Marketing Strategy of Mercedes Benz Firm by cdn12676

VIEWS: 0 PAGES: 20

More Info
									 Competitiveness of
Mercedes Benz A-Class
    In Hong Kong




         Group Project
  International Field Project
Master of Business Administration
    University of Hong Kong
          (Spring - 2001)



            By

    Lawrence C. P. Cheung
      Horace H. W. Chu
        Maxim Kwok
        Joseph Kong
                            TABLE OF CONTENT



     EXECUTIVE SUMMARY……………………………………………………..……1

1.   BACKGROUND – AUTO INDUSTRY……………………………………….…....2
     1.1 DaimlerChrysler………………………………………………………….…..2
     1.2 SWOT Analysis ………………………………………………………..…….3

2.   BENZ A-CLASS…………………………………………………………………..….4
     2.1  Market Potential of A-Class in Different Countries…………………….....4
          2.1.1 Europe………………………………………………………………...4
          2.1.2 Asia……………………………………………………………………5

3.   A-CLASS  AUTOMATIC MANUFACTURING PLANT IN
     GERMANY…………………………………………………………………………...6

4.   MARKET SITUATION IN HONG KONG………………………………………..7

5.   SWOT ANALYSIS OF A -CLASS IN HONG KONG……………………………..9

6.   RECOMMENDATION………………………………………………………..…...11



     Appendix I-a:         Key Information for the Big 3s
     Appendix I-b:         US 1999 Market Share
     Appendix II:          Safety Features of Mercedes Benz A-Class
     Appendix III:         Questions for Interviewing with
                           Mr. Michael Leung, Sales & Marketing Manager of
                           Zung Fu Company

     Presentation Slides




                                        2
Executive Summary

Mercedes Benz has long been the dream of many people and become an analogous
for prestige. With the introduction of A-class, the brand has become much more
affordable for many young executives. However, it also triggered the paradox
between Brand name and Sales volume. The tug-of-war began when Daimler
Chrysle r decided to increase its sales and boost up market shares in the declining
automobile market.

The site visit of the highly automated A-class production plant in Germany was not
only impressive but also demonstrated the dilemma similar to that of aristocratic era
and industrial revolutions. The ambitious of Daimler Chrysler was clearly shown in
the targeted sales of 1,000,000 vehicles by 2001. Thus, the A-class was launched as
a surprise to the market. Despite its excellence in the brand and value-added
features, the relatively low price was the key behind the success.

The production capacity, technology and investment of A-class plant marked the
milestone in the history of Mercedes Benz. Mass production line with over 95%
robotic operations has contradicted the heritage of the brand; yet, it also
strengthened the competitiveness of the product. Despite the fact that the company
never admits that the launch of A-class was to compete with the “low end Japanese
utility car” market, the result has proved the contrary. A-class received the applause
from the European as a practical and safe utility vehicle. Without A-class, Daimler
Chrysler would not been able to celebrate the birth of its 500,000 th vehicles to the
World.




                                          3
The issues facing Daimler Chry sler are far more complicated when the company tried
to market the “Golden Goose” to the Asia market. Extensive research revealed that
the strategy is totally different when compared to the European market. The
perspectives for most of the potential markets are pessimistic, mainly due to the
constraint of customs, tariffs and quotas regulations in various countries.

How could Daimler Chrysler manage its marketing and sales strategy in Hong Kong
in order to stimulate the sales volume? Given the peculiar consumer demand pattern
and the cultural differences, Mr. Michael Leung, the Sales and Marketing Manager of
the sole agent of Mercedes Benz in Hong Kong, targeted its client base at those
young executives who are “Trendy with Life Style”. Due to the economics and
political restrictions imposed in most Asian countries, Hong Kong becomes the last
resort for potential market expansion. However, it does not mean to put down the
price and compete head on with the Japanese or Korean motor companies. The
names of the game are “Brand” and “Safety”; for they are the core competency of
Mercedes Benz.

The present strategy of maintaining the brand image while defending the “yuppies”
image for the new generation is found to be appropriate in penetrating the unique
market for A-class in Hong Kong.


