DAIMLERS

Obsession With

Diversification

Revulsion With

Diversification

Simple related

Diversification

Early 1990’s Mid 1990’s 1998

Edzard Reuter era

• $1.9 billion investment in microelectronics

• $750 million profit in last year of Reuter after loss of $1.3 billion in last year

• $6.25 billion investment in acquisition in last 5 years

Strength

• Lack of dependency on Japan and USA

• Risk minimization

• Backward integration

Weakness

• Lack of perfection

• Need of acquisition to compete ($6.25 billion investment in 5 years.)

Opportunity

• Opportunity to enter huge, diversified market (Microchip needed for multiple devices)

Threat

• Contemporary competitors like: Siemens, Bosch

• Rapidly changing technological environment

Jurgen E. Schrempp era

• Focus on core automotive and truck businesses

• Close the money-losing Daimler Benz industry unit with sell offs and transfers of profitable operation to other divisions

• Slim down DASA Daimler Benz Aerospace, reducing its workforce of 40,000 by 50%.

• Step up sourcing of parts from dollar and other weak-currency area.

• Speed up globalization of manufacturing by plant investment outside Germany

Strength

• More effective and efficient departments (23 units)

• Introduction of a stronger Mercedes brand (83% Sales increase)

Weakness

• Lack of product variation (Limited, upper scale product line.)

• Niche customer base

Opportunity

• Opportunity to shift production outside Germany and attain benefits.

Threat

• Contemporary competitors from Germany like: BMW

• Threat from U.S.A (Ford, Cadillac)

• Threat from Japan

Jurgen E. Schrempp era (Cont.)

• Attained direct operating control of Mercedes Benz (Schrempp became CEO)

• Daimler-benz became Daimler Chrysler after the merger in November 1998.

Product line• Low cost minivan,

SUVs, Cars from Chrysler

Geographic

• 93% sales of Chrysler in North America, 63% of Mercedes in Europe.

• Opportunity in Latin America, Asia

Operational

• Chryslers relation in Supply chain, Daimler’s Diesel engine

Strength

• More cost effective sources ($ 3 billion cost cut )

• Expansion of product line

• Experienced American workforce

Weakness

• Identity crisis of a new company

• Lack of specific culture

Opportunity

• Opportunity to shift production outside Germany.

• Opportunity to target lower and MAC population.

• Opportunity to target Latin America, Asia

Threat

• Contemporary competitors from Germany like: BMW

• Threat from U.S.A (Ford, Cadillac)

• Threat from Japan

Key Partners

- Chrysler

- Chrysler’s

Supply Chain

partners

- Chryslers

engineers

- Daimlers own

suppliers

Key Activities

- Assembling

- Manufacturing

Value Propositions

- Mercedes –

Benz (S,B,C

class Sedan)

- M class SUV

- SLK

- Jeep

- Chrysler Trucks,

SUVs, minivan

Customer Relationships

- Showroom

- Helpline

Customer Segments

- Europe

- North

America

- Latin

America

- Asia

Channels

- Own channel in

Europe

- Chryslers

channel in North

and South

America

Key Resources

- Spare parts

- Tyres

- Steel

- Audio-visual

systems

Cost Structure

Employee Salary, Cost of parts, tyres, Facility

management, etc.

Revenue Streams

Sales of Mercedes- Benz and Chrysler cars

http://www.businessmodelgeneration.com

Flashy

Speedy Production

Low cost cars

Bankruptcy

Conservative

Bureaucratic

Focus on Luxury and

Quality

“They could be heading for unbelievable catastrophe”

- Ulrich StegerManagement professor (IMD)

The newfound company must have

its own separate culture, abandoning

their past ones.

Strong corporate culture

Central Management

should be deployed for critical tasks

Central Management

Company must articulate its investment

priorities (Make luxury cars? Or Cars

for all?)

Set Investment priorities

The newfound company must set a

performance requirement. That

will be common for Daimler and

Chrysler

Strong Performance requirements

Compensation policy should be clear and agreed upon! (Eaton gets $16 million, while Schrempp gets $

1.9 million!)

Compensation policies

Company must articulate its

development path for executives

(Remove uncertainty)

Set development path

• All the necessary adjustments to make the merger successful should be done within first 12-24 months.

However, there is no proper monitoring and adjusting plan !

“…Daimler-Chrysler have combined nothing beyond some administrative departments, such as finance and public relations.”

- Business InsiderSeptember 2001