What was the strategic position of Daimler Chrysler in the European car manufacturing industry from 1980 until the beginning of the new century?

Was the way of managing strategic change successful?

Master's Thesis, 2003

86 Pages, Grade: 2.1 (B+)





List of illustrations (without appendix)


Chapter 1
1. Introduction
1.1. Objectives of the dissertation
1.2. Choosing the analytical tools
1.3. Areas of research and data collection
1.4. Development of the European car manufacturing industry
1.5. Reader’s map

Chapter 2
2. Evaluating the strategic position
2.1. Environmental analysis
2.1.1. Macro Environment Situation in the 80’s Real wage position in the USA and Europe Situation in the 90’s
2.1.2. Industries and sectors Situation in the 80’s Situation in the 90’s
2.1.3. Strategic groups (Porter, 1980) Situation in the 80’s Situation in the 90’s
2.1.4. The organisational field Situation in the 80’s Situation in the 90’s
2.1.5. Market Segments Situation in the 80’s Situation in the 90’s
2.1.6. Opportunities and threats as part of the SWOT analysis (Andrews, 1980) (SW)OT-analysis for the 80’s (SW)OT analysis for the mid 90’s
2.2. Strengths and weaknesses as part of the SWOT analysis (Andrews, 1980)
2.2.1. SW(OT) analysis for the 80’s
2.2.2. SW(OT) analysis for the 90’s

Chapter 3
3. Managing strategic change
3.1. Analysing strategic change
3.1.1. Types of strategic change
3.1.2. Strategic context
3.1.3. Organisational culture
3.1.4. Forcefield
3.2. Management styles and roles
3.2.1. Management styles
3.2.2. Management roles
3.3. Levers for strategic change
3.3.1. Structure and Control Systems
3.3.2. Organisational routines
3.3.3. Symbolic processes
3.3.4. Political processes
3.3.5. Communication change

Chapter 4
4. Discussion and conclusion
4.1. Implications of the Daimler Chrysler case study
4.2. Personal opinion about the results of the case study analysis
4.3. Explanatory remark about the case and chosen analytical tools
4.3. Future outlook
4.3.1. The car manufacturing industry
4.3.2. Daimler Chrysler

Figure 1: Ansoff’s framework for analysing organisational culture
Unemployment figures in the 80’s
Price level development in the 80’s
Wage level development in the 80’s
Price level development in the 90’s
Wage level development in the 90’s
Share of added value in the car manufacturing industry
Use of fuel cells in cars, split up in regions
Porters Five Forces (Porter, 1980)
Average Fuel Consumption per car
Diesel consumption development
Petrol consumption development
Petrol and diesel consumption in Germany
Petrol and diesel consumption in France
Petrol and diesel consumption in Spain
Diesel passenger car production in Western Europe
Worldwide passenger car production by automaker origin (1990 to 1995)
Sales of the biggest European commercial vehicle manufacturers in 2002
Three elements of a globalisation strategy
Product-team structure
Matrix structure
Types of Organisational Cultures
Structure of the Executive Automotive Committee
Comparison: share prices of Daimler Chrysler and its Asian competitors
Comparison: Daimler Chrysler and its strat. allies in the Asian market
Comparison: Daimler Chrysler and EADS
Comparison: Daimler Chrysler and several international indices
Comparison: Daimler Chrysler and its main global competitors

List of references
Annual reports

List of illustrations (without appendix)

Graph 1 European car sales chart (1990 – 2000)

Graph 2 The PESTEL framework

Graph 4 Real wage position in the USA and Europe

Graph 7 New registrations of passenger cars in Middle and East Europe (97/ 98)

Graph 8 New registrations of passenger cars in the Asian market (97/ 98)

Graph 11 Future plans of development of R&D intensity (German car manuf.)

