Operations Management: Mercedes-Benz

1: Company Name


The name of the company under the analysis is the Mercedes-Benz.


2: Background/ history/ industry sector
The company is a popular automobile manufacturer and an international division of Daimler AG. The company history can be traced in 1886 when Karl Benz created the first car Benz Patent Motorwagen. The first Mercedes vehicle was sold in 1901, while the Mercedes-Benz brand was established in 1926 (Forbes 1). Mercedes-Benz is one of most popular and established automobile brands in the world market.


3: Number of employees/ management/ organizational chart
As per 31st Dec 2014, the company had 129, 106 employees working in various departments (Mercedes-Benz 1). The company is managed by a board of directors whose members include Dr. Dieter Zetche (chairman of the board), Markus Schafer (head of production & supply chain management), Prof. Dr. Thomas Weber (head of group research & development), Ola Kallenious (head of marketing and sales department), Frank Lindenberg (Finance & Control), and Dr. Klaus Zehender (head of procurement & supplier quality).
4: Location: Head office/regional offices/ etc.


The Head office of the company is located in Stuttgart, Baden-Württemberg, Germany. To support its operations in the worldwide market, Mercedes-Benz has its market segment into six regions including Africa, Asia, Europe, North and Central America, Australia/Pacific, and South America.



5: List of products and market position (leader, etc., market share, etc.)

Mercedes-Benz is one of the market leaders in the luxury automobile sub- sector in the world market. The company has a range of high-quality automobiles which include Mercedes-Benz 300SL, Mercedes-Benz C-Class, Mercedes-Benz SLS AMG, Mercedes-Benz SL – Class, Mercedes-Benz 450 SEL 6.9, Mercedes-Benz CLS – Class, and Mercedes-Benz SSK among others. The automobiles are considered to be significantly luxuries, making the company ranked number 24 in the Forbes’2014 most valuable brands’ ranking. The overall market share of the company has been growing. For instance,  in 2014, the market share grew by 12.8% (Mercedes-Benz 1). In 2014, BMW, Mercedes, and Lexus’ market share in the United States were 23.6%, 23.2%, and 21.4% respectively. Together the three leaders shared up to 68% of the market. In Europe, Mercedes-Benz is among the top five in the automobile market. The market share in 2012 was 20.1 % against the market leader Volkswagen at 31.4 %. In the luxury sub-sector, Mercedes-Benz was second from BMW whose market share was 18.1 %.


Market Share in China

China is one of the largest markets for Mercedes. In the first half of 2014, the company’s market share was 16%, against the BMW’s 26.6 % and Audi 31.7 %. The Mercedes’ market share is the third largest. However, it is relatively lower than the first two market leaders.




The main competitors in the world’s luxury automobile sub-sector are BMW and Audi. The two competitors are German based brands and have their luxury vehicles sold across the world. The competitors seek the audience of the younger generation away from the traditional automobile world leader such as Ford, GM, and Toyota among others (Forbes 1). In the Chinese market, Audi is the market leader, followed by BMW and then Mercedes-Benz. In the United States, Mercedes-Benz had been leading over the years, but has been overtaken by BMW.
7: Inputs: Transformed/ transforming resources (tangible/intangible resources)
The inputs are the resources at the disposal of an organization, which assist in influencing its performance. The inputs can be tangible or intangible in nature. The first tangible input for Mercedes-Benz is the manufacturing units it owns in various countries across the world. The units are very critical in enhancing the production and supply of the automobiles to the market. Secondly, the company has a tangible resource in its human capital (Mercedes-Benz 1). The executive team includes experienced members, the team of committed employees in the production, marketing finance, and accounting departments. In fact, various teams assist the company to drive its operations. The strong brand and long-term reputation are a set of intangible assets of the company. Mercedes-Benz is well known for quality and luxurious vehicles making it easier to convince existing customers to re-purchase and new customers to start buying Mercedes-Benz models.
8:  Suppliers’ details (list of suppliers, agreement details with suppliers, etc.)

Mercedes-Benz has a long list of suppliers and vendors providing materials, parts and services towards the development and productions of its components. According to Daimler the company targets to establish a strong, sustainable, and mutual partnership with the suppliers (1). The company is keen to enter into cooperation in the supply industry in research and development to ensure that the supplies are of valuable quality. Through the research, the Group aims at ensuring that the suppliers are at par with the required technological expertise to safeguard the quality and competitiveness of its automobiles. The following is a list of a few of Mercedes-Benz’s suppliers and vendors. Since the company uses the Just-time – approach, it requires the suppliers to deliver the parts/components in sequence. Therefore, the suppliers are required to have their stores within the manufacturing unit. Some of the suppliers, for example, Delphi supplying in the M-Class unit has a permanent representative on site.