1.     Background - Auto Industry

The Big 3 are respectively: General Motor, Ford Motor and Daimler Chrysler. The
auto industry (including its cluster industries for accessories and parts) forms an
important one in most countries. In US, nearly one-fifth of the population works for
the auto industry. In countries like Italy, UK and France, governments offer
subsidies to the industry.

Competition is getting even keener. In developed countries, the auto market is
almost saturated with minimal growth rates. On the other hand, major Japanese and
Germany manufacturers have also established production plants in US. They
included: Toyota, Nissan, Honda, Volkswagen, BMW and Hyundai.

With a worldwide production over capacity, there is a continued trend for
consolidation of the largest firms. To prepare for the funds demanded for further
acquisition, the large firms are divesting from their non-core activities. For instance,
                                                        o
Daimler Chrysler sold its train operation, Ad Tranz t Bombardier, Canada in May
2001.

In US, the largest auto market, the recent trend for competition is focused on sport
utility vehicle (SUV) segments.

In 2000, US auto sale reached 17.4 million units, representing a mere 2.9% increase
over that of 1999. In terms of number of unit, the US market constituted 30.6% of
the world market – there was a worldwide delivery of 56.87m in 2000.



                                           4
The comparison on the major information among the Big 3s is tabulated as
Appendix I-a for reference. The 1999 US market shares for major auto
manufacturers is also attached as Appendix 1 -b.


1.1    Daimler Chrysler :

Brief introduction of Daimler Chrysler -

Daimler Benz is one of the oldest automobile firms in the world. In 1885, Karl Benz
& Gottlieb Daimler developed the gasoline engine. In November 1998, Daimler Benz
spent US$38 billion and acquired majority control of Chrysler to form Daimler
Chrysler.     Founded in 1925, Chrysler was the third largest US automotive
manufacturer after General Motor and Ford Motor. Daimler Chrysler is currently the
third largest automotive manufacturer in the world.

Daimler Chrysler has 6 business segments:
   1) Mercedes-Benz Passenger Cars & Smart
   2) Chrysler Group – selling under brands as: Chrysler, Jeep, Dodge, Plymouth;
   3) Commercial Vehicle s – selling under the following brands: Mercedes-Benz,
      Freightliner (acquired from Ford), Sterling (also acquired from Ford, heavy
      truck), Setra, Thomas Built Buses, American LaFrance, Western Star, Orion;
   4) Services –
         i) Financial Services: automotive financing and non-automotive financing;
         ii) IT Services
   5) Aerospace: it owns 30% of EADS and 38% of Airbus
   6) Others

In terms of major markets, Daimler Chrysler mainly operates in Europe and the
NAFTA Region i.e. US, Canada & Mexico. It is relatively less represented in Asia
Pacific region although in October 2000, it acquired 34% of Mitsubishi Motors Corp
and increased shareholdings to 37.3% in April 2001. It also holds 9% equity stake
in Hyundai Motors.

1.2    SWOT Analysis

Strengths
   1) Long time strongly esta blished premium brand name of Daimler Benz – over
      hundred years of successful development of a premium brand name. Rated
      the top premium automobile brand worldwide by Interbrand rating agency
   2) The merged unit of Daimler Benz and Chrysler covers both Europe and NAFTA
      region
   3) Innovative R&D strength
   4) A champion for environmental concern – Daimler Chrysler is a leading global
      innovator with the fuel cell – by 2004, the A -Class will be a market-ready fuel
      cell vehicle



                                           5
Weaknesses
  1) The consolidated corporation s till experienced problems in integrating the two
     business groups, particularly in resolving cultural differences of Western
     Europe and US. Many commentator said it still running as 2 separate
     business units;
  2) Not much presence in Asia region.
  3) Increased competition for Chrysler’s Jeeps and minivans. These sectors used
     to be the highest margin business segments for Chrysler;
  4) Large truck exposure as US and EU truck markets downturn.


Opportunities
  1) Higher growth potential in developing countries like: China, Malaysia,
     Indonesia and India;
  2) Use of Mitsubishi and Hyundai stakes to expand in Asia.


