1. Automobile Industry: Daimler AG
Industry Analysis
Presentation held by:
Evelina Baziuk, Polina Gribakov, Gamze Saba, Weronika
Salach
2011-11-15

2. 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

3. 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

4. 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

5. Industry Analysis
Business Performance (2010)
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 5

6. Industry Analysis
Source: www.daimler.com 6

7. Industry Analysis
Shareholders Structure
Source: www.daimler.com 7

8. Industry Analysis
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
8

9. 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
9

10. 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
10

11. Industry Analysis
German market share of car manufacturers (%)
VW, 21%
Mercedes
Others, 60.3% (Daimler), 9.6%
BMW/Mini,
9.1%
Source: Adapted from Bekker (2011)
11

12. 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

13. Industry Analysis
Target Groups
B2C B2B
• Male/Female • Companies of different size
and industry
• 30-65 years
• Middle or high income
level
• Conservative people who
love comfort
13

14. Industry Analysis
EXTERNAL ENVIRONMENT
PESTEL Model.
Environmental
14

15. Industry Analysis
POLITICAL
PESTEL
• 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
15

16. 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
16

17. 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
17

18. Industry Analysis
TECHNOLOGICAL
PESTEL
• HEV – hybrid electric vehicles
• All-electric vehicles
• F-cell: fuel-cell vehicles
18

19. Industry Analysis
ENVIRONMENTAL
PESTEL
• Stringent environmental regulations
(2005) Euro 4, (2009) Euro 5, possibly Euro 6 in 2014
• Increased emissions
• Rising energy costs
19

20. Industry Analysis
LEGAL
PESTEL
• The ELV directive (End-of-life vehicles) of EC – hazardous substances
reduction
• Anti-bribery provisions
• Anti-trust investigation of EC
20

21. Business EnvironmentAnalysis
Industry Analysis
1.Threat of
New
Entrants
Rivalry Bargaining
Bargaining among
Power of Power of
existing
Suppliers
competitors
Buyers
Threat of
Substitute/
Complimentar
y Goods
Source: Adapted from Porter (2008) 21

22. High Barriers of Entry
Industry Analysis
1. Large Economies of Scale:
• Mature Industry (Trade & Invest, 2011)
• Growth through acquisitions (Corswant &
1.Threat of Fredriksson, 2002)
New Entrants
2. Product Differentiation:
• Brand recognition is highly valued by consumers
(Hanzaee & Yazd, 2010)
• Customers are loyal to national manufacturers
Rivalry (Mintel, 2009)
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)

23. Bargaining power of suppliers is very low
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)
Rivalry
2. Bargaining
Power of
among
existing
Suppliers
competitors Some Industry Suppliers
•Exterior: Polyplex, Switzerland
•Interior: TAKATA PETRI, Japan
•Mechatronics: Mitsubishi, Japan
•Chassis: Kirchhoff Witte, Germany
•Powertrain: ElringKlinger, Germany

24. The bargaining power of the buyers Industry Analysis
is moderately high
Buyer Power
• Almost all production output is
Rivalry
purchased, so industry depends on
among 3.Bargainin buyers (Peters, 2000)
existing g Power of
competitors Buyers
• Rising demand for high technology
lead to large investment in R&D
(Sedgwick, 2011)

25. Not Many Substitutes for Automobiles
Industry Analysis
Substitutes:
Rivalry
among •DB – S Bahn Trains
existing •BVG – U Bahn Trains
competitors
•Storck Bicycle GmbH - Bicycles
Complimentary Products:
•BP - Petrol
4.Threat of •Kumho, Continental - Tyres
Substitute/
Complimentary
Goods
Source: Google (2011)
25

26. Highly Competitive Analysis
Industry Market
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

27. Industry Analysis
NEW OPPORTUNITIES
Opportunities from Industry Structure
MATURE INDUSTRY:
1. Product refinement
2. Investment in service quality
3. Process innovation
27

28. 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
28

29. Industry Analysis
OPPORTUNITIES
Development in the BRIC countries
Brasil, Russia, India and China…
…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
Source: Datamonitor 2011 29

30. 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 30

31. Industry Analysis
OPPORTUNITIES
Blue EFFICIENCY
• Emission-free driving
• Reducing fuel consumption and CO2 emissions
• Lightweight components
• Cleaner engines
• 128 BlueEFFICIENCY vehicles
Photo: www3.mercedes-benz.com 31

32. Industry Analysis
OPPORTUNITIES
Mercedes-Benz B-Class “F-Cell” Technology
A hydrogen fuel cell vehicle
Photo: www3.mercedes-benz.com 32

33. 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 33

34. Industry Analysis
OPPORTUNITIES
Global truck manufacturing.
• Accelerated growth 2010-
2015
• 17.2 million units (2010) →
26.5 million units (2015)
• Enhancing market share
Photo: www.daimler.com 34

35. Industry Analysis
Strengths and Weaknesses
Strengths Weaknesses
Strong brand recognition and Product recalls
market share Legal proceedings likely to
Extensive production and sales hamper reputation
network Underfunded pension
Strong focus on research and obligations
development Heavy debt could limit growth
Large scale of operations
Source: Datamonitor (2011)
35

36. 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.
2011-11-15 36

37. Industry Analysis
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]
2011-11-15 37

38. Industry Analysis
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]
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39. Industry Analysis
Thank you!
2011-11-15 39