Critical Evaluation Of Mercedes-Benz's Current Strategies And Future Competitive Position In Saudi Arabia

You will be assessed on your ability to:

a. Critically evaluate the company’s current strategies for sustainable competitive  advantage.
b. Set out the desired competitive position 3 years from now.
c. Offer clear recommendations on what the company needs to do to achieve that position.
d. Write a logical, well-presented and accurately referenced piece of work.

Evaluation of current competitive advantage

According to Schumpeter (2017), Saudi Arabia has the largest economy in the Middle East and is the richest among the Arab countries. However, one of the drawbacks of the country is that it is dominated by the oil industry. This provides hindrance to other companies from dominating the market. The economy even continued to slow down due to the low oil prices and the production due to the lowering of the oil output. Therefore, for a company like Mercedes Benz, adjusting in the economy can be challenging. At the same time Darroch, Miles and Jardine (2015) is of the opinion that Merceds Benz can help in the development of its market in Saudi Arabia.

This argument is mainly made as the car runs in petrol and Saudi Arabian economy provides opportunities for oil and petrol. At the same time, it has been seen that the implementation of the Fiscal Balance Programme and expense savings had a negative impact on the inflation rate of the country. Hence, it can be concluded that the forecast of the rise in GDP from 2018 is expected to be by 2.2% in 2019 (Coale & Hoover, 2015).

Mercedes-Benz is a global automobile company that has its headquarters in German. Set up in 1926, the company has grown to be one of the top brands of car in the market (Mercedes-benz.com, 2018). However, the growth to the top has been plagued by challenges and competition from different car manufacturing companies. Companies like Ferrari, BMW, Audi and McLaren provide competition for Mercedes-Benz. As stated by Malhotra and Peterson (2014) these companies are direct competitors of Mercedes and it is necessary that Mercedes develop strategies so that the threat from these companies can be mitigated.

As observed by Chernev (2018) gaining a competitive advantage in the market can provide companies with an opportunity to continue improve its brand image as well as its reputation. Therefore, for a company like Mercedes-Benz, the competitive advantage needs to be based on the level of involvement the competitors have on the market. One of the strategies that have been adopted by Mercedes-Benz while trying to gain a competitive advantage in the market is its collaboration with product lines and business units. For example, Mercedes-Benz has managed to gain the assistance of Daimler Financial services in various markets including that in Saudi Arabia.

Thereby, it has been seen that in a competitive market as in the economy of Saudi Arabia, Mercedes have managed to develop itself and establish its position in the market. The support received have helped Mercedes to gain ad increases its technical competence, support system, dealership, financial and managerial perspectives. Therefore, this has provided the company with an opportunity to expand its horizons in the market and gain a competitive advantage over its rivals like Ferrari or BMW. At the same time, Marshall (2014) has seen that Mercedes have managed to align its marketing and sales plans with that of the needs of the customers.

The evolution of the company from being product-centric to consumer centric is another reason behind the development of the company. As Bresler and Lubbe (2014), recalled Mercedes used to manufacture cars that mainly dealt with the profitability earned by the people. The needs and wants of the people were not addressed and due to this Mercedes-Benz were deemed as an expensive car by the public. Hence, this used to be the reason for the company being strategically misplaced in the global market. However, with the adoption of the dealership and support from product line companies, Mercedes-Benz has managed to redeem itself in the market. As observed by Hill (2017) the manufacturing of cars based on the consumer centric care approach can help the company to represent the lifestyle of the customers.

Competitive position in 3 years’ time

This is particularly suited in a country like Saudi Arabia, as the economy of the country is competitive and people residing in the country compete with one another in terms of developing a strong financial position in the market. According to Hill, Jones and Schilling (2014), innovation has also been one of the core advantages of Mercedes-Benz. In the modern world, innovation plays a major role for companies to remain dominant in the market. Mercedes-Benz has managed to spearhead the replacement of fuel injection with the effective application of float carburettor. Hence, Mercedes-Benz is credited with inventing the first automotive with a four brake system.

