Mercedes-Benz is a multinational company (MNC) division of DaimlerChrysler A.G. (DCAG), which manufactures automobiles. It was established by Karl Benz and Paul Daimler in 28th June 1926. Mercedes-Benz’s headquarter is settled in Stuttgart, Baden-Württemberg, Germany. With slogan "Das Beste oder nichts" (in English: "The best or nothing"), it focus on producing luxury cars, buses, coaches and trucks.
United State of America (USA) is the largest Foreign Direct Investment (FDI) country with 1953 projects by foreign companies since 2002. As a result, USA generates the largest inflow from FDI. For example, inflow of 13.90 million USD investments facilitates the country. On the other side, the MNC acquires large amount of benefits from USA. Southern USA has been being offering incentives and packages towards MNC aggressively since economic growth is the main priority of southern government. Alabama is one south-eastern state of USA, with estimation of 4,833,722 populations in 2013. Mercedes-Benz U.S. International (MBUSI) is the name of Mercedes-Benz manufacturing plant, which is located in Tuscaloosa County, Vance, Alabama. The subsidiary was established in 1993. Not only Mercedes-Benz, but also Honda, Hyundai, Toyota, and more than 300 companies invested in the state.
Instead of location and labor consideration, Mercedes-Benz’s FDI flow decisions are affected by the difference of exchange rate and tax rate between home and host country. In short, financial incentives and international foreign opportunity are the factors of MBUSI subsidiary establishment. This paper primarily analyzes the impact of FDI towards Mercedes-Benz and the state of Alabama. Further, the writer focuses on the risk management, and cost-benefit analysis of MBUS...
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Alabama has proven to be a suitable site for many automakers, especially Mercedes-Benz. The FDI has symbiosis mutualism towards Alabama and Mercedes-Benz. Mercedes-Benz acquires tax incentives, gain from non-union workforce, logistic and state’s aggresive support. Alabama is right-to-work state, while Germany is highly unionized. On the other side, Alabama gains economic growth, increase in employment rate, better infrastructure and developed rural area.
Exchange rate, interest rate, government policies, price fluctuate resulted in challenge and opportunity for Mercedes-Benz. Risks can be avoided by using derivatives hedging instrument, such as forward contract, interest rate swap, and currency options. Opportunity can be embraced by keep improving towards today standard, such as government policies and managing the supplier risk for better procurement.
Kiley, David. Driven: Inside BMW, the Most Admired Car Company in the World. Hoboken, NJ: John Wiley, 2004. Print.
Caterpillar Inc. also faces the risk of its cash flow and earnings being affected by fluctuations in the exchange rates of currency, commodity prices, and interest rates. To control for this, the company’s Risk Management Policy ensures prudent management of interest rates, commodity prices, and exchange rates of foreign currency by allowing the use of derivative financial instruments. According to the policy, the derivative financial instruments are not supposed to be used for the purpose of speculation. In its pricing strategy, Caterpillar Inc. faces the risk of difficult shipping of its products. This risk can be encountered by offering its products on instalments and lease to its loyal customers (Caterpillar, Inc. (CAT), 2011).
BMW soon realized that many threats impacted its market share in U.S. The Japanese auto manufacturers started building plants in the U.S. to deal with the increased U.S. demand at a lower cost than importing their cars. BMW's U.S. export situation was made even worse by the appreciation of German mark and additionally the higher German labor costs. As a result, the decision was made in 1991 to bui...
One of the most well accepted models of FDI is Buckley and Casson’s (1976) internalisation theory, who developed a model of MNCs and FDIs centered around the interrelationship between market imperfections, knowledge and the internalisation of production and consumption (Buckley and Casson, 2009). Specifically, the theory recognized that multinational corporations are both horizontally and vertically organized, and that the “the vertically integrated firm internalises a market for an intermediate product, just as the horizontal MNE [multinational enterprise] internalises markets for proprietary assets” (Caves, 1996: p.13). In addition, internalisation will occur, and multinational corporations will expand only as far as the advantages, including barriers to entry, are not offset by the costs of control, communi...
Currently, the major competitors within the industry are Ford, DaimlerChrylser, General Motors (GM), Honda, Toyota, and Volkswagen. A few United States (US) manufacturers produce 23% of the world’s vehicles while Japan is responsible for 21%. The tendency for the industry is to be a global producer of automobiles; parts can be made throughout the world and assembled in many different places. The trend of consolidation has continued throughout today. Presently, this is evident in the recent acquisition of Chrysler by Daimler-Benz in late 1998, thus forming DaimlerChrylser. These consolidations have proved beneficial to consumers since companies have been able to reduce costs and pass those savings on to the customers. Some of the other major examples of consolidation are Nissan selling off a controlling 37% interest to Renault; General Motor’s 49% ownership of Isuzu; and Ford’s 33% majority of Mazda. Other efforts to become more competitive have translated into the European Union dropping trade barriers and European carmakers employing cost reducing efforts. American manufacturers have seen 2-3% growth over the last few years. Some current trends are the explosion in popularity of the Sport Utility Vehicle (SUV) and big luxury vehicles.
