Mercedes Entry to India

Topics: Automotive industry, Mercedes-Benz, Luxury vehicle Pages: 9 (2565 words) Published: September 10, 2014


Table of Contents

Background
Mercedes-Benz is a German automobile manufacturer, a well-known luxury brand around the world. It is also a multinational division of the German manufacturer Daimler AG. Mercedes-Benz’s slogon is “Das Beste oder nichts” which directly translates to “The best or nothing”. (Mercedes-Benz India 2014) Along with rivals such as the BMW and Audi, they are the world leading luxury automakers of the world. Mercedes-Benz first entered the Indian market and set up their company in 1994.(Mukherjee & Sastry 1996) It was initially known as Mercedes-Benz India before being renamed to DaimlerChrysler India Private Ltd after the merger of the parent company Daimler with Chrysler. However after DaimlerChrysler sold off most of its equity interests in Chrysler in 2007, it was renamed to Mercedes-Benz India once again. Currently the company is based in Chakan, Pune, Maharashtra. Mercedes-Benz is now among India’s Top 100 most trusted brands. Introduction

In this report, Mercedes-Benz will be adopted to provide a better understanding of how it entered the market of India and the constraints that it faced. The report will also contain of the different analysis of the environment and the strategies taken by Mercedes in India. I will then cover the entry modes and different strategic considerations associated. Finally a conclusion will be made as to determine whether the entry mode is appropriate for the foreign market. Research was taken from various sources including different journal articles, books and official websites from authorizing institutions. Mode of Entry

Foreign market entry is never easy for a company and is always risky. There must be factors that are worthy to attract a company to venture into a new and uncertain foreign environment.(Apfelthaler &Vaiman 2012) With the ever increasing pressure to increase profitability in the global market and saturating domestic market, Mercedes comes to the decision of entering India’s market. The introduction of a new Automobile Policy in 1993 greatly reduced the barriers of foreign entry into the Indian economy. With this policy, Mercedes anticipated the rapid growth in the passenger car market. Companies usually have a few modes of entries such as through exporting, acquisitions, Greenfield investments or by forming joint ventures. The mode of entry has to be decided by considering all the internal and external factors faced by the company at the point of time. Hence a wrong decision may lead to many disastrous implications. Mercedes then decided to have a joint venture with Telco to enter the India market. This joint venture allows Mercedes to then enter foreign market of India. (Geringer & Hebert 1989) Timing and Scale of Entry

At that point of time, there were already three existing Indian companies in the passenger car market. They were the Hindustan Motors, Premier Automobiles and Telco. There was also one Indo-Japanese venture, Maruti which was the biggest player at that point of time with around 70% of the market share. (Krishnan 2002) Due to the nature of the automobile policy introduced by the Indian government which contained measures, such as de-licensing and the automatic approval for foreign holding of 51% in Indian companies, Mercedes decided to have a joint venture with Telco in 1995. (Belzowski, Henderson & Koppinger 2007) The capital structure was Mercedes 51% and Telco 49%. The reason why joint venture was chosen was because of the continuing government restrictions on Foreign Direct Investment (FDI) of over 51%. Obtaining approval for a wholly-owned subsidiary proves to be a challenging task, therefore instead of risking being entangled over with local regulatory issues, collaborations with a domestic car maker would be a more viable option. Mercedes being the first luxury brand of automotive to enter India will also help to build brand loyalty and create a benchmark for future competitors. (Hill,...

References: 2. Apfelthaler, G & Vaiman, V 2012, ‘Challenges and opportunities of internationalization in professional service industries’, The Service Industries Journal, August, vol. 32, no. 10, pp. 1589-1592.
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