Graph 15 World automobile production

Graph 22 Development of the second-hand car market in Germany

Graph 25 Portfolio structure of Daimler-Benz in the 80’s

Graph 27 Some characteristics for identifying strategic groups

Graph 28 Passenger cars

Graph 29 Commercial vehicles

Graph 30 The ten biggest car manufacturer in the world in 1998

Graph 31 SW(OT) analysis for the 80’s

Graph 32 SW(OT) analysis for the 90’s

Graph 33 Product/ market matrix

Graph 35 Share of national and international trade of selected German companies

Graph 36 Mergers and Acquisitions in 2000

Graph 39 Types of change

Graph 40 Daimler Chrysler share (DCX) compared w. the Eurostoxx 50 (92 - 03)

Graph 41 The cultural web

Graph 43 Forcefield analysis

Graph 45 Political mechanism in organisations

Graph 46 Effective and ineffective communication of change

Graph 47 Research evidence on firm specific determinants of business perf

Graph 48 Global Automotive M&A activity (80 – 02)


I want to thank some people for their help while I was writing this dissertation because without them I would not have been able to do so

First of all, I dedicate this work to my parents, Karin and Werner, because they supported me for the time I spent in England, unquestioned and always willing to listen to me.

Furthermore, I want to thank my supervisor, Gerald Barlow, who always gave me constructive feedback and, although very busy at that time, tried to arrange a meeting whenever there was a need for it.

Finally, I want to thank all my friends who gave me valuable information and encouraging comments.


This dissertation is about strategic positioning and managing strategic change. The first chapter makes clear the importance of clear defined strategy, mergers & acquisitions as well as alliances resulting out of increasing globalisation and gives Daimler Chrysler as a good example for analysing these managerial issues.

Chapter two shows different strategies Daimler Chrysler was/ is following, a diversified one in the 80’s and a focused-orientated strategy in the 90’s. Increasing threats of saturated markets, global competition, fluctuating economic influences and rising technological standards had/ have to be coped with by Daimler Chrysler in using their strengths of well-known brand reputation, high quality standards and developed service culture. The result was a strategic position emphasising the upper car segment in the 80’s as well as reliable commercial vehicle and a completer range of products in the 90’s trying to serve nearly all segments in the car market.

Chapter three deals with the management of strategic change and the process of becoming a global player in the car manufacturing industry. Problems a merger causes concerning differences in culture and management are considered and the act that concentration of power (as it happened at Daimler Chrysler at the time while the merger took place) on charismatic top management obviously paid off in the late 90’s.

The final chapter four demonstrates the difficulty of fostering successful change management and the necessity of mergers and alliances when following a global concentric growth strategy. It becomes obvious that, although the automobile industry is confronted with severe competition, Daimler Chrysler has the potential of getting the major player in this industry. When following consequently the chosen path of focussing on the car manufacturing sector and implementing new technologies and customer demands fast (faster than potential competitors), then Daimler Chrysler will be at the “top of the league” in the future.

Chapter 1

1. Introduction

1.1. Objectives of the dissertation

This dissertation aims at analysing strategic management, in detail, the implementation of company’s strategies suitable for successful positioning in the market and managing strategic change effectively. As Porter defines strategy as a sustainable competitive advantage (Porter, 1980), establishing in the relevant market(s) and fitting management action to changing influential factors is crucial for creating a prosperous company. Due to the resulting importance of strategy, the focus of this dissertation lies on managerial issues and ways of coping with them.

I am concentrating on Europe and its car manufacturing industry which has like many other industries experienced significant competitive dynamics in the past when considering, for example, the creation of the European Single Market or the overall trend of globalisation. Daimler Chrysler is, next to General Motors, Ford, Toyota and VW, the fifth biggest global player in this industry (www. autozine.kyul.net, 02.08.2003 and Potter, 1999) and therefore an adequate example for demonstrating ways of managing strategic positioning and strategic change.

Daimler Chrysler experienced essential change in strategy and consequently a changing company portfolio over time. Portfolio means the mix of different businesses a company incorporates (Hill and Jones, 2001). I chose a time horizon of ca. 20 years which includes two important periods concerning Daimler-Benz (after 1998: Daimler Chrysler; in this dissertation whether it is written Daimler-Benz, Daimler Chrysler or DC, the same company is described) stamped by different strategic objectives resulting in a varying company structure and existing portfolios. That development is always necessarily to be seen in relation with the dynamic influential macro- and micro-environment.

The outcome of this dissertation is an analysis of Daimler Chrysler, their different strategies and their measures over time in order to be able to cope with the increasing competitive environment. The result will and cannot be the only right analysis and does not offer a complete reliability concerning future developments. However, it is a possible evaluation of Daimler Chrysler’s strategies and tries to give an understanding of strategic decisions relating to structure and portfolio of the company.