In Saudi Arabia, Mercedes-Benz has 23 plants of which are engaged in various methods of assisting the company. These plants are situated in a strategic manner that helps in controlling the operational management of the plant and at the same time ensures that the costs are kept in control (Mercedes-benz.com, 2018). Therefore, the application of innovative strategies as well as that of the collaboration with product line has helped Mercedes-Benz in remaining competitive in the business market and at the same time ensure that distribution strategy of the company are aligned with the supply chain management of the company. Hence, competitive position of the company can be predicted.

Having analysed the current competitive advantage in the market of Saudi Arabia, a comparison can be made between its main competitors so that the position of Mercedes-Benz in 3 years time can be understood. The comparison needs to be made between Audi, Mercedes-Benz and BMW based on the global market scenario and on the scenario that is presented in the Saudi Arabian market. This can help in understanding the reasons for the choice of the customers about the type of cars that they want to own. The analysis can help Mercedes to continue its improvement in the markets of Saudi Arabia and the world.

Hitt and Duane Ireland (2017) is of the opinion that brand positioning of the luxury cars provide it with competitive advantage in the market. In the case of every luxury cars, the brand targets the younger customers. Thereby it is necessary that the prices remain cheap. In this case, Mercedes-Benz earns global revenue of $4.6 billion while BMW earns $7.3 billion (Mercedes-benz.com, 2018). Therefore, it can be said that in comparison to the profits earned, BMW is more popular than Mercedes-Benz among the people around the world. At the same time, it also denotes that fact that Mercedes-Benz focuses more on the young customers than BMW.

This can be evidenced from the profit earned by the company, which provides a clear idea about the prices set by both the companies. Ginter, Duncan and Swayne (2018) opined that unit sales made by BMW is 1.67 million while that made by Mercedes-Benz in 1.26 million. This also highlights the rate of sales that the two companies make and the manner in which the popularity remains with the global customers. Even in a country like Saudi Arabia, Mercedes-Benz provides less number of sales (7430) as compared with the sales made by BMW (9371).

Wheelen et al. (2017) is of the opinion that in comparison with Audi, Mercedes-Benz is ranked low in terms of profits as well as sales. This can be another example of the popularity of Mercedes in the global market. The reason for the low rank in comparison with BMW and Audi is mainly due to the failure to incorporate proper innovative ideas in the market. As observed by Rothaermel (2015) Mercedes-Benz has ceased creating new and innovative models that can outmatch its competitors in the industry. In a country like Saudi Arabia, due to the rich economic development of the country, the cost of purchasing of cars is more.

Thereby, innovative car models with modern technology can provide Mercedes-Benz with an opportunity to remain competitive in the market. By comparison, it can be seen that Mercedes-Benz sells more cars than Ferrari in the global market. While the sales of Ferrari have been credited to being 4321, the sales of Mercedes-Benz are 5213. As compared by Bettis et al. (2015) the manner in which profitability of Mercedes-Benz increases in the market of Saudi Arabia can provide positive notion of the company testing success in the market. Mercedes-Benz has often been viewed as a symbol of power and the ultimate car for the people that prefer assistance of the chauffeurs to drive the car.

This indicates that people driving their own car prefer more expensive brands than Mercedes-Benz. Based on such comparison it can be said that the reason for the focus of Mercedes-Benz on the youth of the country and the global world is mainly to build interest among them to purchase the car. As observed by Wagner and Hollenbeck (2014) the profitability of the company and the manner in which it sets its prices indicates that Mercedes-Benz maintains its aim of targeting young customers. Therefore, it can be said that based on the comparison made between Mercedes-Benz and other top car companies in the world such as BMW, Audi and Ferrari, Mercedes can overtake BMW and gain the second position in three years’ time.

The reason for the growth of the company in terms of ranking is that the car has its roots in the Formula-1 circuit. As observed by Frank (2018) in countries like Britain or USA, Mercedes is driven by some of the reputed names in the history of the sport. It faces competition from Ferrari or McLaren but Mercedes-Benz provides for the creation of opportunities in the market in terms of growth. Baker and Sinkula (2015) is of the opinion that luxury brand cars are being favoured for developing sports and increasing the brand awareness in lesser-known games. Therefore, in 3 years’ Mercedes-Benz can reach the top of the sporting arena in terms of growth in the Formula-1 circuit.

