2011-11-15

Automobile Industry: Daimler AGIndustry Analysis

Presentation held by:

Evelina Baziuk, Polina Gribakov, Gamze Saba, Weronika

Salach

Industry Analysis

Our Presentation

1. Introduction:

• History and financial information

2. Industry Analysis:

• PESTLE

• 5 Forces Framework

• Opportunities and Threats

3. Strategic proposal for Daimler AG

2

Industry Analysis

History

• Gottlieb Daimler and Carl Benz:

• the invention of the automobile in

1886

• Headquartes: Stuttgart

• 125th anniversary, one of the biggest producers of premium cars

• the world’s biggest manufacturer of commercial vehicles with a global reach

Source: www.daimler.com 3

Industry Analysis

Creating Value Added

Daimler’s vision:

to provide first-class service to their dealers and customers

and create additional value.

Source: www.daimler.com 4

Industry Analysis

Business Performance (2010)

5

Manufacturing Facilities in 17 countries

Market Capitalization about EUR 54.0 billion

Total Revenues EUR 97.8 billion

(2010 financial year)

Net profit/loss EUR 4,674 billion

Automotive Sales 1,895,400 vehicles

thereof: 1,276,800 Passenger

Cars

thereof: 355,300 Trucks

(2010 financial year)

Employees 260,100 (December 31, 2010)

R&D Expenses EUR 4,849 billion

Source: www.daimler.com

Industry Analysis

6Source: www.daimler.com

Industry Analysis

Shareholders Structure

7Source: www.daimler.com

Industry Analysis

8

• 5-7% of annual market growth

• Online ordering

• Most of R&D are being outsourced

• German automakers buy more parts from outside than produce in

house

• Increased automakers bargaining power

• Mass customization of products

Current trends in German automobile industry

Industry Analysis

9

• Largest industry sector in Germany (20% of total German industry

revenue)

• One of the largest employers (workforce – 723.000)

• Europe`s №1 automotive market in terms of production and sales

• Germany hosts the largest concentration of OEM plants in Europe (30

OEMs, 4 major brands)

• 2010 – 17% of worldwide cars production

• Country`s most innovative industry sector (R&D – EUR 57,4 billion)

• 2005-2009 – yearly 0,2% decrease in unit labor costs

German Automobile Industry in numbers

Industry Analysis

10

• Number of competitors: 6 companies

• Homogeneity of products: homogeneous

• Cost of entry: very costly

Industry Structure (S-C-P Model)

OLYGOPOLY

Expected firm performance: Competitive Advantage

Industry Analysis

German market share of car manufacturers (%)

VW, 21%

Mercedes (Daimler), 9.6%

BMW/Mini, 9.1%

Others, 60.3%

Source: Adapted from Bekker (2011)11

Industry Analysis

Brand Architecture

• Mercedes-Benz Cars

• Daimler Trucks

• Mercedes-Benz Vans

• Daimler Buses

• Daimler Financial Services

http://www.daimler.com/brands-and-products/our-brands 12

Industry AnalysisTarget Groups

B2C

• Male/Female

• 30-65 years

• Middle or high income

level

• Conservative people who

love comfort

B2B

• Companies of different size

and industry

13

Industry Analysis

14

EXTERNAL ENVIRONMENTPESTEL Model.

Environmental

Industry Analysis

15

• Government regulations - environmental issues

• 2009: car scrapping incentive announced (Umweltprämie)

