purchase costs. Thus, with the full life-cycle cost accounting,
rather than simple vehicle purchase price comparisons, would tend to favour hybrid vehicle.
Hence, the boosting method here is the operating costs should be visibly stated in the brochures
and showrooms in order to have significant potential economic benefits of using Mercedes
hybrid vehicles compared to conventional vehicle.

As a conclusion, even though the Mercedes hybrid vehicle technologies that are not able
to directly compete with conventional gasoline and diesel vehicles in terms of vehicle
performance into the general vehicle market. However, Mercedes hybrid vehicle technology may
be successfully being accepted into market niches that offer special framework conditions where
they can compete with conventional vehicles. Such market niches may be certain areas as
mentioned above and certain transport modes, vehicles, purposes and marketing techniques.

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References:

1. M.P.William., J.H.Robert., R.K.Jack,.(2008). Introduction to business 10E. South-

Western. Cengage Learning.
2. Portolese.D.L.(2009). Title Introduction to business . Boston. McGraw-Hill Higher
Education.
3. Online resources. http://www.hybridcars.com/news/mercedes-benz-prepares-big-
increase-hybrid-car-production-29592.html.
4. Online resources. http://thegreenmarket.blogspot.com/2011/03/mercedes-getting-serious-
about-hybrids.html.
5. Online resources. http://www.carsdirect.com/hybrid-cars/best-hybrid-luxury-car-on-the-
market.

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