As observed by Leigh and Blakely (2016) Mercedes-Benz have managed to create compact cars in countries like Saudi Arabia. This has provided Mercedes-Benz with an opportunity to assemble its products in the local market so that it can be considered beneficiary for the company. This can help in the vast improvement of the company in the local market of Saudi Arabia and ensure that the growth of the company is achieved. Amin (2017) is of the opinion that the rich economic condition of Saudi Arabia can be utilised to its advantage by Mercedes-Benz as it can improve the sales of the cars it manufactures. Therefore, recommendations can be made that can help Mercedes-Benz remain competitive in the market and reach the target set by the company in 3 years’ time.

One of the recommendations that Mercedes-Benz can make is that it needs to ensure that its productivity is maintained in the local market in which it operates. It has been observed that Mercedes-Benz has about 38 stores all around the world and it is important that each of the 38 stores maintain coordination with one another in terms of manufacturing cars (Mercedes-benz.com, 2018). As seen previously, Mercedes brought about considerable innovation in the world of automobiles but have since then been unable to maintain its innovative status in the market. Therefore, this can be considered as one of the most important changes that Mercedes-Benz needs to bring about in the company.

In Saudi Arabia, Mercedes-Benz needs to meet the demands made by the customers so that they can purchase the product over Audi and BMW. For this, Mercedes-Benz needs to innovate and ensure that features of the cars manufactured by it do not match with the features of its competitors. It is important that the car company develop its research and development facility so that it can continue to work in an effective manner in the innovation of the car. This can help in the increase of sales of the company and ensure that profitability of the company increases. At the same time, Mercedes can try to implement an innovative technical competence in every country of its operation.

It has been seen that Mercedes-Benz has managed to set up assembling houses in the local market. Therefore, this can be of superior advantage for the company particularly given the fact that it can understand the needs and requirements of the local market. Mercedes could gain a better understanding of the local market of the world and based on it the company can continue to innovate. Based on the set up of assembling houses within the country, Mercedes can be predicted to sale over 55,000 cars. This can help in improving the profit of the company and at the same time provide financial support for the company.

The unit sales of the company can increase based on the analysis of the environment (Amin, 2017). The internal as well as the external environment of the company need to be analysed so that Mercedes-Benz can promote the changes required for success. For the external analysis, strategic implementation needs to be based on the analysis of the competitors. In the case of Mercedes-Benz, the major competitors such as BMW and Audi need to be the focus of the company. Analysis of these competitors can be done by keeping in mind the sales as well as profitability of the company. The recognition for the need of compact cars has been the most influential strategic thought adopted by Mercedes.

According to Hill (2017), the economic condition of Saudi Arabia is high and therefore, it is important that every company try to build its image in the country. Despite the dominance of the oil and gas companies, Mercedes-Benz can gain advantage in the market of Saudi Arabia. This can be made by collaboration with oil and gas companies so that Mercedes-Benz can gain the recognition required in the market. The start of the company to built reputation in the market can begin from investing in new car in the market. This can be done by conducting a proper marketing analysis so that the tastes of the customers can be identified.

It has been mentioned that the people in Saudi Arabia tend to prefer expensive cars with the application of new and improved technology. Therefore, it is important that Mercedes-Benz collaborate with technically rich companies so that it can continue to implement IT technologies for the smooth control of the cars. This approach can help the company in situations dealing with that of using the car in Formula-1. The introduction of 10 new global cars can help Mercedes to improve its current position as well as the future position in which it is placed. The emphasis need to be shifted from the sporting arena towards the development of the cars for the local public.

Therefore, it can be said that the implementation of such policies can help Mercedes-Benz to retain its position in the market and at the same time promote the company in the Saudi Arabian market. Competitors such as Audi and BMW need to be analysed and a benchmarking strategy can be implemented so that Mercedes-Benz can retain its current position and improve it in the global market as well as in the Saudi Arabian market.

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