It is to be mentioned that the strategic development of Chrysler before the merger is not explained and analysed due to the fact that although the merger was characterised as a “merger of equals” (Daimler Chrysler, 1998) the dominance of Daimler-Benz while planning and implementing this merger leads more to a “friendly takeover”. If a merger takes place, there is always one culture dominating, one CEO has to leave or give up his/ her position and only one headquarter will be kept (Schoettle, 2002). In the case of Daimler Chrysler, Robert J. Eaton, former chairman of Chrysler, was appointed until 2001, afterwards Juergen E. Schrempp would be the only chairman of the merged company.

1.2. Choosing the analytical tools

In order to evaluate the development of their corporate-level strategy and the corresponding business units and operational strategies as well as ways of dealing with changes in the business macro-/ micro-environment and within the company itself, it is useful to work with certain analytical tools.

To be able to evaluate the strategic position of Daimler Chrysler, it is essential to analyse the relevant environment. I will start with the macro-environment which refers to the broader influential factors for nearly all organisations. Hence, the PESTEL analysis will be used to examine political, economic, socio-cultural, technological, environmental and legal forces (Johnson & Scholes, 2002).

The next step is to look at the car manufacturing industry. In this case, Porter’s Five Forces (Porter, 1980) are going to be used to evaluate competitive forces within this industry. Strategic groups as well as the organisational field are other important classifications helping to analyse and understand the near environment (Johnson & Scholes, 2002). Finally, the market is to be segmented and, by using part of the SWOT analysis, opportunities and threats will be identified (Andrews, 1987 and Johnson & Scholes, 1989).

After having dealt with the external environmental factors, internal strategic capabilities will be evaluated. In this aspect, I will concentrate on existing resources, core competences and key issues in the environment. In order to do so, I will use again the SWOT model which explores internal strengths and weaknesses and the key environmental issues (Andrews, 1987 and Johnson & Scholes, 1989).

In using the framework of Johnson and Scholes, it is possible to analyse Daimler Chrysler’s management of strategic change. It includes the evaluation of strategic change

which explores the type of change, the strategic context with its different features, the specific organisational culture of Daimler Chrysler and a forcefield analysis. Other aspects of this framework are the different management styles and roles and the levers for strategic change. The latter includes inter alia structural and control systems, organisational routines, symbolic (rituals and cultures) and political processes and communication change (Johnson & Scholes, 2002). Political processes are let out in this part of the analysis.

1.3. Areas of research and data collection

For the car manufacturing industry and Daimler Chrysler in particular there exists a huge amount of literature. I will use different sources in order to get the relevant information allowing a sensible and effective analysis. To do so, the Web of Science gives a large amount of relevant information. Furthermore, the Templeman library will be used for literature research. Due to the fact that Daimler Chrysler is a German-American company, I will use the library of the Philipps University of Marburg to obtain other relevant material. Finally, the world wide web (www) and Daimler Chrysler itself are other important sources when dealing with this dissertation.

Limitations of these sources of research do occur when dealing with company culture on the one hand and with past strategy in the 80’s on the other hand. Culture is internally and unwritten laws, habits and rituals are hardly published for external stakeholders. Information about the strategic development in the 80’s is partly taken out of archives or databases. However, the existing material is sufficient to analyse Daimler Chrysler and its strategic development.

1.4. Development of the European car manufacturing industry

Daimler Chryslers’ activities in the past were characterised by a strategy of diversification as seen when looking at its portfolio over time. However, the current situation shows a focus on the car manufacturing sector and spin-off’s of other activities formerly included in the company’s operations, for example, the sale of two business units of Dornier (transfer to a company in which the Fairchild Aircraft Inc. held the majority share in June 1996; Daimler-Benz, 1996) or their railway unit Adtranz (agreement with Bombardier in August 2000; Daimler Chrysler, 2000). Therefore, I will mainly concentrate on the car

manufacturing industry and describe the overall development in the last 20 years and actual trends in this sector.