Threats
   1) Declining demand in most developed countries - auto manufacturers are
      facing a shrinking world auto market especially in truck market. In US,
      consumers keep their current cars an estimated 8.5 years which is the highest
      in 40 years.
   2) Intense competition in US, many Japanese manufacturers have established
      production plants in US.
   3) Not only in the mass market, even in the luxury market, there is keen
      competition from Japanese - Toyota’s Lexus was the top selling luxury car in
      year 2000, while Benz was only No. 2;
   4) Excess capacity worldwide: by 2002, automakers will have a capacity to
      produce 80m vehicles with demand of only 60m units;
   5) Rising fuel prices
   6) Environmental issues.
   7) There is potential threat for diluting the premium brand-equity of Daimler
      Benz because of expanding lower-end vehicle products

2.    Benz A-Class

Launched in March 1997 at the Geneva International Motor Show, the A-class
vehicle is Daimler Benz’s first effort targeted to mass market.

The fact that the A-class won the 1998 Achievement in Automotive Safety Awards
was especially important to Daimler Benz since in the test stage, it had revealed
design weakness - it flipped during a test drive. Daimler Benz respond by spending
hundreds of millions of deutsche marks to fix it with harder tires and installed the
electronic safety system ESP (Electronic Stability Program).

The A-Class is famous for its remarkably adaptable interior. This miniature Mercedes
can hold 4 passengers and their luggage without feeling the strain, or go to the



                                         6
other extreme and become a single seater with room for most things the sportsman
or handyman might want to carry.
Its basic 390 liters of cargo space give the A160 a 30 percent advantage over
anything previously seen in this segment. Its lift -out rear seats and front passenger
seat means the A160 can be converted to single -seater operation with maximum
space for luggage or equipment. As much as 1700 litres load space ca n be achieved.
No less than 70 percent of the A160’s total length can be made available to its
occupants, with generous legroom and front headroom unrivalled in a car of these
dimensions.
Its miserly 7.2 litres per 100 kilometres mark it out as being economical in fuel as
well as size, while it meets and exceeds existing and future EU emission controls by
as much as 40 percent.
In Hong Kong, it is available in 3 different lines, 2 different lengths – standard 3.6
meter A-Class and 3.77 m long wheelbase vers ion. It is priced at HK$214,000 for
A190 Elegance/ 219,700 for A190 Avantgrade in HK.


2.1   Market potential of A-Class in different countries:

2.1.1. Europe
Europe is the major market of Daimler Chrysler. The design concept of A-C lass is
targeting to gain market shares from expending its product range downward. A-
Class carries with it the traditional supreme quality of Mercedes Benz products but at
the same time, offers a very flexible functionality and a strong sense of security. It
would appeal to the European market since consumers stress on both quality and
functionality.

2.1.2. Asia
a.     PRC -
To protect the domestic industry, the Chinese government imposes many restrictions
on car imports. As competition increased for the locally produced car manufacturers,
including those joint ventures from foreign investors, there is an intense price
cutting war. However, prices of imported cars remain firm because they are largely
targeted at the high-income earners.

                                       m
As a result, should Daimler Chrysler ai s to open the PRC market, A-Class is not the
right product to push. As buyers need approval which is difficult to get, premium
car, which also bring higher profit margin, will be the choice.

b.      Singapore
It is a well-known fact that owning a car in Singapore is expensive. Not only that,
buying, registering, and licensing a new car in Singapore is also complicated. Import
Duty and Additional Registration Fee, equal about 200% of a vehicle’s Open Market
Value. Moreover, since May 1990, any person wishing to register a vehicle must first
obtain a COE (Certificate of Entitlement) through bidding. A COE is valid for 10 years



                                          7
from the date of registration of the vehicle. Upon expiration of the COE, it can be
revalidated for another 10 years by paying a fee.
As of Jan 96, the COE price ranged from S$20,000 to S$50,000, which vary with the
power of the engine.
With such restrictive conditions, A-Class would thus definitely not a good candidate
for Benz to develop the Singapore market.

c.      Other Asian countries like: Taiwan, Indonesia and Malaysia -
They all impose a high tax on car imports and therefore A-Class would not be the
right tool for Benz to expand its market. The right strategy would be local assembly
through either Mitsubishi or Hyundai.

d.    Basically , these leave Hong Kong as the most likely Asian market that A-Class
should target on.




