Introduction
The luxury motor vehicle company, Mercedes-Benz (Mercedes) was founded by Carl Benz, Wilhelm Maybach,Gottlieb Daimler, and Emil Jellinek in 1901. Initially, the company was functioning as a corporate manufacturing gas engine but later expanded itself due to the increase in demand (Abdou, Yasser and Raafat, 2022). The German luxury and commercial vehicle company has come a long way from its initial beginning in 1926. At present the company has become the largest producer of automobiles in the decade but has a significantly lower share in the global market share. The company has played an important role in creating electronic and mechanical innovation which has helped the formation of the model of modern automobile. Its vivid presence in history has catered to it earning the name for being the longest-standing automobile company in the world.
Figure 1: Mercedes Global Market Share 2020
Source: (Abdou, Yasser and Raafat, 2022)
Operating environment of Mercedes-Benz
The operating environment refers to the ecosystem where a business operates. it involves various factors that can potentially impact business operation performance and the long-term sustainability of the business. To analyse the operating system of Mercedes, there is a need for the Mercedes-Benz operational analysis of four major factors. The elements include the competitive environment, client composition, standing with creditors and merchants, and the ability to attract prospective employees.
We can examine the company's recent growth in light of its competitive posture. The corporation has now gained the seventh rank among the most important brands in the world. (Mercedes-Benz Group, 2023). This achievement shows the high position of the company as a luxury brand. It has also taken hold of US households by offering budget automobiles at lower prices than these companies. This aggressive marketing strategy has allowed the company to attain its position as a fierce competitor in the US market (Li and Wang, 2021). The company however faces rivalry from various similar automobile products such as BMW, Audi, Volvo, Jaguar etc.
Figure 2: Mercedes-Benz competitors
Source: (Li and Wang, 2021).
The industry in itself faced challenges in product recovery, massive layoffs, low sales and constant changes in consumer behaviour. Moving forward to the composition of its consumers, Mercedes produces a wide range of products that can also be associated with a wide variety of customers. Although it is known for its luxury brand products, the company targets most of its products to consumers in the upper-middle and upper class. Most of the customers of the company are prone to taking care of the quality of the products and have high consumption rates (Li, 2022). The consumers also pay attention to the brand image of the company which affects their social status.
Figure 3: Typical Mercedes-Benz advertisement
Source: (Li and Wang, 2021)
The company has also maintained its position as an innovator and production company among its suppliers and creditors. It has also made its suppliers sign an admission letter to lower CO2 emissions by 2039, thus increasing its reputation further. Employer branding is an important aspect that affects the increase of organisation attractiveness for potential employees (Sirojuddin and Sopiah, 2022). This aspect has been favourable for Mercedes and has allowed it to gain employees with great potential. However, it still faces competition from other automobile brands when it comes to hiring new talents.
Mercedes-Benz operational analysis Transformation Process model
Figure 4: Prioritisation of raw materials
Source:(Mercedes-Benz, 2023).
Inputs: Inputs denote the basic operation associated with the production of finished goods. In reference to Mercedes-Benz, the fundamental operation is associated with the gathering of raw materials which is prioritised in the above figure. These raw materials are necessary components for the manufacturing of vehicles and their parts which are later offered to the market across the world. It has been said that because of the increasing rate of inflation Mercedes-Benz has faced increased costs in raw materials, logistics and labour management. It has a direct impact on the overall profit margin for which consistent negotiation with suppliers is promoted.
Figure 5: Transformation Process Model
Source: Self-Developed
Processing: This particular step includes different operations for Mercedes-Benz. The report by Akinola, (2018) has stated that operations such as allocating resources, selection of factory location, activity scheduling etc are very crucial. In concern to Mercedes-Benz, seven major steps can be identified in this stage (1) steel converted to panels (2) designing of Uni-body from panels in welding shop (3) Paint shop (4) Prewashed body and phosphate coating (5)painting (6) setting of components like wheels, tires etc and (7) test drive. Based on these activities the entire manufacturing operation gets accomplished.
Outputs: In the contemporary world Mercedes-Benz has evolved as one of the largest automobile producers in the world (Abdou, Yasser and Raafat, 2022). The overall outcome that the firm has offered to date has satisfied respective customers and it has added value as a whole. Ultimately it has offered premium vans, high-end passenger cars and many more. The quality and standard of these finished products act as a competitive advantage that provides strength to compete in the existing dynamic market. The above figure has demonstrated operations involved within three stages of the transformation process model which has included all basic operations.