While the trend changed from an efficiency-orientated management in the 80’s towards a quality-driven management in the 90’s (Colombo and Comboni, 1991), the stagnating European car manufacturing industry in the mid-nineties (see graph 1) had to face a severe competition due to the fact that Japanese carmaker’s represented high productivity, effectiveness and fast model development. An example would be the trend towards lean production which the Japanese manufacturer like Honda and Toyota master perfectly (Smith, 1997).

In the late 90’s, speculations about consolidations (M&A) were on the spot and the merger of Daimler and Chrysler in 1998 (www.daimlerchrysler.com, 06.2003) as well as the acquisition of Volvo by Ford in March, 1999 (www.ford.com, 05.09.2003) proofed the assumptions and forecasts made in the past.

illustration not visible in this excerpt

Major changes were on the move and the vision of 6 to 8 global players dominating the market started to become realistic. As PWC stated in their survey in 1998, “increasing competition has pushed vehicle manufacturers to achieve big cost reductions by rethinking car design, assembly and production techniques” (PriceWaterhouseCoopers, Global Automotive Deal Survey, 1998, p.5). In the future, global overcapacity and declining profitability are going to challenge the market participants and the process of concentration will probably continue. Other aspects which got increasingly important for car manufacturer were environmental issues, the use of alternative energy sources and high-standard electronic system implementation (PriceWaterhouseCoopers, 1998).

1.5. Reader’s map

In the following chapters I am going to analyse Daimler Chrysler’s strategic position and their way of managing strategic change. In chapter 2, Daimler Chrysler’s strategic position is evaluated for two different periods of time, namely the eras of Edzard Reuter (1987 until 1995) and Juergen E. Schrempp (1995 until today), dealing with the macro-environment and step by step the micro-environment, namely the car manufacturing industry in Europe, the different market segments Daimler Chrysler is serving and their competitors like, GM (www.gm.com, 13.08.2003), Ford (www.ford.com, 13.08.2003), Toyota (www.toyota.com, 14.08.2003) or VW (www.volkswagen.de, 14.08.2003). The resulting chances and potential threats occurring in this market will be explored and analysed. In order to get a complete picture of Daimler Chrysler’s position in the market, their internal strengths and existing weaknesses are subject to investigation. By evaluating relevant resources and capabilities the competitive advantage for Daimler Chrysler will be analysed which gives them an edge over their actual rivals.

In chapter 3, the dynamic factors influencing the way of implementing different levers of strategy as well as the strategy itself are subject to investigation. Here, I will focus on the different aspects of change. Daimler Chrysler was and still is heavily influenced by charismatic and strong leaders in the top management (Edzard Reuter and Juergen E. Schrempp are the most relevant examples and the impact on competitive action will be analysed in detail later in this dissertation). Their personal styles and effective

implementation of control systems, ideologies and communication influenced Daimler Chrysler’s performance and shaped the overall company picture and performance.

In the last chapter (chapter 4), a discussion of the analytical outcome gained in the previous chapters will let me come to a conclusion of how good and in what way Daimler Chrysler performed over the past years, what its position is today and what implications this has for the future. A general trend in the car manufacturing industry is required to come to reasonable predictions for the forthcoming years.

Chapter 2

2. Evaluating the strategic position

2.1. Environmental analysis

2.1.1. Macro Environment

For evaluating the macro-environment I will take a closer look at the different forces the PESTEL analysis (Johnson & Scholes, 2002) uses in order to filter out relevant external influences the company has to deal with (for details see graph 2). It is crucial to consider a possible future impact on the company compared to the past development. Situation in the 80’s

illustration not visible in this excerpt

Political forces were reflected by a growing emphasis on environmental protection, for example, restrictions concerning air- and water-pollution or the increasing orientation towards waste reduction, both, in production and consumption. For more details go to www.europarl.eu.int. These issues were implemented quicker and in a more consequent way in Europe than in the United States due to the fact that Europe was and still is much more densely populated than the US and solving environmental issues was and is crucial.

Increasing attention was also paid to the aerospace industry sector due to the facts that, firstly, the east-west conflict still existed, though improving and relaxing in the end-eighties (fall of the Berlin wall) and secondly, that the aerospace industry was an important sector to gain advantage over international competitors (nations). One example for this situation was Ronald Reagan’s Star Wars program in 1983 for protection against enemies (e.g. Soviet Union and other communist countries; he also mentioned potential threat from

existing aliens, which is absolutely debatable!). The growing importance of gaining the edge over other nations in this industry was always very important. Furthermore, not only military purposes but also scientific reasons dealing with technology, biology/ biotechnology and geography were motives for the aerospace industry.

