STRATEGIC ANALYSIS OF MERCEDES-BENZ INDIA

INRODUCTION:

Mercedes-Benz India Pvt. Ltd. is a wholly owned subsidiary of the German Daimler AG. It is founded in 1994, with headquarters in Pune, Maharashtra. The company has a commercial vehicle plant outside Chennai, which it is currently upgrading with an investment of €700 million. The passenger cars manufacturing plant is located in Poona, same as the headquarters.

MARHET POTENTIAL:

The company sold around 9003 units in FY 13/14 in India, which is an increase in its sales by 32 % in a year. Though the sales stood second in German Big 3 cars, the percentage increase is huge, showing its increasing potential in Indian market. 

OVERALL BUSINESS STRATEGY:

Mercedes-Benz has focused more on market penetration and product development strategies to maintain or increase the sales of its business units.

·         Market penetration strategy: The automobile industry of India is growing at a high pace. The company is looking forward to expand the sales of its automobiles in current markets by competitive pricing, intense distribution and aggressive promotion. The company is also looking to raise the usage rate of its customers, attracting new customers and converting the customers of its competitors.

·         Product development strategy: In the dynamic and turbulent market, where the models of automobiles are changing rapidly, the company always strives to design new models, and keep high quality to attract new customers and also to retain old ones.

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MARKETING STRATEGY:

Mercedes-Benz adopted a 360 degree marketing strategy, which it believes is the reason for increase in sales. It also believes that consumers engaged through more than one channel are more valuable than the ones who interact through single channel. The brand is especially known for marketing through social media, mobile applications and behind the screen videos.

Mercedes-Benz Facebook page is a place for interaction with its customers. Their blogs is another place of interaction with their followers counting over 2 million.

Another innovative marketing strategy the company has adopted is video campaign. They have not just uploaded commercials videos in YouTube but also have uploaded behind the screens in making an advertisement. They also divided the feed into types of vehicles and commercials for easy navigation.

Other than these digital forms, Mercedes-Benz also campaigns through print magazines, billboards and direct mail. Push notification in mobile apps is another avenue. Holding events and participating in auto shows are its other marketing strategies.

POSITIONING STRATEGY:

Mercedes-Benz is known for offering best luxury cars in India from long time. But the increase in competition from other premium car manufacturers is threatening to the company. Therefore the company has undertaken a rebranding exercise to target the youth. The company has worked on model line ups, marketing and brand positioning simultaneously to align with its positioning strategy.

AREAS OF STRENGTH:

• ·         Mercedes-Benz has a very strong brand name attached to it. The additional value placed by the consumers for the brand gives the company an ability to charge high price and helps in gaining high profits.
• ·         The company has superior technology which the competitors cannot imitate. By this, Mercedes-Benz can meet the needs of the consumers effectively and maintain its brand value.
• ·         The company has high financial leverage which makes it easy to expand its business and gain profits.
• ·         The innovative culture of the organization helps in producing unique products and services that meet their customer needs.
• ·         Instead of targeting all customers, Mercedes-Benz targets only its new customers to grow their business. The loyalty of customers increases by this specific targeting and accordingly brings profits to the company.

THREATS:

• ·        There are many international companies for the premium automobile segment across the globe. Each company has its own advantage and combating with them is tough for Mercedes-Benz.
• ·      Also the competitors offer special discounted prices to the same segment of population. This intense competition may make it difficult to sustain.
• ·       The tastes of consumers change very rapidly. Therefore Mercedes-Benz should always keep its pace with the needs of its consumers.
• ·         Availability of cheap and highly efficient domestic and Japanese cars poses a threat to the sales of the company.
• ·         Government rules for this sector like tax increase for importing vehicles, increasing fuel prices may decrease sales due to high costs involved in buying and maintaining.

FUTURE POTENTIAL/GROWTH PLAN:

As a part of its strategy, the company is planning to invest Rs. 350 crore to introduce new small and compact car in India by 2015. The company has also planned to introduce its 10 new models in the country in next few years and for that it is looking to assemble SUV’s ML, GL and GLC-Class in India.

            Mercedes-Benz has identified the need for more compact cars and the benefits of assembling the vehicles locally. Localization of the content reduces the cost of its vehicle and brings price advantage for the company. The company is also looking forward to sell around 5500-6000 cars by 2020. This is part of the large growth plan to be in the leading position in the premium automobile segment in India.

The company is looking forward to increase its profitability by making project related collaborations with other manufacturers like Renault/Nissan and from savings obtained from different strategies and improved efficiency in its value chain.

CONCLUSION:

Mercedes-Benz has set up a growth strategy for 2020 not just to occupy leading position in the premium car segment in terms of brand, products and profitability but also to increase its unit sales. Many efforts like implementing large no. of events are being taken by the company to achieve these four goals. Though to handle the future uncertainties, it might need to up its game and engage proactively in product placement and stronger brand equity creation to sustain its position.

