Mercedes Case Study

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Mercedes-Benz a German based automotive company and is one of the top three luxury automobile makers in the world, bested only by BMW and Audi. However, Mercedes did not become a great luxury car manufacturer by remaining confined to its German borders. The German car manufacturer expanded beyond its borders to compete in the international arena of automotive manufacturing. In order to succeed in this endeavor, Mercedes had to make calculated decisions regarding costs, location, marketing, organizational structure etc. The following paragraphs will detail the pros and cons of abandoning home-country practices, why the company decided to undertake FDI in the United States rather than build the vehicles in Germany, and why Mercedes decided …show more content…

When Mercedes made the move to build its first ever plant in Alabama it positioned the company to tap into outsourcing markets with other countries such as USA, Mexico, and Canada. This outsource allowed them to gain more cost effective and cost savings methods while boosting sales for the company. By moving to Alabama the company saved over 50 percent in labor costs from Germany and received a 250 dollar tax incentive from Alabama for bringing jobs to the state. Along with the moving to the U.S. Market, Mercedes was able to bring a diverse staff of German trainers, diverse management teams, including personnel from Japan and Detroit, to bridge the gap of communication between the German philosophies and U.S. Workers. With this Diverse group working in cohesion to create one of the best plants in the automobile industry they developed an egalitarian shop with a “just-in-time” manufacturing method that made the Mercedes automotive plant feel as if its employees were working for …show more content…

The introduction of the Mercedes M-class was designed to help increase sales, as well as appeal to the current generation of young adults. A prime factor involved in the decision to undertake Mercedes FDI to the U.S rather than continue its assembly in Germany is labor cost reduction by about 50 percent from that of Germany. With this reduction the opportunity cost would also decrease, allowing the company to better meet the needs and wants of the consumers as well as appeal to a more youthful market and increase sales by investing in

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