International Marketing

BBA-04

Stefan Sippel Kristian Ojanper Sune Virta

Case study: DaimlerChrysler AG

1. What problems would Mercedes-Benz have faced if it had remained a niche player selling world cars to the luxury market worldwide? Concentrating on serving one market segment limited the size of a company, and thus limited the potential benefits from economies of scale in research, product design and development, production and marketing. Larger profits seemed to require a world car company or a global car company that could compete successfully in a number of market segments in two or three of the worlds major markets. 2. What are the key characteristics of Fords approach to internationalization/globalization? The company, started in 1903, introduced the assembly line with interchangeability of parts to automobile manufacturing. With its advantages in low cost, high volume, and availability of parts for service, it was able to rapidly expand its market. It quickly moved from a domestic to an international and then to a multinational firm. The company set up a sales branch in France in 1908, built its first European factory in Britain in 1911, established Ford-Werke AG in Germany in 1925, and began production in Japan in the same year. Ford has factories in North America, Latin America, Europe and Asia. Where government policies, limited market sizes, or other factors have kept the company from developing wholly owned factories, they have used exports and/or joint venture production facilities to meet local demand. In 1979 Ford purchased a 25% equity share in Mazda primarily in order to gain knowledge related to small car development and production. The relationship with Mazda assisted Ford in moving toward global design, manufacturing, and marketing. 3. What are the key characteristics of Toyotas approach to internationalization/globalization? After the destruction of World War II, and a crippling labor dispute in 1949, it sold only about 300 vehicles per day. Then orders for thousands of trucks came in from the US 1

International Marketing

Stefan Sippel Kristian Ojanper Sune Virta Defense Department. Profits from this sale gave the company money to finance the production of passenger cars. Toyota had already developed a prototype small car, and had studied Fords production lines. The company invested in modern manufacturing equipment and introduced the just-in-time inventory system. Formal and informal trade barriers provided Toyota, and other Japanese manufacturers, with a protected domestic market while they developed an increasingly efficient production system. As the scale of production rose and costs declined, Toyota tried to export to the US market. The first try in 1958 failed in road tests because of poor styling. A second entry with redesigned automobiles and improved quality was a success and they subsequently began exporting to Europe. The oil crises in 1973 and 1978-9 made Toyotas small, fuel-efficient automobiles very attractive in the US, and their market share grew rapidly. Toyota eventually felt compelled to begin production abroad because trade barriers limited their ability to increase market shares overseas. Toyota opened its first factory abroad in 1984 when it joined General Motors in a joint venture, to produce cars in California. Toyota used the joint venture as much for a learning experience as for the cars produced. Their primary objectives included learning to work efficiently with US labor and suppliers. 4. Which of the three companies approached internationalization the best? Explain.

BBA-04

5. Are there other approaches to internationalization/globalization that Mercedes-Benz could have taken rather than relying on large acquisitions? What problems might they have caused?

6. Should the potential problems at Chrysler and Mitsubishi have been foreseen by German management?

International Marketing

Stefan Sippel Kristian Ojanper Sune Virta 7. If Ford was so successful in working with Mazda, why should DaimlerChrysler have any concerns about working with Mitsubishi?

BBA-04