Supplier Parts
Delphi Piezo Injector
TI Automotive Fuel Pumps
Montaplast Radiator frame
Hella Headlamps
Wadco Air suspension compressors
Jonson controls Battery
Leopold Kostal Electrical Connectors
AMP Electrical Connectors
Mann and Hummel Airbox
Siemens Electronics
Gillet Exhaust



9: What is their operation strategy: processes, scope of activities, etc. (***)
The operational strategy by Mercedes-Benz is drawn from the four strategic growth areas, including the strengthening of the core business, growing the new markets, leadership in green technology and safety, and the development of new mobility concepts. The company is in the process of renewing its product range. After the research, designing and development, the company has a target to launch more than 30 new models. However, two models were launched in 2014, which include GLA Coupe and C-Class. In 2015, the Mercedes-Benz will strengthen its core business further by launching new models such as Mercedes-Maybach, CLA Shooting Brake, Mercedes AMG GT and GLE Coupe among others (Daimler 1). To manage the operations, the company should effectively deal with the complexity resulting from the expanded variant in models.  In addition, Mercedes-Benz intends to increase the standardization and modularization of the manufacturing plants. For example, through the standardization, Mercedes-Benz has been able to produce its new C-Class in four plants located in different continents.
10: Operation planning and control; department layout (process/activities)
Mercedes-Benz is involved in the design, production, and marketing of its luxury automobiles. Designing and production activities are highly integrated. However, there are measures to ensure that only the designs that can meet the model standards of luxury automobiles are designed and produced. The designers develop a sketch of a model and advance it into a prototype. The approved prototype is the then sent into the production unit/department for production, which is adopted as a model. Later, the marketing department takes over the finished automobiles and distributes them to the market. Mercedes is a powerful innovative platform used by Mercedes-Benz to reach out to the target customers, display the models available, take orders, and arrange for delivery. The platform is convenient for customer particularly those who cannot physically access the dealers and distributors.
11: A list of customers:  (brief intro, type of agreement with buyers, etc.)
Mercedes-Benz’s customers are all over the world. The company does not have a list of customers because it manufactures and sells luxury vehicles to final consumers. The consumers include individuals and business. Individuals, in this case, are the high class and some of the upper middle class. Large business organizations are also part of the customers who purchase Mercedes-Benz models for their executives and top managers. Apart from the sales agreement, there are no indications that Mercedes-Benz enters into special agreements with the consumers.
12: Problems faced in operation department (***)
According to Hawranek, there are clear indications that Mercedes-Benz is facing some problems in the market (1). First, the company is losing some of its key markets to competitors including BMW and Audi. For example, it is clear that BMW has overtaken Mercedes-Benz as the market leader in the subsector in the United States. The large number of new models released by BWM, in this case, contributes the problem. The other operational problem concerns are the Chinese market strategy, where the company has two units that are said work against each other. After investing significantly in the market, the degree of competition in the two sales organizations reduces the strength required to compete with other players in the market.
13: How they measure operations performance
Mercedes-Benz uses the Daimler Group’s performance measurement system. The system is oriented towards the investor’s interests and the value- based management. Value added is a key measure of the Group and divisional performance. Value added is determined using return on sales and net asset’s productivity.  The measure determines how the division achieves the minimum return expectations of the shareholders and creditors. Apart from the value added measure, Mercedes-Benz uses the EBIT to measure the financial performance measure. In addition, the performance is measured using non- financial indicators such as CO2 emission of the automobiles, energy and water consumption in the production sites.


14: Who design products/services and how (design process)
Mercedes-Benz designs and manufactures automobiles. The company has its designers whose work is to design models out of ideas and develop them into a product. After an idea arises, the designers work as a team to create the definite idea automobile. The team fine-tunes the sketch and makes it to the right geometric requirements. The first prototype is made of clay on a scale of 1:4. The model is then created into a full prototype awaiting approval into a new vehicle with full commercialization. The design process can take years before the model is manufactured in large quantities for sale.


15: How they manage quality

Quality Management at Mercedes-Benz starts from the idea, sketching, designing, model development, and production. The design process starts with an idea, then to model development, which is highly emphasized with every step undertaken by the team. Safety, luxury, and environmental care are some of quality considerations during the designing and production of the automobiles (Daimler 1). The company has a team of engineers in the entire production process to ensure that the quality aspects from different perspectives are incorporated. In addition, the suppliers are required to adhere to quality requirements to avoid mechanical faults.


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