STRATEGIC ANALYSIS OF AUDI INDIA

INTRODUCTION:

Headquartered in Bavarian heartland, Audi was formed in 1930 by merging 4 German automotive and auto-component companies. The four rings logo which is one of the most recognised brands in the world is symbolic of this merger. It is touted to be one of the famed “German Big 3” in luxury car makers, the others being BMW and Mercedes-Benz. It entered the Indian market in 2004. Since then, Audi has seen tremendous growth in the last decade. It is one of the reputed brands in the country now. Commenting on Audi India's performance, Joe King, head, Audi India said: Our strong leadership is a result of our unique marketing activities, network expansion, diverse product portfolio...”  Recently it achieved hat-trick of Best-ever: Best-ever yearly sales-10126 units (FY 13/14); Best-ever quarterly sales-2740 units (Jan-Mar 14); Best-ever monthly sales-1404 units (Mar14). Let us take a look at the strategy that Audi has for the Indian market and the marketing and promotional activities in plans on to achieve greater and sustained success in India.

MARKET POTENTIAL:

India is a growing market with its need for luxury sedans and sports utility vehicles (SUVs) increasing every year. India is one of the top ten markets for luxury sedans now and top 4 in automotive sector in-terms of growth per annum.            Since 2010 the passenger vehicles section comprising of passenger cars, SUVs and MPVs had a CAGR of around 17 percent which is very healthy considering the global slowdown of car sales.

The increase in Audi’s sales has also been good. The company recorded sales of 10126 units in India in FY 13/14, implying 11 percent growth and thus became the first luxury car maker to cross the 10000 milestone in the country. 

TARGET MARKET:

Audi is targeting the customers who are looking for executive segment, premium compact segment sedans, high performance supercars and sports utility vehicle enthusiasts who look for quality products. Targeted Consumer profile for the sedans and SUVs is that of executives; who are in 30-45 age brackets and for the super sports cars, the young adults are the target customers.

            According to Joe king, "The average age is around 35 years for luxury car buyer in India, which in global scenario is 43-45 years. Hence globally India is the youngest market for Audi ecosystem." 

OVERALL BUSINESS STRATEGY:

Audi has followed a strategy of acquiring greater sales by offering the best features for their customers compared to their competitors for similar prices in the luxury auto segment. Their strategy consists of building a strong brand presence and high perception of the Audi brand, a good distribution network and offering an exciting and diverse product portfolio to the consumer in India. Attaining and maintaining a market leadership position is the primary focus.

MARKETING STRATEGY:

Their Marketing is quite ruthless. Their main focus when it comes to marketing is strength in direct sales. In so much so that each dealer of Audi cars is expected to employ at-least 15 sales people. The company has strict policies for monitoring and appraising the sales task force. If any salesperson is unable to make any sales, they are simply asked to leave as they are very sure that it could not have been due to dissatisfaction with their products. Primary activities done to engage the prospective consumer include giving demos and test drives.

Consumer satisfaction is very important in the luxury car segments and hence Audi has set high benchmarks for providing the best after sales service. They even provide free after sales service for the first two times similar to what is followed in the two-wheeler vehicles segment in India unlike BMW and other companies offering similar cars.

The Print medium is heavily utilised in marketing, especially lifestyle magazines are used to promote the brand. New car launches are extensively covered in press launches and in all leading dailies and news magazines. This is followed by its iconic advertisements in television showing comfort and high quality of ride and its sportiness.

Billboards along junctions in high traffic lanes, is another important component of their marketing strategy. Whenever a new dealership is opened in a new city, full-page advertisements are carried out in the dailies and thus footfall in the dealership is increased. Then it is the responsibility of the sales force to convert this footfall into sales.

Displaying new models in AutoExpo is also something Audi is very particular about, to let the market know what products to expect from the company in the forthcoming year and thus they pre-emptively create flutter and demand before the cars hit the market. This is a part of their pull strategy. 

Audi also engages in push strategy by giving consumer incentives to purchase the cars immediately without delaying (as delaying in purchase gives chances for brand preferences to oscillate). These incentives include low interest rates and even zero interest EMIs in certain festive seasons such as Diwali and offering branded Audi merchandises such as watches, calendars and key chains etc. Also the sales force is given incentives to push through their sales.

PRODUCT STRATEGY:

Audi offers superior performance and driving experience packed with luxury and aesthetic designs and hence it promotes itself and is perceived as Highly Aspirational cars. Its prices and promotions reflect the same. It has created a strong brand reputation by winning several races such as Le Mans, F4 etc. This speaks volumes about their traction control systems and the direct fuel injection system of the Audi cars which is critical in winning these races.

Audi A3 is awarded world Car of the Year 2014.

