restructuring of daimler - anoushka

7/27/2019 Restructuring of Daimler - Anoushka

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RESTRUCTURING OF DAIMLER-BENZ

Summary:

Daimler-Benz is an organization with 300,00 employees worldwide and

consists of 4 groups:

Mercedez Benz : By far their biggest and most successful group

with 200,000 employees. Deals in passenger cars and commercial

vehicles.

AEG-Daimler Benz : Deals in rail systems, micro electronics,

automation, heavy diesel engines.

Aerospace Group: Its a part of the aircraft business. Deals in space,

defence, civil and propulsion systems.

InterServices: Provides financial services, insurance brokerage, real

estate, mobile communications, marketing and trading.

In 1995-1996 there was a need to refocus on what the company could do

best. It was clear that their strengths were in car manufacturing, truck

business and railroad sector. Mercedez benz had a strong competitive

position with its cars and trucks in Europe, North America and Latin

America. While the vans were doing well in Europe and buses, in Latin

America.

After this analysis, they decided that globalization and development of

new product segments would help them grow. In 1995, they went


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through huge losses due to currency fluctuations and blurring of the

companys image due to diversification. All of this ate into profits.

Therefore, the unprofitable arms of Daimler-Benz, AEG and Fokker, were

cut off. Hence, they now aimed at maximizing medium and long term

profitability instead of short term profitability.

To achieve this aim of reduced costs and increased profitability, the

organizational structure was decentralized and simplified so that

decisions could be made faster. It was also designed to promote co-

operation.

In 1997, the board was restructured. Mercedez-Benz was integrated into

Daimler-Benz and chief Helmut Werner resigned from the company.

Problem Areas:

After reading the case, one will realize that the main problem area had to be an

overdose of diversification. This is what actually led to the losses.

The minor problem was exposure to currency fluctuations.

Analysis:

The company wanted to be leaders in every sphere of the manufacturing

business but were completely let down. It was difficult for them to focus on theimportant areas of the organization. The loss making units were pulling the

whole organization down. Diversification into the world is good, but this

reduces the ability to focus on every unit. The reasons could be many. Like no

link between each sub-division, weak link of the business gets unnoticed, short-

term profitability leading to long term loss. One cannot diversify overnight. The

organization should find its profit making entity, extract as much profit as it

can, create a strong base for itself and then diversify. Daimler-Benz lost its

market share as it was doing too many things at one time.

Daimler-Benz realized from the mistakes made in the past and chose to correct

its mistakes. Their organization structure was centralized. It seemed like one

head unit couldnt keep a tab of the operations of its other entities spread

across the globe. Hence, they approached a decentralized structure. Every unit

would work on its own and behave like Daimler-Benz and not as a branch.

Therefore the various groups must work autonomously so that Daimler-Benz

makes a name for itself worldwide. Even though theyve adopted a

decentralized approach, the head office must keep a tab on the happenings of

the different branches. Its finances and reports should be looked into, on a

periodical basis.

Daimler-Benz never wanted to restrict itself only to manufacturing. AEG was

into robotics, automation, rails, etc. Daimler-Benz wanted to capture these


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markets also and emerge as a leader. Also, maybe since all other companies

were venturing into Aerospace, Daimler-Benz wanted to acquire superiority in

that field too. Daimler-Benz also ventured into the finance sector with its

InterServices arm. The reasons as to why they ventured into the finance sector

could be because they could now get a regular inflow of cash. They had a readymade customer base to deal with; the clients from their other groups.

The various decisions that Jurgen Schrempp can take are as follows:

Decentralization is a key decision that can help save Daimler-Benz. Each

unit should have their own goals and targets. Promotion of

entrepreneurial spirit is important. Every employee should be

accountable to himself. Reward and recognition programs should be

followed.

They should try tapping markets other than Europe and America. They

could head to Asia; China and Japan, set an industry there and make

Mercedes-Benz affordable to the nationals.

Globalization will help them grow in terms of sales and profitability.

New Organisation Structure:


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restructuring of daimler - anoushka

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