Concerning market accretion and the development of trade it is to say that at that time a trend towards a slow down of economic growth occurred and an respective cyclic volatility of the automobile industry which could have been observed in the early 80’s (1982/84) where the trend of demand was retrogressive (Blotevogel, 2002, chapter 10). The decreased pace of economic growth was represented by national GDP trends, interest and inflation rates. Unemployment figures showed a turnaround point compared to the positive

trend of the last years(see appendix, graph 3). That development changed in the late 80’s (1985/88) when the relevant figures improved again (Blotevogel, 2002, chapter 10).

When also taking into consideration the real wage level developments in Europe and the US (unit labour costs minus deflator of GDP) at that time, the volatility comes out clear and backs up the foregoing statement. The slope of the curves (graph 4) reflect the up’s and down’s in the economy at that time.

Real wage position in the USA and Europe

Abbildung in dieser Leseprobe nicht enthalten

Graph 4: Flassbeck, 1999, p.2, The percentage on the vertical axis is cumulated. EWU

means European Economic Union, Deutschland means Germany.

Socio-cultural factors were the increasing living costs resulting out of higher living standards and quality requested for personal and public activities. This changing lifestyle went hand in hand with higher social costs for companies and therefore, due to the boost of ancillary wage costs, resulted in an adverse cost structure for companies. For more detailed information about price and wage levels in different European countries see appendix (graph 5 and graph 6).

The enhancement of technological standards developed constantly over the past years was likely to continue with an even faster speed than before. Relevant basic technologies created synergy effects getting more and more important for companies searching for a competitive position in the market.

The protection of the environment, mentioned before under the aspect of political factors, got increasing important resulting out of stronger awareness of the dependence on healthy ecological systems and the growing movement of green parties influencing political and legal areas in several countries (e.g. Germany and Scandinavian countries).

Legal factors were basically covered by the political and ecological factors which resulted in different environmental, production and safety laws. Examples were the Article 138 of the Single European Act (1986) which lays down minimum requirements concerning health and safety at work, the resolution from 18th January, 1984 “on the future development of the common transport policy (*4.5.1.), to the vital importance of safety as the main criterion for any action in this area.” (www.europarl.eu.int/factsheets/4_5_3_en.htm, 08.2003) or the compulsory introduction of unleaded petrol in October 1989 (leaded petrol would virtually disappear from January 2000; Directive 98/70) (www.europarl.eu.int, 08.2003). Situation in the 90’s

At that time, the trend towards big companies and multinationals occurred in nearly every industrialised country. Governments supported this development and dependent on the size and power of a company, mutual influences on administration and legal issues were existent. One can consider the issue of so-called “soft money” (SustainAbility & GPC, 2001) companies donated to different political parties or the involvement in think tanks for different purposes relevant for certain industries. Concrete examples were the situation of

the Environmental Industries Commission with less than 200 members and a tiny budget and, in comparison, the established energy and energy use industry in the UK or the Biotechnology Patenting Directive as one of the most lobbied directive of the European Parliament (SustainAbility & GPC, 2001).

The process of opening western countries and economies towards Eastern states (e.g., Eastern and Central European countries) took place and was expected to continue with consequently important influences on national political decisions. However, the economic upturn in some Central European areas slowed down temporarily. To get a better picture of consequential economic outcome graph 7 shows new licences of cars in Middle and East Europe in 1997/ 1998. The change is shown as percentage:

New registrations of passenger cars in Middle and

East Europe (1997/ 1998)

Abbildung in dieser Leseprobe nicht enthalten

Graph 7: VDA, Annual report 1999, p.21 (change in percent; 1998/ 1997)

ASEAN states were confronted with serious problems resulting out of financial and monetary crises in the late 90’s and Europe and its industries were affected by all these developments in the macro-environment. An example concerning Daimler Chrysler and

other internationally orientated automakers would be the development of new licences of cars in that area in 1997/ 1998 (graph 8). The change is shown as percentage:

New registrations of passenger cars in the Asian

market (1997/ 1998)

Abbildung in dieser Leseprobe nicht enthalten

Graph 8: VDA, Annual report 1999, p.18 (change in percent; 1998/


Liberalisation and deregulation was on the way and supported the economic development of globalisation and internationalisation. Because of this process which included financial and legal advantages, it got interesting for foreign companies and investors to go abroad and do business.

