The DaimlerChrysler Merger (A): Gaining Global Competitiveness Question 1: What was the situation at Daimler and what was the situation at Chrysler before the merger? The situation at Daimler was difficult before the merger because Daimler experienced tremendous losses in the beginning of 1990s.
Starting from 1995 when the new CEO came in place some changes were instantly done, for example, unprofitable business units were either closed, restructured or sold. Even though the new CEO had in mind how to turn the company around, the Japanese rivals competed really well by offering comparable products in the car industry at cheaper prices.
In general, the auto industry was shifting, basically many of the luxury car brand merged with other bigger car companies around the world, and therefore, the number of luxury car brands expanded which also had a positive impact on the economy overall. Chrysler, on the other hand, also experienced a tough period during those two decades; the company was near the bankruptcy twice. Nonetheless, the firm shifted its focus in the direction of cars and light trucks. In the 1990s, Chrysler made significant shifts which ultimately led the company toward a stronger competitor in the car industry.
Chrysler shifted its focus and headed for the cost-effective approach, thus the firm was known to be the leanest car manufacturer During the 1990s the company experienced positive changes which turned them into a strong player. The company was focused toward cost-effectiveness approaches which turned to be new world standards. The company was considered as the leanest manufacturer compared to the other participants of the Big3.
Nevertheless, the company’s position in the market was weakening after its attempts to expand the company beyond NAFTA. Question 2: How does the external macro-environment look like for the automotive passenger car industry? To address this question I will use the PESTLE forces analysis. Political- the political factors were pretty much stable for the automotive car industry. At the time of the merger and in general, there was not perceived any political instability that would negatively affect this industry.
Competition was solely based on the products that each of the companies produced. Economic- The economic factors of that time seemed to contribute positively to the success of the companies. During the 1970s car manufacturers were able to produce fuel-efficient cars due to the oil crises of that time. Countries such as Asia and Latin America were in the expansion and developing phase and promised an attractive future for the car manufacturing industry.
Nevertheless, economic difficulties due to currency volatility, high inflation and competitive pressure resulted in a negative impact for the companies in these markets. Production costs were reduced due to the low cost of raw materials that were set by the suppliers of that time. Socio-Cultural- Socio-Cultural factors of that time did not have a strong impact on the future of the industry. The biggest impact was due to the doubled world population which increased the number of cars purchased. Technological- these factors were the most influential for the future of the car manufacturing industry.
The technological developments during the two last decades have shaped largely this industry sector by changing the production methods, affecting the production costs, and changing the working capacities and the employment levels. The companies were investing huge amounts of money in R&D which was one of the most crucial aspects of their success. Authorities undertook various technological approaches by the use of computers to reduce the flow of traffic and pollution levels. Environmental-
These factors were also crucial for the success of the companies as the world was becoming more conscious and aware for the negative impact that car emissions had on the environment. In order to reduce this impact, companies undertook actions to change the manufacturing process and produce more efficient cars with lower negative impact on the environment. As explained above, the technological developments also played an important role on the reduction of negative impact that cars had and still have on the environment. Question 3: How does it look like for the micro environment (5 forces)?