• 2,500€ for a >9-year-old car and buying a new one

• Autobahn (Germany) – no speed limits

POLITICALPESTEL

Industry Analysis

16

• Foreign currency fluctuations

• Emerging markets (BRIC) – economies of scale

• Continuing globalization and consolidation

• Observed accelerated increase in car sales/market growth

ECONOMICPESTEL

Industry Analysis

17

• Popularity of eco-friendly/green products

• Growing affluence – ownership of more than one car

• Comfort and product quality demand

• A car = status object

SOCIO-CULTURALPESTEL

Industry Analysis

18

• HEV – hybrid electric vehicles

• All-electric vehicles

• F-cell: fuel-cell vehicles

TECHNOLOGICALPESTEL

Industry Analysis

19

• Stringent environmental regulations

� (2005) Euro 4, (2009) Euro 5, possibly Euro 6 in 2014

• Increased emissions

• Rising energy costs

ENVIRONMENTALPESTEL

Industry Analysis

20

• The ELV directive (End-of-life vehicles) of EC – hazardous substances

reduction

• Anti-bribery provisions

• Anti-trust investigation of EC

LEGALPESTEL

Industry Analysis

Source: Adapted from Porter (2008) 21

Rivalry among existing

competitors

Bargaining Power of Suppliers

1.Threat of New

Entrants

Bargaining Power of Buyers

Threat of Substitute/

Complimentary Goods

Business Environment Analysis

Industry Analysis

1. Large Economies of Scale:

• Mature Industry (Trade & Invest, 2011)

• Growth through acquisitions (Corswant & Fredriksson, 2002)

2. Product Differentiation:

• Brand recognition is highly valued by consumers (Hanzaee & Yazd, 2010)

• Customers are loyal to national manufacturers (Mintel, 2009)

3. Cost Advantages Independent of Scale:

• Experienced management board (more than 15 years in the industry) (Osiris, 2011)

4. Government Policy :

• The CO2 emissions to be reduced to 120 g/km by 2012 (Trade & Invest, 2011)

• Otherwise 0.95 € charge per g/km of CO2 (Trade & Invest, 2011)

High Barriers of Entry

Rivalry among existing

competitors

1.Threat of New Entrants

Industry Analysis

Supplier Power

• Automobiles consist of more that

20.000 parts (Liker et al, 1996)

• Supplier markets are operated by

small and medium-sized firms

(Peters, 2000)

Some Industry Suppliers

•Exterior: Polyplex, Switzerland

•Interior: TAKATA PETRI, Japan

•Mechatronics: Mitsubishi, Japan

•Chassis: Kirchhoff Witte, Germany

•Powertrain: ElringKlinger, Germany

Bargaining power of suppliers is very low

Rivalry among existing

competitors

2. Bargaining Power of Suppliers

Industry Analysis

Buyer Power

• Almost all production output is

purchased, so industry depends on

buyers (Peters, 2000)

• Rising demand for high technology

lead to large investment in R&D

(Sedgwick, 2011)

The bargaining power of the buyers is moderately high

Rivalry among existing

competitors

3.Bargaining Power of

Buyers

Industry Analysis

25

Rivalry among existing

competitors

4.Threat of Substitute/

Complimentary Goods

Substitutes:

•DB – S Bahn Trains

•BVG – U Bahn Trains

•Storck Bicycle GmbH - Bicycles

Complimentary Products:

•BP - Petrol

•Kumho, Continental - Tyres

Not Many Substitutes for Automobiles

Source: Google (2011)

Industry Analysis

Key CompetitorsBMW

• Competes in car manufacturing and financial services

sectors;

• MINI Exclusivity

VW

• Reported to be the No 1 carmaker in Europe

Volvo

• Leading maker of trucks, buses, and construction

equipment as well as marine (Volvo Penta), aircraft

(Volvo Aero), and industrial engines

• Struggles to suggest he right product mix for the right

market

Highly Competitive Market

Industry Analysis

27

MATURE INDUSTRY:

1. Product refinement

2. Investment in service quality

3. Process innovation

NEW OPPORTUNITIESOpportunities from Industry Structure

Industry Analysis

28

1. Development in the BRIC countries

2. Growing demand for green technologies

3. Daimler and Reanult-Nissan cooperation

4. Global truck manufacturing

NEW OPPORTUNITIESEnvironmental Opportunities

Industry Analysis

Source: Datamonitor 201129

…witness a rapid increase in car sales (in million units).

