A case of joint venture between Daimler and Chrysler

1. DAIMLERS

3. Obsession With
Diversification
Revulsion With
Diversification
Simple related
Diversification
Early 1990’s Mid 1990’s 1998

4. Edzard Reuter era

5. • $1.9 billion investment in
microelectronics
• $750 million profit in last year of
Reuter after loss of $1.3 billion in
last year
• $6.25 billion investment in
acquisition in last 5 years

6. Strength
• Lack of
dependency on
Japan and USA
• Risk minimization
• Backward
integration
Weakness
• Lack of perfection
• Need of
acquisition to
compete ($6.25
billion investment
in 5 years.)
Opportunity
• Opportunity to
enter huge,
diversified market
(Microchip
needed for
multiple devices)
Threat
• Contemporary
competitors like:
Siemens, Bosch
• Rapidly changing
technological
environment

7. Jurgen E. Schrempp era

8. • Focus on core automotive and truck businesses
• Close the money-losing Daimler Benz industry unit
with sell offs and transfers of profitable operation to
other divisions
• Slim down DASA Daimler Benz Aerospace, reducing its
workforce of 40,000 by 50%.
• Step up sourcing of parts from dollar and other weak-
currency area.
• Speed up globalization of manufacturing by plant
investment outside Germany

9. Strength
• More effective and
efficient
departments (23
units)
• Introduction of a
stronger Mercedes
brand (83% Sales
increase)
Weakness
• Lack of product
variation (Limited,
upper scale
product line.)
• Niche customer
base
Opportunity
• Opportunity to
shift production
outside Germany
and attain
benefits.
Threat
• Contemporary
competitors from
Germany like:
BMW
• Threat from U.S.A
(Ford, Cadillac)
• Threat from Japan

10. Jurgen E. Schrempp era (Cont.)

11. • Attained direct operating control of
Mercedes Benz (Schrempp became
CEO)
• Daimler-benz became Daimler Chrysler
after the merger in November 1998.

12. Product line
• Low cost minivan,
SUVs, Cars from
Chrysler
Geographic
• 93% sales of Chrysler
in North America,
63% of Mercedes in
Europe.
• Opportunity in Latin
America, Asia
Operational
• Chryslers relation in
Supply chain,
Daimler’s Diesel
engine

13. Strength
• More cost effective
sources ($ 3 billion
cost cut )
• Expansion of
product line
• Experienced
American
workforce
Weakness
• Identity crisis of a
new company
• Lack of specific
culture
Opportunity
• Opportunity to shift
production outside
Germany.
• Opportunity to target
lower and MAC
population.
• Opportunity to target
Latin America, Asia
Threat
• Contemporary
competitors from
Germany like:
BMW
• Threat from U.S.A
(Ford, Cadillac)
• Threat from Japan

14. Key Partners
- Chrysler
- Chrysler’s
Supply Chain
partners
- Chryslers
engineers
- Daimlers own
suppliers
Key Activities
- Assembling
- Manufacturing
Value Propositions
- Mercedes –
Benz (S,B,C
class Sedan)
- M class SUV
- SLK
- Jeep
- Chrysler Trucks,
SUVs, minivan
Customer
Relationships
- Showroom
- Helpline
Customer
Segments
- Europe
- North
America
- Latin
America
- Asia
Channels
- Own channel in
Europe
- Chryslers
channel in North
and South
America
Key Resources
- Spare parts
- Tyres
- Steel
- Audio-visual
systems
Cost Structure
Employee Salary, Cost of parts, tyres, Facility
management, etc.
Revenue Streams
Sales of Mercedes- Benz and Chrysler cars

15. Flashy
Speedy
Production
Low cost cars
Bankruptcy
Conservative
Bureaucratic
Focus on
Luxury and
Quality

16. “They could be heading for unbelievable catastrophe”
- Ulrich Steger
Management professor (IMD)

17. The newfound
company must have
its own separate
culture, abandoning
their past ones.
Strong corporate culture
Central
Management
should be deployed
for critical tasks
Central Management
Company must
articulate its
investment
priorities (Make
luxury cars? Or Cars
for all?)
Set Investment priorities

18. The newfound
company must set a
performance
requirement. That
will be common for
Daimler and
Chrysler
Strong Performance requirements
Compensation
policy should be
clear and agreed
upon! (Eaton gets
$16 million, while
Schrempp gets $
1.9 million!)
Compensation policies
Company must
articulate its
development path
for executives
(Remove
uncertainty)
Set development path

19. • All the necessary adjustments to make the merger successful
should be done within first 12-24 months.
However, there is no proper monitoring and adjusting plan !

20. “…Daimler-Chrysler have combined nothing beyond
some administrative departments, such as finance
and public relations.”
- Business Insider
September 2001