3.      A-class automatic manufacturing plant in Germany
Flexible manufacturing system
It looks like something out of a science -fiction movie in which remote-controlled
carts deliver a basic casting to a computerized machining center. Although carts are
still controlled by workers, the whole production process is not far away from that.
With robots positioning and repositioning the casting, the machining center calls
upon its tools to perform varying operations that turn the casting into a finished part.
The robots can perform measurement on their own, make adjustment and perform
their job accordingly.

In a global economy, those manufacturing organizations that can respond rapidly to
change have a competitive advantage. They can better meet the diverse needs of
customers and deliver products faster than their competitors. When customers were
willing to accept standardized products like Ford model T, fixed assembly lines made
sense. But nowadays, flexible technologies are increasingly necessary to compete
effectively.

There are plenty of varieties for a car like A-Class: Color of exterior and interior,
seating, wheels, sunroof, types of engines and even the dimension of the car. The
manufacturing system is flexible enough to be capable of so many varieties. It is




                                          8
very important especially nowadays the company is facing challenge of short
production cycle.

Working condition
                                              r
As nearly 90% of production process is al eady automated, it is noticed that few
people are needed in the production. It is a great advantage in a country where
income level is so high and the labour unions are so powerful. People’s job nature
has been changed – instead of performing boring assembly task, people are
responsible for the whole set of machinery. They assist in monitoring and keeping
the system working normally. In which workers’ job satisfaction is fulfilled through a
clear definition of task identity and significance. Workers will know how effectively
they are performing and they are responsible for the results. Internal rewards are
obtained by individuals when they learn that they personally have performed well on
a task that they care about. This is a key factor in assuring quality in a brand like
Mercedes-Benz.

In operating and maintaining such a highly complicated system, employing
workforce of high education level is needed. Besides being able to operate
computerized system, they need to have ability to solve most of the problems on
their own or in their own group. Obviously it is not easy to migrate the whole system
to those less developed countries. It is difficult to recruit such kind of people. This
also contributes to the competitiveness of the company in a world -wide basis.

The working condition is excellent when compared with manufacturing plant in Hong
Kong and China. The plant is clean and spacious. Since few people are working in a
plant, each worker can enjoy lot of working space. And as other European
companies, people usually have very short working hours, when compared with
people in Hong Kong and Asia. In fact good working condition is a crucial factor in
retaining good quality people, increasing their job satisfaction and hence productivity.

Fast and efficient – time to market
It takes only 22 hours for the plant to finish a car. It is extremely important in a
highly competitive global environment. The shortening of production life cycle is a
general trend. Severe challenge mainly comes from Japanese counterparts. The
automated but flexible manufacturing plant has not only to maintain a short
production cycle, but it also has to be highly adaptive in switching to produce brand
new and enhanced model. Also cost is definitely a key factor. If not such an
automated system is used, the high labour cost in Germany can reduce substantially
the competitiveness of the company.

4.    Market situation in Hong Kong

Mercedes-Benz has been serving the luxury market for a long time. While many
other European counterparts started to launch those low-end products, the A-class is
a break-through in Mercedes-Benz family.

It is found that the original customers of Mercedes Benz are generally over 40 years
                                                                                 i
of age. Starting from introduction of C-Class, Mercedes Benz is trying to break n to


                                          9
market of younger generation. The invention of A-Class further actualizes the
company ’s strategy of opening new market. Firstly the stylish design and its
versatility present a new perspective to Mercedes Benz supporters. Its
unprecedented first launch in the trendy DKNY shop in Central and the careful
selection of young pop stars in all those promos especially emphases the young and
feminine image of this new product.

Although no direct related sales statistics can be obtained from Mercedes Benz since
the buyer is not necessarily the one who actually drives the car, e.g. Father /
Husband can buy the car for his daughter / girlfriend, it is observed that the
percentage of female drivers of A -Class is higher than those in other categories.