Assisted by politics and legal aspects, the process of concentration in certain industries proceeded and the trend towards focussed growth continued and future development was anticipated to strengthen that movement (Potter, 1999). The economic growth in the mid-nineties was modest with an average of 2% growth from 1995 to 1997 and the synchronisation of larger industries cyclic developments increased. As a result, the process of globalisation and possible large scale operations for companies (geographical and production process-related) got accomplishable (www.wto.org, 07.2003).

Socio-cultural circumstances improved in a way that the proportion of wealthy households increased, but on the other hand the percentage of poorer households rose as well; the social distinctions negatively increased. Considering this, it is helpful taking a look at the persistent weaknesses of the social systems in Europe reflected by an unemployment figure of 13 million people, 42% of them long-term unemployed (European Commission, 2002). The demand for luxury goods (for example, upper class cars) improved in industrialised countries as well as in transition countries like in Eastern Europe while the demand for other products did not deteriorate but developed stable. For price and wage levels in selected European countries see appendix (graph 9 and graph 10).

The speed of technological development and improvement was still escalating and future outlook did not predict a slowdown. For companies this process implicated a necessary increased investment and a shifting towards research and development areas (R&D) due to the fact that the market (the customers) expected higher quality and innovative products, e.g. the car was started to be considered as “ the third accommodation” (Colombo and Comboni, 1991, p.116) and resulting expectations of drivers. Rising R & D expenditures were also a consequence of the saturation of the car market followed by increased competition. The following graph (graph 11) illustrates the growing importance of R & D activities using Germany as an example. Additionally, see appendix (graph 12) about usage of software- and technology components in the car manufacturing business, showing the rate of adding value based on software parts.

illustration not visible in this excerpt

Product development and production got more and more ecologically compatible and most industries adapted that trend early enough and were able to cope with the growing environmental consciousness at present time and in the future (Teresko, 2003). An example would be the development of alternative engines like fuel cells (see appendix,

graph 13). Developing alternatives dealing with possible increased expectations concerning the environment still had to be subject to most business for future aspects.

Legal aspects were again mainly covered by political and economical factors resulting in different rights creating a legal basis for the relevant parties involved in such a process. Examples would be the further development of environmental directives concerning leaded petrol which had to disappear in 2000, the availability of financial resources through several EU R&D programs (called, for example, JOULE or ESPRIT) or the creation of a training network (funded by the FORCE program) for the automobile industry (for more details about the different programs, see www.europarl.eu.int).

2.1.2. Industries and sectors

In this chapter Porters Five Forces (Porter, 1980) will be used to analyse the industry and its sectors. Different players like buyers, suppliers, customers and competitors create lots of interdependencies and action-reaction processes and evaluating the industry situation is necessary in order to come to a reasonable output for the final result. For a graphical overview, see appendix (graph 14). Situation in the 80’s

Coping with the bargaining power of suppliers, there were no big changes foreseeable in the future as far as one could evaluate it at that time. Including the fact that from an overall point of view sales stagnated or started to decrease, e.g. decreasing ones in the truck sector like in Western Europe and the Middle East, although expected recovery in areas like Latin

America and Western Europe, and increasing sales figures in the passenger car segment (Davies, 1985), for details see graph 15 at the end of this paragraph, the power of suppliers might increase. However, combining that actuality with the process of concentration and focussing of the automotive industry and their existing players, it abundantly got clear that size and level of production determined influences and potencies of companies trying to exercise pressure on their suppliers (vehicle manufacturers calling for higher quality and tighter controls (Davis, 1983; Hill and Jones, 2001)). The pressure of recession in the early 80’s combined with the fact that “in most cases over 60 per cent of the components in vehicles are supplied by outside specialist manufacturers” (Davis, 1983, section IV, p.4)

resulted in demand for high quality standards, tight cost control at the suppliers’ level (gained by Japanese production methods like Total Quality Management (TQM) and Lean Supply) and effectively aimed at reducing the number of suppliers. Actual influences and bargaining power of suppliers were not be seen on a relevant higher level in the future until the point that they start to merge and concentrate as well. That overall trend of long-term relationship with car manufacturers and fewer direct suppliers was also expected in that sector (White, 1994). However, the general position of suppliers and their power was still weak.