4Vs model
Volume: It discusses the number of manufacturers of the product that is required to fulfil the demand in the marketplace. The goal of Mercedes is to develop the most desiredvehicles in the global region and to take the lead in shaping the transformation to a software-driven and electric future (Mercedes-Benz, 2022). Mercedes builds luxury cars and in the year 2022 the firm delivered around 2 million cars globally this showed significant growth in its business and this signifies the level of consistency in their cars and services.
Variety: It refers to the multiplicity of goods or services that are sold by firms to their customers. Mercedes specialises in making cars with its quality design and services that are being offered in the global region. The company owns 23 models of Mercedes-Benz in the market which includes 9 SUVs, 9 Sedans, 2 Coupes, 2 Convertibles and 1 Hatchback which comes with new features and functions.
Variation: Automobile firms with quality products are highly under pressure to attain the demand of the market. The increasing awareness regarding sustainability might have a huge impact on the demand and supply of Mercedes-Benz’s products. The report developed by Mercedes-Benz Group AG, (2022) has stated that acceleration of electric vehicles (EV) can significantly increase the demand for Van EV in the coming years. Therefore, it can be predicted that the demand for products like the Mercedes EQS will be huge in future however there will be no particular seasons where high demand variant is visible.
Visibility:Mercedes-Benz potentially segments its customers based on factors such as economy, consumption level, age etc (Li, 2022). It can be said that consistent segmentation of customers and markets enables firms to understand the pinpoints of probable users. Also, it has been found that Mercedes-Benz has a strong presence on different social media platforms that have enabled the firm to interact with people to a huge extent. It has helped in understanding their behaviours along with the ongoing trends in the market such as energy vehicles. Through these diverse platforms engagement with customers has also been enhanced encouraging the easy way to identify customer’s pain points and needs.
Performance Objective and Current Performances
Performance objectives or performance refer to the goals set by an organisation to achieve within a set limit of time. These objectives analyse the different aspects of the performance of an organisation such as efficiency, productivity, customer satisfaction and revenue. The five key performance objectives comprise quality, speed, dependability, flexibility and cost. Considering the aspect of cost, organisations constantly try to find ways to lower their production costs and increase profits. The company has increased its sales by 9% in 2023. The company has made stable progress by implementing objectives changes in supplies and increases in manufacturing. The aspect of quality has also been maintained by the company throughout its functioning. The company has adopted the sustainable manufacturing of products while also maintaining the age-old quality of its products (Mercedes-Benz Group, 2022b).
Figure 6: Energy consumption of Mercedes-Benz in production
Source: (Mercedes-Benz Group, 2022b)
The company has also aimed to implement rigorous quality checks that will maintain the quality of its products. This allows the employees to perform better in manufacturing high-end automobiles. The development of better customer relationships includes building a better network with customers (Zulyanti and Irawan, 2023). The company takes active action in addressing customer complaints daily. Lastly, the company has enabled more than 60-65 per cent of its workers to work during its digital transformation which has brought a competitive advantage to its business (Mercedes-Benz Group, 2022). It also aims to analyse the human rights risks that might be experienced by its staff during production. This considers the aspect of flexibility and allows employees to be more productive.
Figure 7: Identification of Human rights risk by Mercedes
Sources: (Mercedes-Benz Group, 2022)
Analysing the financial report of 2022 we can conclude that Mercedes has presented all the statistics required to determine its current performance.The company also claims to monitor efficiency metrics like net income and expenses as a percentage of revenue to calculate their income, on a regular basis. It has stayed stable even after being affected by the Russian-Ukraine war on its business. The company has a record revenue of 150017 million euros and has seen an increase in its financial value by 9% by the year 2022 (Mercedes-Benz Group, 2022a). The company has also taken steps in completing its goal of taking social responsibility in recent years and made donations towards development and education. Overall it has donated and supported over 1200 projects worldwide. Mercedes has also introduced eight new customer service initiatives such as “Premier Express Prime”,“Car Care Kits”, “Fast Lane Body and Paint”, “Online Service Estimate” and “Online Service Appointment Booking”, in recent years.
Figure 8: Donations and sponsorships made by Mercedes-Benz.
Source: (Mercedes-Benz Group, 2022b)
The company has taken many steps towards achieving its corporate goal of becoming an industry leader in CASE technologies.To compete in the competitive market among its competitors like Audi, BMW, Porsche, Jaguar Land Rover, Lexus etc. the firm is focused on bringing enhanced safety to its segments of cars using different strategies.Mercedes Me is one of the significant innovations that has been developed by the firm to identify the issues and conditions of the cars which can be used through an App from a remote location. The features like door locking, parking, location of cars etc. can be seen through the Mercedes Me App from remote location (Ruef, 2018).This is also one of the competitive advantages for the company to thrive in business for the long term.