Moreover, having a relatively low cylinder volume (below 2000cc) is a definite
advantage in a high oil price region like Hong Kong. A-Class is well designed to fight
for the low oil consumption market segment. In fact there is an environmental
friendly version of A-class compact fitted with fuel-cells in the market. It is believed
that A -Class is actually going into this direction.

According to Mr. Michael Leung, A-Class is positioned to be a special small car,
resembling Volkswagen’s Beetles. Notwithstanding, A-Class is not designed to
compete directly with, say, Beetles or K-car in the small car market. The prestige
logo carried by A-Class and the exceptional high safety standard, together with its
high price tag, open a new market for this product.

However, while they have their positioning strategy, people can easily make
comparison between A-Class and other European small car. Here we are trying to
compare A -Class with other cars, in terms of features, category and price.

A typical Mercedes-Benz A190 Avantgarde costs over HK$ 220,000, which is well
over the low end Japanese cars like Toyota’s Corolla and Corona, Honda’s Civic,
Mitsubishi’s Lancer and Nissan’s Sunny. As shown in Table 2, A-Class has a
significant price difference from those of other utility cars apart from Golf. If we
simply compare cars of similar price range, we find that the most comparable model
is Volkswagen’s Golf, which costs from HK$ 170,000 to HK$ 280,000 (different
models have different prices). Other cars with comparable price range like Toyota’s
Camary, Mitsubishi’s Galant, SAAB’s 9-3 series, Renault’s Cabriolet, Peugeot’s 306
series,… actually are different types of cars that target different market segments. A-
Class is not competing directly with them.

   MPV model                                Price
   Toyota’s Picnic                          HK$   180,000
   Opel’s Zafira                            HK$   183,800
   Mitsubishi’s Dion                        HK$   196,800
   Hyundai’s Trajet                         HK$   176,800
Table 1: Price comparison of some MPV (Multi-Purpose Vehicle)

When we look further into Mercedes-Benz A-Class and Volkswagen’s Golf series, we
find that A -Class is more popular than Golf in Hong Kong. It is believed that brand


                                          10
name effect takes a substantial role in the competition. Hong Kong people, who are
considering a European car, generally opt for famous brands such as Mercedes-Benz
and BMW. Volkswagen is not as popular as Mercedes-Benz in Hong Kong. People
who cannot afford to purchase those over HK$400,000 luxury cars may find the
price of A-Class, which carries the same luxury brand, very attractive.

Model                      Price                     cc/engine
A 160                      HK$   214,000             1598/4
A 190                      HK$   219,700             1898/4
CABRIOLET                  HK$   279,000             1984/4
1.8 GTI                    HK$   259,000             1781/4
2.0 CLOTH ED               HK$   169,800             1984/4
Table 2: Price and features comparison of A-Class and Golf series 1




5.        SWOT Analysis of A -Class in Hong Kong

Strengths
Mercedes Benz is a very well known prestige brand in Hong Kong. The celebrated
1970s Cantonese -pop star Sam Hui wrote a song named Searching for a Job. In the
lyrics he mentioned that you have to use your intelligence to become successful
before you can drive a Mercedes-Benz. Owning such a car has been a long-standing
dream for many Hong Kong people; driving one is a recognizable symbol of success.

Not until the launch of the A-class, owning a Mercedes-Benz has been very
unaffordable with the list price of many models above HK$1M. The A -Class, however,
prizing at around HK$220K is not only affordable but come very close to the prizing
of some mid-range Japanese models like Camay of Toyota.

The inexpensive prizing model (relative to other models of Mercedes Benz) of the A-
Class has not translated to the scarification of the traditional values of the old
Mercedes Benz brand name. Amongst those values, the most important one is the
Germany tradition of engineering precision and complexity, which helped Mercedes
Benz to design and manufacture high performance motors and sophisticated
engineering designs.

1
    www.caranddriver.com




                                           11
The key design features of the A-Class that would attract customers from the world
including those in Hong Kong are its highly sophisticated safety features. Functions
like the sandwich concept and early activation seat belts are examples of safety
features that have been innovated with the A-Class. The A-Class is meeting safety
standards similar to that of an E-Class or C-Class. For more details on the A-C lass
safety functions, please refer to Appendix II.