Mercedes-Benz was looking to build their first auto manufacturing plant in the United States in 1993. The company was intent on locating in North Carolina because of their experience with their large truck division plant that was located in that state. The company’s officials did not intend on visiting Alabama and was not considering the state when Governor Jim Folsom, Jr. and other officials signaled their intent to bid on the new plant. This “give-away” was viewed negatively in a state that has a poor education system and under-funded pension system and caused Folsom to lose re-election in the next election to Fob James. The “corporate welfare” was a major issue and the expectations from the project have never been realized. In fact, William Gunther, an economist at the University of Alabama stated that the job calculations are wishful thinking and “we are suffering from winner’s curse” (Myerson, 1996).
The expanding global market has created both staggering wealth for some and the promise of it for others. Business is more competitive than ever before, and every business, financial or product-based, regardless of size or international presence is obligated to operate as efficiently as possible. A major factor in that efficient operation is to take advantage of every opportunity to maximize profits. Many multinational organizations have used derivatives for years in financial risk management activities. These same actions that can protect multinational organizations against interest rate futures and currency fluctuations can be used to create profits for those same organizations.
The automotive industry is one of the most important sectors of the economy for every country in the world. It involves a large number of corporations and institutions engaged in the manufacturing process of motor vehicles including designing, developing, manufacturing, marketing, and selling. It contributes to the global economic growth by generating a significant return and creating a ripple effect on supporting the supply chain as well as providing job opportunities for the skilled workers (ACEA, 2016).
Many different cars in the world dont campare to at least half of what a Mercedes Benz
This paper examines the expansion of General Motors overseas in its various phases, as well as triggers for internationalization and the problems faced during the process. The paper also considers what benefits have been achieved through international growth, and how the company can be classified with regards to Bartlett and Ghosal’s 4 typologies. Finally, the paper discusses the concept of a “world car,” meeting the demands of customers across the globe.
BMW was founded in 1916 as an aircraft-engine factory in Munich. In 1923, BMW built the first motorcycle and then in 1928 bought a car factory with license to build a small car called the Dixi. It continues growing and expanding its business with a good reputation and high quality of products which both satisfy its customers.
BMW having high market share in European and U.S luxury car markets, started facing issues with launch product qualities and also facing a fierce competition from Japanese producers. Currently the market share was still stable but the rigorous growth of Japanese producers would affect BMW in future. These Japanese competitors had set higher standards of conformance.
The global company Mercedes-Benz is considered one of the most successful and well-known automotive companies worldwide. Since 1886, the company’s founders Gottlieb Daimler and Carl Benz made history with the invention of the automobile, including the Daimler Group, which is one the biggest producers of premium cars and the world’s biggest manufacturer of commercial vehicles globally (Daimler, 2013). Their main focus is innovation, safety, technology, style, brand image, expansion, and superior automobiles by offering the best of the best to consumers worldwide. The brand’s philosophy is to continuously create radically new products to advance the cause of human mobility. It is also the number one luxury brand in the United States and Germany while continuously expanding in China and Russia as well (Interbrand, 2013). Mercedes-Benz has a great selection on divisions such as cars, trucks, vans, buses, and financial services offered to any consumer or business. Their global reach has increased tremendously by including production facilities in 17 countries on five continents and having 93 locations worldwide. As a pioneer of automotive engineering, their strategy is to continue the same pioneer role with the ongoing development of mobility, especially in the areas of safety and sustainability (Daimler, 2013). It is very essential for the company to focus on consumers’ needs and their highly well known brand in a competitive global economy. That is why the company Mercedes-Benz releases a brand new model every year to stay on top of its competitors by improving previous models. Some strategies practiced are global marketing, global product development, global product pricing, global advertising, global distribution, an...
Mercedes-Benz is a leading Automotive Manufacturer throughout the world. Even though they are the best at what they do, they do not focus all their attention on only automotives, they excel in CSR and involvement in the community as a whole. They are always helping to develop and educate the future children of the world, as well as help people affected with HIV/Aids with education to keep a steady income and teach general skills. This is what sets them apart from the rest.
The automobile industry is a pillar of global economy. Globally automotive contributes roughly 3 % of all GDP output. It historically has contributed 3.0 – 3.5 % to the overall GDP in the US. The share is even higher in the emerging markets, with the rates in china and India at 7 % and rising. China produces the highest number of automobiles followed by US and Japan (oica.net, 2015). The industry supports direct employment of 9 million people to build 60 million vehicles and parts that go into them (oica.net, 2015). Many other industries such as steel, iron, glass, aluminium, textiles etc. are associated with the automotive industry and resulting in more than 50 million jobs owed to the auto