BRIC expected

growth in 2011 2010 2011

Brasil 4.5% 3.5 3.7

Russia 17% 1.8 2.2

India 10% 2.8 3.0

China n/a 18.1 20.0

OPPORTUNITIES Development in the BRIC countriesBrasil, Russia, India and China…

Industry Analysis

Photo: www3.mercedes-benz.com30

Mercedes-Benz S 400

BlueHybrid

• Saving fuel

• Reducing emissions

• ZERO emission

OPPORTUNITIESGrowing demand for green technologiesHybrid-electronic technology (HEV).

Industry Analysis

Photo: www3.mercedes-benz.com31

• Emission-free driving

• Reducing fuel consumption and CO2 emissions

• Lightweight components

• Cleaner engines

• 128 BlueEFFICIENCY vehicles

OPPORTUNITIESBlue EFFICIENCY

Industry Analysis

Photo: www3.mercedes-benz.com32

A hydrogen fuel cell vehicle

OPPORTUNITIESMercedes-Benz B-Class “F-Cell” Technology

Industry Analysis

Photo: www.japanmarkt.de33

• Smart for two

• Expanding the Smart®

family

• Green technologies

• Increase in volumes

(economies of scale)

OPPORTUNITIES Daimler and Renault-Nissan cooperation.

Industry Analysis

Photo: www.daimler.com34

• Accelerated growth 2010-

2015

• 17.2 million units (2010) →

26.5 million units (2015)

• Enhancing market share

OPPORTUNITIES Global truck manufacturing.

Industry Analysis

Source: Datamonitor (2011)35

Strengths Weaknesses

� Strong brand recognition and

market share

� Extensive production and sales

network

� Strong focus on research and

development

� Large scale of operations

� Product recalls

� Legal proceedings likely to

hamper reputation

� Underfunded pension

obligations

� Heavy debt could limit growth

Strengths and Weaknesses

Industry Analysis

2011-11-15 36

Strategic Recommendations

1. Continue investing into R&D

for further product

refinement.

2. Launch new products and

refine the old ones.

3. Invest into service quality

heavily.

4. Concentrate on capturing

market share in the emerging

markets and economies.

Industry Analysis

2011-11-15 37

References (1)Bekker, H. (2011) ‚ List of 20 Best-Selling Car Manufacturers in Germany in 2010‘ [Online] Available at: http://henk-

bekker.suite101.com/list-of-20-best-selling-car-manufacturers-in-germany-in-2010-a328223 [Accessed: 10 November, 2011]

Clark, J. (2010) ‚Daimler AG Recognized its Best Suppliers with the Daimler Supplier Award‘ eMercedesBenz. 19 March, 2010

[Online] Available at: http://www.emercedesbenz.com/autos/mercedes-benz/corporate-news/daimler-ag-recognized-its-best-

suppliers-with-the-daimler-supplier-award/ [Accessed: 9 November, 2011]

Company Spotlight: Daimler AG.Full Text Available MarketWatch: Automotive, Sep2011, Vol. 11 Issue 9, p16-17

Component Design: Are there Really Large US Japan Differences?’, Research Policy, 25, 59–89

Corswant, F. & Fredriksson, P. (2002) ‘Sourcing trends in the car industry: A Survey of car manufacturers’ and suppliers’ strategies

and relations’. International Journal of Operations and Production Management 22(7) pp.741-758 [Online] Available at:

http://www.emarketing.net.cn/upload/file/2009/02/17/201234875118940.pdf [Accessed: 8 November, 2011]

Daimler: Not a One-Legged Story.Full Text Available Black Book - The Best of Bernstein - Pan-European Edition (Fourth-Quarter

2007), Sep2007, p33-36, 4p.

Daimler: Outperforms Challenging Western European Market. Full Text Available White Book - European Autos Data Book - 4Q:10:

Will Anyone Ever Make Money in Mass-Market Europe Again?, Feb2011, p75-77.

