Automobile Industry: Daimler AG Industry Analysis

Presentation held by: Evelina Baziuk, Polina Gribakov, Gamze Saba, Weronika Salach

2011-11-15

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

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 worlds biggest manufacturer of commercial vehicles with a global reach

Source: www.daimler.com

Industry Analysis

Creating Value Added

Daimlers vision: to provide first-class service to their dealers and customers and create additional value.

Source: www.daimler.com

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Business Performance (2010)

Manufacturing Facilities Market Capitalization Total Revenues Net profit/loss Automotive Sales in 17 countries about EUR 54.0 billion EUR 97.8 billion (2010 financial year) EUR 4,674 billion 1,895,400 vehicles thereof: 1,276,800 Passenger Cars thereof: 355,300 Trucks (2010 financial year) 260,100 (December 31, 2010) EUR 4,849 billion

Employees R&D Expenses

Source: www.daimler.com

Industry Analysis

Source: www.daimler.com

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Shareholders Structure

Source: www.daimler.com

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Current trends in German automobile industry

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

Industry Analysis

German Automobile Industry in numbers

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

Industry Analysis

Industry Structure (S-C-P Model)

Number of competitors: 6 companies

Homogeneity of products: homogeneous Cost of entry: very costly

OLYGOPOLY
Expected firm performance: Competitive Advantage
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Industry Analysis

German market share of car manufacturers (%)

VW, 21%

Others, 60.3%

Mercedes (Daimler), 9.6%

BMW/Mini, 9.1%

Source: Adapted from Bekker (2011)

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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

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Target Groups

Industry Analysis

B2C

B2B

Male/Female 30-65 years Middle or high income level Conservative people who love comfort

Companies of different size and industry

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Industry Analysis

EXTERNAL ENVIRONMENT PESTEL Model.

Environmental

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Industry Analysis

POLITICAL PESTEL

Government regulations - environmental issues 2009: car scrapping incentive announced (Umweltprmie) 2,500 for a >9-year-old car and buying a new one Autobahn (Germany) no speed limits

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Industry Analysis

ECONOMIC PESTEL

Foreign currency fluctuations Emerging markets (BRIC) economies of scale Continuing globalization and consolidation Observed accelerated increase in car sales/market growth

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Industry Analysis

SOCIO-CULTURAL PESTEL

Popularity of eco-friendly/green products Growing affluence ownership of more than one car Comfort and product quality demand A car = status object

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Industry Analysis

TECHNOLOGICAL PESTEL

HEV hybrid electric vehicles All-electric vehicles F-cell: fuel-cell vehicles

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Industry Analysis

ENVIRONMENTAL PESTEL

Stringent environmental regulations (2005) Euro 4, (2009) Euro 5, possibly Euro 6 in 2014

Increased emissions Rising energy costs

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Industry Analysis

LEGAL PESTEL

The ELV directive (End-of-life vehicles) of EC hazardous substances reduction Anti-bribery provisions Anti-trust investigation of EC

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Business Environment Industry Analysis Analysis

1.Threat of New Entrants

Bargaining Power of Suppliers

Rivalry among existing competitors

Bargaining Power of Buyers

Threat of Substitute/ Complimentar y Goods

Source: Adapted from Porter (2008)

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High Barriers Industry of Analysis Entry 1. Large Economies of Scale:

Mature Industry (Trade & Invest, 2011) Growth through acquisitions (Corswant & Fredriksson, 2002)

1.Threat of New Entrants

2. Product Differentiation:

Brand recognition is highly valued by consumers (Hanzaee & Yazd, 2010) Customers are loyal to national manufacturers (Mintel, 2009)

Rivalry among existing competitors

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)

Bargaining power of suppliers Industry is very Analysis low

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)

2. Bargaining Power of Suppliers

Rivalry among existing competitors

Some Industry Suppliers

Exterior: Polyplex, Switzerland Interior: TAKATA PETRI, Japan Mechatronics: Mitsubishi, Japan Chassis: Kirchhoff Witte, Germany Powertrain: ElringKlinger, Germany

Analysis The bargaining power of the buyers Industry is moderately high

Buyer Power

Rivalry among existing competitors

3.Bargainin g Power of Buyers

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)

Not Many Substitutes for Industry Automobiles Analysis

Substitutes:
Rivalry among existing competitors

DB S Bahn Trains BVG U Bahn Trains Storck Bicycle GmbH - Bicycles Complimentary Products: BP - Petrol Kumho, Continental - Tyres

4.Threat of Substitute/ Complimentary Goods

Source: Google (2011) 25

Highly Competitive Market Industry Analysis

Key Competitors
BMW

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

Industry Analysis

NEW OPPORTUNITIES Opportunities from Industry Structure

MATURE INDUSTRY:

1.

Product refinement

2.

Investment in service quality

3.

Process innovation

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Industry Analysis

NEW OPPORTUNITIES Environmental Opportunities

1.

Development in the BRIC countries

2.

Growing demand for green technologies

3.

Daimler and Reanult-Nissan cooperation

4.

Global truck manufacturing

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Industry Analysis

OPPORTUNITIES Development in the BRIC countries Brasil, Russia, India and China
witness a rapid increase in car sales (in million units).

BRIC Brasil Russia India China

expected growth in 2011 4.5% 17% 10% n/a

2010 3.5 1.8 2.8 18.1

2011 3.7 2.2 3.0 20.0

Source: Datamonitor 2011

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Industry Analysis

OPPORTUNITIES Growing demand for green technologies Hybrid-electronic technology (HEV).

Mercedes-Benz S 400 BlueHybrid

Saving fuel Reducing emissions ZERO emission

Photo: www3.mercedes-benz.com

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Industry Analysis

OPPORTUNITIES Blue EFFICIENCY

Emission-free driving Reducing fuel consumption and CO2 emissions Lightweight components Cleaner engines 128 BlueEFFICIENCY vehicles
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Photo: www3.mercedes-benz.com

Industry Analysis

OPPORTUNITIES Mercedes-Benz B-Class F-Cell Technology

A hydrogen fuel cell vehicle

Photo: www3.mercedes-benz.com

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Industry Analysis

OPPORTUNITIES Daimler and Renault-Nissan cooperation.

Smart for two Expanding the Smart family Green technologies Increase in volumes (economies of scale)

Photo: www.japanmarkt.de

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Industry Analysis

OPPORTUNITIES Global truck manufacturing.

Accelerated growth 20102015 17.2 million units (2010) 26.5 million units (2015) Enhancing market share

Photo: www.daimler.com

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Industry Analysis Strengths and Weaknesses

Strengths Strong brand recognition and market share Extensive production and sales network Strong focus on research and development Large scale of operations

Weaknesses Product recalls Legal proceedings likely to hamper reputation Underfunded pension obligations Heavy debt could limit growth

Source: Datamonitor (2011)

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Industry Analysis

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.

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Industry Analysis

References (1)
Bekker, H. (2011) List of 20 Best-Selling Car Manufacturers in Germany in 2010 [Online] Available at: http://henkbekker.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-bestsuppliers-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, 5989 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]

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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/version2011104/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]

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Industry Analysis

Thank you!

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