Weaknesses
The Mercedes Benz brand represents a 100 years history of design and production of
automobiles. In the commercial car section, their products are all prestigious in
terms of both superb engineering design and luxurious outlook and passenger
compartments. The A-Class models however characterize a somewhat derisory and
meager appearance. Comments from potential Hong Kong customer like, “If I am
going to buy a Mercedes Benz, I am not going to buy one like this (the A-Class)”
have been heard. In sum, the A-Class fails to reflect the “status” and “symbol of
success” mentioned in the previous section.

From the visit, it was learnt that one major group of customers that Mercedes Benz
wants to sell the A-Class to were people who already own a high -end Mercedes Benz
and would like to own a second car for daily usage (e.g. going to the market or
bringing children to school etc). According to statistics, however, less than 10% of
Hong Kong car owners own more than one car. Many of those who own more than
one have one of them from their company; they therefore usually do buy another
high-end model (since they do not actually own the first one) instead of purchasing
a “low-end” A-class as their second car.

In the section on strength, the superb engineering design of Mercedes Benz was
mentioned as one of the major traditional values the A-Class should have inherited.
However, when the A-Class was launched in 1998, a Swedish journalist failed a
standard “elk test” with the A-Class in front of a whole group of international
reporters. The car was turned over and the Swedish journalist was injured. After
this, the engineering director of Mercedes Benz was asked in a car show in Japan on
how this could have happ ened and he did not give satisfactory answers. To solve
the problem, ESP 2 systems are now added to the A-Class to reduce speed when
turning in order to avoid such accidents from happening again. Nevertheless, this
incident has creating a lot of negative publicity for the brand and the A-Class model
in particular.

Opportunities
The A -Class is a complete diversion from the traditional Mercedes Benz models. The
smaller and less luxurious design imply that the target customers are no longer
successful businessmen in their late thirties and older but:

    -       Young executives (especially females)

2
 ESP stands for Electronic Stability Program. It monitor the rotation speeds of the four wheels of the
car independently together with the car position and automatically brake one of the wheels according
to its pre-programmed rules.


                                                  12
     -     Housewives whose husbands own prestigious models already
     -     Retired businessmen who used to own a prestigious models
     -     People who would otherwise have brought cars of similar capacities from
           other Japanese or European manufacturers

The people listed above are the opportunities for A-Class in Hong Kong. The A-Class
dealer must secure the above customers by using marketing strategies that differ
from those that have been used for the other classes.

Threat
The A-Class is facing fierce competition in Hong Kong from not only the Japanese
car manufacturers, but also its European counterparts. The price of A-Class at
HK$220K is inexpensive only when compare to the other prestigious models of the
Mercedes Benz range. When comparing with other brands, however, its value-for-
money is hard to justify. To purchase a car of similar capacity from the Japanese
vendors, one needs to pay only half the prize (e.g. a Toyota Corolla at HK$120K).
When contrasting with the other European brands, there are many brands and
models that provide similar or even higher value at a lower prize. Examples include
Mondeo of FORD at HK$150K, Renault Scenic at HK$200, Peugeot 206cc at
HK$170K, and Volks Wagon Golf at HK$200K. Comparing to the examples said, the
A-Class is the smallest in size.

Since the A-C lass is a diversion of the other Mercedes Benz models. It is not unlikely
that the reduced-value of the A-Class in terms of outlook, level of lavishness, and
prizing can hurt the traditional values of the Mercedes Benz brand name. Whether
the A-Class is to be successful or not, the company is risking that potential customer
might think that Mercedes Benz can no longer provide the “status” and “symbol of
success” that it used to be well known of.