POSITIONING STRATEGY:

Audi has positioned itself as an aspiration brand in India. In line with this strategy, they have launched their best performing cars in India and have delayed the launch of the more economical models such as A4 until recently. They portray themselves as being the leaders in multiple sectors of cars by launching diverse range of products ranging from classy-looking sedans, to sport coupes and strong and agile Sports utility vehicles. This is garnered them a perception of expertise in overall automotive segment and not merely in one range of cars.

By pricing on par with BMWs and Mercedes they are trying to imply that they are of the same league as these German Auto companies and yet offer more features in their cars.

Their motto of “Vorsprung durch technik” (Progress through technology) implies to the consumers that Audi is technology oriented and not just focussed in good design.

AREAS OF STRENGTH:

1.      A strong brand presence (Built by winning several races consequently, and good consumer reviews over the years).

2.      Constant innovation in design, form and functionality (MMI, Navigation, Quattro’s four-wheel drive etc).

3.      Efficient operations management providing high margins of profit by reducing cost.

4.      Association with the super car brand Lamborghini gives it a sporty image and advantages of technological collaboration.

5.      Technological superiority through R & D investments in relation to lot of other brands worldwide.

6.      Large Product mix and width catering to sedan, sports car, luxury car and sports utility vehicle segments of the auto market.

7.      Audi cars are touted to have the right mix of class, comfort and peppiness; striking chord with both young and mature customers.

8.      Market leader in the Indian sports car market with cars like R8, TT, RS 5 Coupe and S4 under its belt.

THREATS:

1.      Regulations in entering new market and need to make alliances with local companies to enter certain nations like china.

2.      Constantly tightening environmental regulations making auto companies to proactively regulate their engine performances.

3.      Exposure to fluctuations in currency exchange rates when exporting from Germany.

4.      Competitions from larger companies with more resources are a constant threat. Other companies like BMW, Mercedes which have such perception of high German standard cars give tough competition in emergent markets.

FUTURE CHALLENGES:

Future challenges include stiff competition from other German auto manufacturers like BMW, Mercedes-Benz and from Lexus too. The cars on the model of Nissan 350z are both sporty and tuned for the Indian roads. The other models of that chassis and make from Nissan if launched in India would give stiff competition to Audi’s TT’s sales.

            Also the Indian consumer at present has very high perception of the “Made in Germany” tag that these companies carry. So when they set up manufacturing units in India for its low labour cost, they would have to communicate to the consumer that quality won’t be compromised on at all.

FUTURE POTENTIAL/ GROWTH PLAN:

India is also transforming itself into a major Auto-manufacturing hub. Especially Chennai is on the way to become the world’s largest Auto hub by 2016 by having installed capacity to manufacture more than 3 million cars annually. By 2020, sales of passenger vehicles in India is said to increase to 9 million. Passenger vehicles include passenger cars, Sports utility vehicles and MPVs. Of these, Audi is already into two sectors. So Audi is poised for growth in India owing to the growing demand.

   

            As we can see that sales of Audi has clearly been on a growth pattern and has outgrown the likes of BMW and Mercedes which have been long established in India. And with the Annual Luxury Car segment in India set to growth at 15% we can estimate that even if very conservatively all three contenders only manage to get a 15 % share of this growing pie, Audi will still rule the roost in sales for the next financial year.

            

              Audi is expecting moderate growth for luxury car market for the next 5 years and is planning to bring in six more new models to the Indian market by 2015. These new models will engage the consumers who are brand loyal and also the ones who would want to upgrade from mid-level sedans and the sports enthusiasts. So predictably at least one sports car and one entry level luxury sedan (A4) will be launched by 2014.

IMPACT ON SOCIETY:

The drastic rise of sales of India has a lot to do with the changes that Audi has brought in consumption/purchase patterns in the luxury car segment. While previously there were only two companies in this segment, with the name of Mercedes being common in every household as a symbol of class and luxury, Audi’s entry since 2004 has changed this paradigm.

            Their Ads focus more on the features than on the brand name which is displayed only towards the end, which in a way make the consumer focus more on the value and features provided and not be stuck in names alone. This has motivated the consumer to look beyond just Mercedes and BMW for luxury sedans and now other foreign brands are also finding India fertile for foraying into.

            Another impact of Audi’s is that their constant offering of newer technologies to the consumer such as the MMI and the navigation systems, other car manufacturers now have to keep up and offer more such features to the consumer.

RECOMMENDATIONS/AREAS TO IMPROVE:

Audi’s policy of constant innovation keeps them up to date in technology field. But the Indian consumer needs more than just technological features to go for a luxury car. They also look for the prestige that such a car carries, which in India is generally created by strong celebrity endorsements and repetitive telecast of advertisements and effective product placement in the Indian movies. This will greatly help Audi to stay ahead in the sales of their cars in India.

CONCLUSION:

Audi has got its marketing strategy in perfect place as is shown by its growth to being the number one sold luxury car brand in India in merely 10 years of its presence. Though to handle the future uncertainties, Audi might need to up its game and engage proactively in product placement and stronger brand equity creation to sustain its position.