Mercedes comes to Alabama.

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MERCEDES COMES TO ALABAMA                                                            

A CASE ANALYSIS IN

7021 GSM

INTERNATIONAL BUSINESS

MERCEDES COMES TO ALABAMA

SUBMITTED TO: MR. BRIAN MERRETT

Analysts:

Christopher Vas, S2123281 

Gaurav Jain, S2123652

Jayesh Janardhanan, S2122740

EXECUTIVE SUMMARY

The world is heading towards rapid globalisation, with more and more companies transcending their national boundaries of operations thereby engaging themselves in international business. With the dawn of the millennium we have seen major business conglomerates spread their wings in order to become global organisations.

The rationale of this report is to study the “globalisation strategy” undertaken by Mercedes Benz- a pioneer in the manufacture of luxury cars. The objective of the report revolves around the decision that Mercedes Benz took in 1993 to extend it’s operations to the world’s largest democracy- the United States Of America, as a part of it’s internationalisation approach thereby transforming it into a fill line automobile manufacturer from an automaker known just for its luxury cars.

This report analyses this shift in strategy of Mercedes Benz, evaluating the elements of shift and various risks involved in it. An effort has also been made to understand the various actions that followed Mercedes Benz’s entry into Alabama. The study also briefly describes the challenges Mercedes had to encounter at Alabama and the way it successfully faced them. Opinions of public officials from both the countries have also been expressed in a personalised manner.

Finally this new strategy is further scrutinised as a success or failure, after doing an exhaustive study of all the causes and consequences of this decision taken by the company.

TABLE OF CONTENTS

HISTORY………………………………………………………………………4

THE NEW STRATEGY OF MERCEDES-BENZ…………………………..5

ELEMENTS OF SHIFT…………………………………………………………7

MERCEDES-BENZ U.S INTERNATIONAL, INC…………………………...8

RISKS INVOLVED WITH MBUSI…………………………………………...9

THE INITIAL STEPS IN ALABAMA………………………………………10

OPINIONS OF PUBLIC OFFICIALS………………………………………..12

EVALUATION OF MERCEDES-BENZ’S ALABAMA EXPERIENCE….13

CONCLUSION…………………………………………………………………15

BIBLIOGRAPHY……………………………………………………………….17

HISTORY

Mercedes-Benz is the automotive division of Daimler-Benz AG, Germany’s largest industrial group. Daimler-Benz had been created in 1926 by two of Germany’s automobile pioneers, Gottlieb Daimler and Karl Benz. Following the World War II, Daimler- Benz established a reputation for automobiles of high- quality and superior engineering. Over the next few decades, Mercedes-Benz automobiles became synonymous with prestige and excellence. Throughout the 1970’s and 1980’s they ranked among the most prestigious luxury cars in the world. Throughout it’s growth the company followed a strategy based on German production and global exports. The vast majority of value added activities, from research and design to procurement and manufacturing, took place in Germany. A network of foreign subsidiaries handled local sales and service.  

In 1973, reacting to the growing strength of the Deutsche mark (DM), Mercedes-Benz shifted the sourcing of its U.S destined diesel trucks to Brazil, but production of automobiles remained firmly in Germany. German engineering and German quality were hallmarks of Mercedes-Benz, and customers the world over were willing to pay the price.

Mercedes-Benz is organised into two divisions: Passenger Cars and Commercial Vehicles. The Passenger Car division offered three levels of luxury cars in 1991 and the Commercial Vehicle Division manufactured trucks and buses, and had production broadly distributed around the world, with manufacturing sites in Mexico, Argentina, Turkey and the United States.

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THE NEW STRATEGY OF MERCEDES-BENZ

In early 1993, Daimler-Benz AG (DBAG) announced that it would build its first passenger vehicle manufacturing in the United States. This decision emphasized the company’s globalisation strategy to move closer to its customers and markets. After an intensive, six-month site selection process, DBAG chose Tuscaloosa County, Alabama as the location for its $300 million plant. Mercedes-Benz U.S. International, Inc. (MBUSI), based in Tuscaloosa, was formed to fulfil the goal of producing the new M-Class, All-Activity Vehicle.

This task of developing and producing a new vehicle, at a new plant, in ...

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