Datamonitor: Daimler AG (2011) DaimlerChrysler AG SWOT Analysis, p1-12.

Germany: Trade and Invest (2011) The Automotive Industry in Germany. Issue 2010/11 pp. 2-7 [Online] Available at:

http://www.gtai.com/fileadmin/user_upload/Downloads/Industries/Automotive/1_Englisch/IndustryOverview_Automotive_September2

010_GTAI.pdf [Accessed: 8 November, 2011]

Hanzaee, K. & Yazd, R.M. (2010) ‚The impact of brand class, brand awareness and price on two important consumer behavior

factors; customer value and behavioral intentions‘. African Journal of Business Management 4(17) pp. 3775-3784 [Online] Available

at: http://www.academicjournals.org/ajbm/pdf/pdf2010/4Dec/Hanzaee%20and%20Yazd.pdf[Accessed: 8 November, 2011]

Industry Analysis

2011-11-15 38

References (2)Hoover's Company Records (2011a) Daimler AG. NexisUk[Online] Available at:

http://www.lexisnexis.com/uk/nexis/mungo/docEP.do?twi=0&format=GNBFI&cmdfmt=prthex&risb=21_T13203199888&docNo=

1&cmd=2E43463B48565250524F3B444F432D49442823343137353823293B3D52435F4551305F2E434C2B3A434F4D504E5

92B3A48565250524F2B3A3D53535F234E4F444F43233B2E4655 [Accessed: 9 November, 2011]

Hoover's Company Records (2011b) Volkswagen. NexisUk[Online] Available at:

http://www.lexisnexis.com/uk/nexis/mungo/docEP.do?twi=0&format=GNBFI&cmdfmt=prthex&risb=21_T13203199888&docNo=

1&cmd=2E43463B48565250524F3B444F432D49442823343138353323293B3D52435F4551305F2E434C2B3A434F4D504E5

92B3A48565250524F2B3A3D53535F234E4F444F43233B2E4655 [Accessed: 9 November, 2011]

Hoover's Company Records (2011c) Volvo. NexisUk[Online] Available at:

http://www.lexisnexis.com/uk/nexis/mungo/docEP.do?twi=0&format=GNBFI&cmdfmt=prthex&risb=21_T13203199888&docNo=

1&cmd=2E43463B48565250524F3B444F432D49442823343138353423293B3D52435F4551305F2E434C2B3A434F4D504E5

92B3A48565250524F2B3A3D53535F234E4F444F43233B2E4655 [Accessed: 9 November, 2011]

Liker, J. K., R. R. Kamath, S. N. Wasti, and M. Nagamachi (1996) ‘Supplier Involvement in Automotive Industry’.

Mintel (2009) ‚Car Ownership and Purchasing in Europe - August 2009’ [Online] Available at:

http://academic.mintel.com/sinatra/oxygen_academic/search_results/show&/display/id=475603/display/id=475603/display/id=4

75603/display/id=475603/display/id=476866#hit1 [Accessed: 8 November, 2011]

Osiris (2011) Daimler Managerial Report. [Online] Available at: http://osiris.bvdep.com/version-

2011104/cgi/template.dll?checkathens=1&kick=1&product=20&user=her.6148710033156812&pw=bloDVkxRmnKJKOs5Nc1Y%

2bw%3d%3d [Accessed: 8 November, 2011]

Peters, J. (2000) ‚Buyer Market Power and Innovative Activities‘. Review of Industrial Organization 16. pp. 13-38 [Online]

Available at: http://www.springerlink.com/content/j5gj54822r082m64/fulltext.pdf [Accessed: 9 November, 2011]

Sedgwick, D. (2011) ‘Suppliers praise BMW, Daimler. Paying for technology wins high survey marks’. Automotive News. 31

October, 2011 [Online] Available at: http://www.autonews.com/apps/pbcs.dll/article?AID=/20111031/OEM01/310319835/1424

[Accessed: 9 November, 2011]

Industry Analysis

2011-11-15 39

Thank you!