6.       Recommendations

Currently, we cannot see a lot of Mercedes Benz A-Class running on the roads of
Hong Kong, let alone China. The reason for this, in our opinion, is that the model
has not been properly marketed. As mentioned in the section on “opportunity”, a
whole suite of very different marketing program should be conducted. Currently,
only the A-Class launch with DKNY was conducted. In order to better promote the
model to the “ladies” and “young executive” communities, marketing programs like
the followings should be considered:

     -     A-Class advertisement on magazines likes Cosmopolitan, Elle, and The
           Next Magazine.
     -     Sponsorship of sport events (e.g. tennis and golf matches) that focus on
           the A -Class.
     -     Sponsor fashion show that target on the same section. E.g. Ralph Lauren
           and DKNY




                                          13
     In order to differentiate itself from its competitors (as mentioned in the section on
     “threat” above), the A -Class must improve its image such that its potential customer
     can perceive that they are buying the “taste” and “brand value” that A-Class’s
     competitors lacks. Such image improvement can include standard leather seats and
     wooden steering wheel etc. Otherwise, if the A-Class is to stay in its existing trivial
     existence, then Mercedes Benz should seriously consider whether or not to create
     another brand in order not the risk dragging down the prestigious Mercedes Benz
     brand name.

     On the other hand, people having this budget may go for a comparatively more
     luxury passenger or sports car. It can be seen clearly that A-Class does not intend to
     compete in those segments. They are territories of C-C lass. However, the target
     segment of A-Class is not really large. According to Mr. Michael Leung, on average
     there are about 20 new A-Class sold in each month. The questions for the interview
     with Mr. Leung are included in Appendix III. It only constitutes less than 10% of
     the overall sales. It can easily be found by staying in Central or Wan Chai for a while :
     you may not find many A-Class running on the road in Hong Kong.



     Appendix I-a - Key information for the Big 3s:-

(Unit: US$ million)              Daimler Chrysler                  General Motor                   Ford
Figures as at FY2000

HQ                             Stuttgart/Aubrun Hills                  Detroit                    Detroit
Incorporated                      Daimler : 1885                        1916                       1919
                                  Chrysler : 1925
                                Merging: May 1998
No. of car sold in 2000 -               4.7m                            8.6m                       7.4m
as % of worldwide car
industry                              (8.4%)                             (15.1%)                  (13.0%)
Major markets                      Europe: 68.6%                 North America: 81.5%         North America:
                               North America: 20.3%                  Europe: 20.4%                 66.4%
                                     Asia: 8%                    Latin America: 2.8%
Revenue                               152,446                           184,632                   141,230
Net Income                              694                               4,452                    3,467
Stockholders’ Equity                  18,449                             30,175                    18,610
Brands                      Passenger cars –                  N. America –               Ford, Mercury, Lincoln,
                            Mercedes-Benz, Chrysler,          Chevrolet, Pontiac, GMC,   Volvo, Jaguar, Land Rover,
                            Jeep, Dodge, Plymouth             Oldsmobile, Buick,         Aston Martin, TH!NK
                                                              Cadillac, Saturn;
                            Commercial cars –
                            Mercedes- Benz,                   International –
                            Freightliner, St erling, Setra,   Opel, Vauxhall, Holden,
                            Thomas Built Buses,               Isuzu, Saab, Chevrolet,
                            American LaFrance,                GMC, Cadillac
                            Western Star, Orion
Asian partners              - 37.3%      in     Mitsubishi    - 49% in Isuzu             33.4% in Mazda Motor
                              Motors                          - 20% in Suzuki            Corp
                            - 9 % in Hyundai Motor            - 20% in Fuji Heavy
                                                                Industries (“Subaru”)




                                                              14
Appendix 1-b:        US 1999 Market share

                                   Auto    %            Light Truck %
GM                                    29.4                    29.1
Ford                                  25.0                    29.1
Daimler Chrysler                      16.7                    23.1
Toyota                                 8.7                     7.2
Honda                                  6.4                     2.7
Nissan                                 4.0                     3.3
Volkswagen                             2.2                      -
Mazda                                   -                      0.7
   Sub-total:-                        92.4                    95.2
Others                                 7.6                     4.8




APPENDIX II – Safety features of Mercedes Benz A-Class

Source: www.mercedes-benz.com

Passive safety of the highest standard
Of    course,   the   engineers     innovate
completely new concept for the A-class has
not been able to defy the laws of physics.
However, the revolutionary structure used
in this new generation of vehicles expresses
an innovative way of thinking that makes
the A-class a genuine Mercedes as regards
passive safety.