World automobile production

Abbildung in dieser Leseprobe nicht enthalten

Graph 15: source: VDA, Auto 1999, Annual report, p.16 (blue shows Western Europe, orange reflects North America, green shows Japan, red stands for the rest of the world, y-axis in million cars; increasing production figures after 1982 due to improved sales in the passenger car sector)

Looking at the buyer situation and their bargaining power, it is to be mentioned that the obvious trend of mergers and acquisitions as well as strategic alliances (e.g. the changing view of big companies with the saying “elephants do not gallop” and the fact that since the mid 80’s the amount of mergers grew ca. 15% every year until 1995 (Winfried Wolf; 2000)) weaken the position of buyers as seen when looking at the development of the number of companies reduced by the trend of concentration mentioned before. Buyers and potential customers had to cope with more powerful suppliers of cars.

On the other hand, the increasing saturation of the automobile market puts buyers into an improved position due to the fact that car manufacturer faced a more severe competition at that time and in the future. Bargaining power of buyers was weak to medium at that time.

The threat of new entry has to be differentiated by distinguishing between potential external rivals (which means companies not present yet in Europe) and already represented car manufacturer entering a different segment within the automobile industry. Here I will concentrate mainly on the first group because intra-industry movements will be dealt with later in relation with strategic groups. For external companies entering this industry was

associated with high affordable economies of scale. In order to be efficient and successful, production costs as well as costs for components had to be kept down. Considering this fact together with the development of concentration and globalisation, future chances and, therefore, threats of new entrants came mainly from the US and from the East (e.g. Japan, South-Korea). Examples would be Ford with their Ford Accord as the car of the year in Europe in 1980 (www.ford.de, 05.09.2003), Nissan which was producing from 1986 onwards in the UK (Done, 1991), Toyota being present with a company subsidiary since the mid-seventies in Germany (www.toyota.de, 05.09.2003) or Honda with one of the first Japanese automotive R&D departments in Europe (Offenbach, Germany; since 1984) (www.honda.de, 05.09.2003). Only car manufacturers like the ones mentioned were able to cope with the high fixed costs followed from huge investment efforts for plants, infrastructure and communication systems. The improving technological complexity and internationalisation of competition set the barriers to entry on a high level. Restrictively, the influence of big European companies from the automobile sector on governmental and legal action stated in the beginning would negatively affect possible entrants. An example would be the limitation of market share (maximum: 16%) for Japanese cars agreed between the EC and Japan in July, 1991 (Done, 1991).

Combining all these facts, the threat of new entrants is to be rated medium with potential upward-movement.

Dealing with existing threats of substitutes the enlarging influence of environmental issues tries to direct the use of means of transportation away from cars and instead towards public and ecologically sensitive transportation. Furthermore, the trend towards smaller cars with less fuel consumption and the use of diesel started at that time in Europe and car manufacturers had to react to the movement by serving the market with smaller and more compact cars, increasingly using diesel (www.autozine.kyul.net, 02.08.2003). For detailed information about petrol and diesel consumption , see appendix (graphs 16 to 21). Trying to make a forecast at that time, the result would be that despite this trend the car manufacturing industry was still powerful and influential, not at least because of the

precaution undertaken in recent years concerning these future developments and the lobbying of influential and powerful participants in the business.

illustration not visible in this excerpt


Excerpt out of 86 pages


What was the strategic position of Daimler Chrysler in the European car manufacturing industry from 1980 until the beginning of the new century?
Was the way of managing strategic change successful?
University of Canterbury  (Canterbury Business School)
2.1 (B+)
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ISBN (eBook)
ISBN (Book)
File size
2092 KB
What, Daimler, Chrysler, European
Quote paper
Dennis Sander (Author), 2003, What was the strategic position of Daimler Chrysler in the European car manufacturing industry from 1980 until the beginning of the new century?, Munich, GRIN Verlag, https://www.grin.com/document/29894


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