Figure 9: Mercedes Me App
Source: (Ruef, 2018).
TQM principles
Total Quality Management (TQM) is anidea that mainly emphasizes managing the organisation to provide quality to its customers which identifies the contribution of employees and focuses on customers. It implies that quality is not a single technical issue but has to be addressed from the strategic management viewpoint (Fening and Boateng-Okrah, 2017).
To manage the quality of the product an organisation has to understand these areas in their business operations.Robotic Process Automation (RPA) is asoftware which is efficient and effective and is used by Mercedes to reduce time, manage tasks and create value-adding techniques.The firm uses this software in its quality management of the products to automate the business processes by using RPA due to an increase in physical error rate and workload (Kreuzwieser, Kimmig and Ovtcharova, 2021).
Figure 10: Types of processes that is suitable for RPA
Source: (Doguc, 2020)
The firm pays more attention to its customer to bring improvement in their cars and satisfy them with their needs and requirements. The firm by focusing on the customer requirements introduced the service brand “Mercedes Me” which links the vehicle and the driver.The mobility service can be used through a browser or App which helps to diagnose the car and identify the condition of the vehicle (Scherpen, Draghici and Niemann, 2018).In the era of digitalisation to mitigate digital challenges the firm founded Mercedes-Benz.io which is a full subsidiary of the company. Mercedes-Benz.io is accountable for e-commerce and significantly contributes to digital products and web applications.Mercedes-Benz.io expects that employees are willing to enhance their roles and bring growth to an organisation which serves as a positive mechanism in the workplace (Ackermann, Schell and Kopp, 2021).The firm has significantly focused on managing and maintaining the quality of its products and workplace to bring innovation and improvement in its business in the market.
Major strengths and weaknesses of the operation
Strengths
Mercedes-Benz has focused on bringing continuous growth in its business by taking various measures and strategies.To expand its business in the European market the company opened a plant in China by merging with a local subsidiary. Furthermore, the company tied with Renault-Nissan to increase its production line in vans and trucks for internationalising their products with large segments. The production of vehicles in China has brought a competitive advantage for the company because of cost-effective labour and cheap materials.The company also focused on developing completely knock-down (CKD) vehicles and it’s expected to increase its units from 2.65 per cent in 2017 to 6.05 percent in 2026.
Figure 11: CKD vehicle output
Source: (Chemendy, 2018)
The increasing number of units of CKD vehicles identifies the gaining significance in the market. Furthermore, with its effective and strategic operations, the firm has stood out as a valuable business unit with the highest revenues and returns on sales (Chemendy, 2018). The major strength of the operation in its business is that it helped the firm to bring innovation and satisfy the requirements and needs of the customer.The firm with the introduction of “Mercedes Me” has significantly brought transformation in vehicles which helps drivers to identify the issues in vehicles. Moreover, the firm invests in innovation to bring improvements in segments of vehicles and is also strength of the firm. Therefore, the innovation and development brought in its segments of vehicles can be considered a competitive advantage in its business in the market.
Weaknesses
Mercedes-Benz with the changing automotive sector finds it very volatile which offers high risks and opportunities in business. The firm has also received challenges because of its failure to meet ecological goals in the USA and China which led to a negative impact on business (Chemendy, 2018).With its enormous transformation in vehicles, the firm faced recalls because of emission scandals and fire risks in its EV cars.The firm was sued for manipulating the emission figures in Germany and Europe and this harmed their reputation and trust in customers (Zhang et al., 2023).It is also one of the significant weaknesses of Mercedes-Benz's operations in its business in the competitive market. The other weakness related to the operations of the firm is that ensuring a high-quality product the firm has faced quality control issues which has affected its reputation in the market. The company claims that the supply chain management of the firm is effective but in the financial year 2022, the firm faced challenges in its supply chain management. Mercedes-Benz faced supply chain management challenges in getting resources like semiconductors which are the main part due to which there was an increasing number of unfinished vehicles which could not be delivered to customers. It is also one of the significant weaknesses of the company which can hamper their sales in the market.
Conclusion
In an organisation, it is important to focus on using various organisational strategies and techniques to bring improvement and progress in business. Mercedes-Benz to bring improvement in its business operations has brought numerous changes and strategies which have helped them to attract customers and sustain in the market. For bringing continuous improvement it is crucial for the firm to focus on customer requirements and needs in the product and encourages employees in the workplace. This can help in identifying the changes in the product and introduce new techniques and features which can enhance its performance and motivate employees to perform actively. The firm to attract customers and encourage employees introduced various technological things and brought transformation which has attracted customers and brought continuous growth in business.
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