      Maximum exploitation of all possible
deformation possibilities is one of its most
important ingredients. The sandwich concept is
founded on this principle. This positioning of the
major assemblies creates a side-member and
cross-member structure that is continuous and
level, resulting in high rigidity in frontal, lateral
and rear-end collisions and dissipating impact
        i
forces n a controlled manner.




Safety belts: activated at an early stage
In an accident, the activation of the full-size,
driver and passenger airbags and sidebags on



                                           15
request must be utterly dependable, while the belt
tensioners built into the three-point safety belts
must be activated at an extremely early stage.
And that not all Occupants experience a forward
acceleration when a vehicle comes to a standstill
in a crash or when braking. A restraint system
holds them in their seats and prevents them from
hitting interior elements such as the steering
wheel and windscreen. A safety belt which acts
too abruptly however can cause serious back
injuries. Like other Mercedes cars, the A-class is
equipped with belt forcimiters to prevent this,
markedly reducing the loads exerted on the
human body.




Protecting occupants
Mercedes-Benz engineers have made all the
restraint systems in the A-class particularly
sensit ive so as to control the retardation of the
passenger cell from the earliest stage. In other
words,        the      belts      act       earlier.

In this way, roughly the same overall forces are
exerted in the restraint system in both minor and
major accidents, protecting the bodies and health
of all occupants. Yet another safety feature is that
all parts that an occupant could hit in an accident
are padded and flexible. For example styrofoam
inserts in the footwell carpeting reduce possible
stresses on the foot in the event of a frontal
collision. The interior door linings are smooth-
surfaced, with no potentially dangerous physical
features.




                                          16
   Appendix III – Proposed Questions for Interview with Mr. Michael Leung
              Sales and Marketing Manager of Zung Fu Company
 Marketing:
1. How Zung Fu assesses the importance of Hong Kong as a market for A-Class?
 2. What promotion strategy will be employed?
 3. Any geographic variance in terms of promotion strategy?
 4. In Zung Fu’s opinion, would the introduction of A      -Class damage the premium
    brand image established by Daimler Benz?
 5. Unlike Europe, the Hong Kong consumer seem to be much more price conscious,
    would this hinder A-Class’ sale as there are options for Japanese compact cars with
    much lower price?
   Industrial Analysis:
6. Who is the major competitor of the A-Class in Hong Kong?
7. Who are the targeted customers of the A-Class in Hong Kong?
8. What is the current and expected market share of the A-Class in the Hong Kong
   utility cars market?
9. What is Zung Fu’s strategy to increase the market share of A -Class in Hong Kong?
10. What is the core competency of the Company and its Hong Kong office?
11. What value-added services are available to the customer?
 Corporate Strategy in Asia:
12.What are the corporate strategy in tackling the Asian Market?
13. Will the company focus on exploiting the market elsewhere in Asia? E.g. China &
    Japan, etc.
14. Any expansion plan of the distribution channel in Asia?
15. Projection of the motor vehicle market in Asia and Hong Kong?
16. Future plan of merger and acquisition?
17. What is the impact of China’s entry to WTO to the company?



                                           17
Finance:
    18.Sales Volume of A-class as a percentage to total sales of Mercedes-Benz in Hong Kong?
19. Operation cost and the profit margin for each A -class sold in Hong Kong?
20. Any difference on consumer’s purchasing power and pattern between Mercedes-
    Benz’s higher end model and A-class? E.g. the financing requirement of the buyer
21. What is the amount of investment of Zung Fu in Hong Kong? Including the show
    rooms and garage, etc.

 Management & Human Resources:
22.The level of autonomy in Hong Kong’s office in terms of the daily operation and
  management of the Hong Kong office?

Cultural Difference of the Consumer:
    23.Any noticeable difference between the consumer in Hong Kong as compared to other
    Asian countries?
     24. What specific measures are employed to accommodate the uniqueness of the
     Consumer demand in Hong Kong?
  Appendix IV – Photos of the Hong Kong Zung Fu Show Room




                                             18
19
References

       1.    www.caranddriver.com
       2.    www.mercedes-benz.com




                                 20

								
To top