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This case was prepared by Ralf Ermisch and Chia-Chi Hung
of the Fox School of Business and Management at Temple
University under the supervision of Professor Masaaki
Kotabe for class discussion rather than to illustrate either
effective or ineffective management of a situation described
(August 1999).
                     
CASE 17
DAIMLER–BENZ AG: THE A-CLASS AND THE “MOOSE-TEST”
In 1998, Daimler–Benz merged with the American
carmaker Chrysler to form DaimlerChrysler AG. This titanic
company has a value of $40 billion, $130 billion in
sales and more than 400,000 employees.
Daimler–Benz’s Strategic Priorities and Opportunities:
• Generate returns in every business unit demanded by
international standards
• Achieve a leading position in every market it serves
• Seek opportunities to expand its presence in foreign
markets with an emphasis on Asia
• Grow business in which it has technological and managerial
expertise
Mercedes-Benz
Mercedes-Benz had its beginnings in 1886: Karl Benz
received a patent for the world’s first motor vehicle.
In 1901, Daimler obtained the rights to use the name
Mercedes. In 1926, Benz and Daimler merged. Today,
Daimler – Benz’s automotive segment, Mercedes-Benz,
contributed about 71 percent of the group’s revenues
in 1997. Mercedes-Benz has dealerships in more than
170 countries, with over 350 dealerships in North
America. The name Mercedes-Benz has become synonymous
with fine craftsmanship and luxury, and
reflects a tradition of exceptional engineering, performance,
service, and safety. The prices of the manufactured
cars range from $20,000 to $130,000. The Passenger
Car Division in the Automotive segment
contributed DM 53 billion, 43 percent of the Group’s
total revenue in 1997. (See Exhibit 1 for percentage of
sales for the different models.)
Market, Sales, and Competition
The most important car markets for Mercedes-Benz include
Germany, the rest of the EU, the United States and
Japan. In 1997, 39 percent of its cars were sold in Germany,
25 percent in the EU (excluding Germany), 17
percent in the United States and 6 percent in Japan.
Revenues and unit sales increased to a new record
high levels in 1997. The most significant rise was in the
United States with unit sales increased by 41 percent,
due to the successful introduction of the M-Class and
several other new models.
17-2 • Case 17: Daimler–Benz AG: The A-Class and the “Moose-Test”
Two major competitors in Western Europe are Audi
and BMW, and other competitors are Jaguar, Lexus,
Porsche, Rolls Royce and VW. In the U.S. market, the
main competitors are Acura,Audi, BMW, Cadillac, Ford,
Jaguar, Lexus, Lincoln, Porsche, Rolls Royce, Saab,
Volvo.
THE NEW BABY BENZ
Background–Small Car Segment
Mercedes started its small car invasion in the early
1980s by introducing the W201 series (190E). The result
was very successful, that the 190E became its best
seller. In fact, the European and Asian automobile
market structure is changing. Bigger cars are no longer
selling well, while the market bias is toward smaller
cars. Therefore, in the fall of 1997, Mercedes stepped
deeper into the small car segment by launching the
new A-Class, a car that is set to compete with Volkswagen
Golf. The A-Class is an evidence of the new look
Daimler –Benz—a youthful, dynamic, productive, and
innovative company.
Mercedes’ A-Class was launched in October 1997,
the plaudits followed thick and fast. It is a revolutionary
car in Mercedes history with breaking new ground in size
and safety. In Britain alone, 30,000 motorists had registered
interest in buying the car before it was launched.
Mercedes has invested $1.5 billion in A-Class project.
The result is a car that blurs the line between small
hatchbacks and minivans. The advanced-design of the
A Class establishes a completely new vehicle segment
offering exceptional versatility and spa-ciousness that
distinguish the A-Class from other cars of its size.
Design—The New Baby Benz
Appearance. The A-Class applies the most radical
concept: A tall body, near-zero overhangs, and sandwich
structure chassis (see Exhibit 2). The structure
is called sandwich because the horizontal-oriented
engine is placed above the floorpan but under the
cabin. As a result, the cabin is raised, and so is the roof.
Its short front end extends straight toward the windscreen.
Besides, the clever design makes it look pretty
　
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