A SMART car had initially been introduced due to the fact that the European car manufacturers raised a concern regarding the increasing levels of pollution and congestion in city centers which could possibly lead to an eventual ban of conventional cars in city centers imposed by the government. SMART has provided a new perception of mobility where potential buyers were to encounter the “uninterrupted mobility solution”, referred as smartmove. Smart The basic idea is that
Smart cars are designed to be small, fuel-efficient, environmentally responsible and easy to park—the ultimate in-city vehicle.The company’s vision is to provide unparallelled safety and comfort on the roads along with the options to choose from a lot of versions.
The unique selling points of the car are technology, design, customization, space (small size yet large interior) and being environmentally-friendly. SMART is positioned as a highly customizable and safe compact car for city use, targeting students, old people, business people, and working ladies.
Micro Compact Car AG (MCC), a wholly owned subsidiary of Daimler-Benz (formerly a joint venture of Daimler-Benz and Swatch), is the company behind Smart. Together these manufacturers have developed what they call a new mobility concept that relieves the heavy environmental pressure caused by present traffic while still ensuring continuous individual mobility.
MCC management could go back and look on numerous peaks: a completely new brand had been developed; a production site had been developed and constructed from scratch, pilot marketing of brand and product concept had raised high levels of customer awareness and interest in European markets; a dealer and marketing organization had been developed and was ready for product launch.
Moreover, the supply-chain concept development went beyond existing practices in the automotive industry on a number of points: customers can contribute to the configuration of products; lead-times for cars are counted in weeks; suppliers have co-invested in the production location and have taken over shares of primary assembly beyond existing levels; the added value of
MCC during production is approximately only a remaining 10% of the production cost-price. Overlooking the development and installation of the supply chain, all of which had been done since the first feasibility study of Mercedes in 1993 and the foundation of MCC in 1994, the management team realized it was facing a new set of challenges. The supply chain are completely new in the market and go beyond such existing practices as supplier involvement, outsourcing and modular production in the industry.
Modules such as complete frontor rear ends are pre-assembled on site and suppliers are involved in design and final assembly through co-ownership of the site, co-design and some major share in the manufacturing activities. Given the untraditional approach, MCC executives face some fundamental challenges including how to manage and control a supply chain in which MCC only adds some 15% of the operational value added. This question is not only relevant to MCC but to the Daimler- Benz Corporation as a whole, which has set Smart as a strategic learning project.
Moreover, the concept being brought to practice by MCC is generally accepted by leading car-manufacturers as of key importance to future industry developments. Manufacturers and suppliers therefore monitor the successes and failures of MCC, as the results will mark the future organization of their companies and of the supply chain. Smart has now been an issue of concern as its sales performance has not met the company’s expectations. Abandoning smart was also an option many considered ,yet some executives see it as an investment for the future unfolding potential for growth and profitability.
Smart cars made losses in the late 1990s and continued to do so in the early 2000s. In February 2005, Reuters reported that the Smart car had made a loss of about 600 million euros in 2004 and sales have remained relatively low compared to the company’s forecasted numbers up until now. It seems as if the mobility concept of smart cars did not quite take off as the company had originally hoped. Questions have been raised whether or not the smart cars are truly economical and if its benefits justify its cost.
Challenges to the Smart car involve a number of different aspects. Even though the car has proven to be good for its size, it doesn’t really provide the perception of safety, particularly its highway performance. When on the highway, the Smart Car tends to become twitchy and unsettling. There is also no clutch on the Smart Car. Due to this, when shifting gears, the driver must be very patient.
Furthermore, a Smart car might not appeal to consumers who are price sensitive, as its starting price is 11,590 dollars for a base model which could potentially put off consumers by the price , and particularly for the two-seat configuration which further limits their target market due to the fact that the car has size constraints. Smart cars are left somewhere in between as they are priced higher than other compact cars alternatives whereas they, at the same time, lack the superiority in design comparing to that other models in the Mercedes line.
The original smart concept envisaged that a wide range of mobility services would be offered to owners through a package to be offered as ‘smartmove’. In some cases, these services were to be offered with discounted rates and preferential treatment, as an incentive for customer purchase, particularly among those who are environmentally aware.
Although the potential for links with transport providers, including vehicle hire companies, opens up the possibility that owning a car may not be the only convenient way, or the ‘best’ way for a person to ensure getting from one place to another, it might pose a very complicated message to buyers as one would certainly hope that buying a car at more than 12,000dollars would provide them the convenience and utility they seek.
One of the “benefits” allowing customers to use their personal Smart card to get discounts on renting a car they need at Avis for a vacation or family outing is unquestionably ironic for a person who has just purchased a car unless these cars do not provide the same utilization, possibly in terms of capacity and speed, which this “smartmove” concept might have geared customers towards the wrong idea.
MCC has proposed an electric rechargeable version of the smart car that is intended to be in mass production of the vehicle by 2012.
With depletion of oil reserves and increase in pollution levels all over the world, governments and communities are awakening to the several benefits of electric vehicle technology: they are non-polluting and quiet, they can be charged easily saving owners the need to queue at gasoline stations, Electric vehicles are mostly charged at night, when power consumption is low, therefore making more efficient use of power plants, they are easy to service and maintain and most EVs have a very low operating and maintenance cost.
SMART should exploit the current market conditions that have been geared towards environmental concerns and go forth with the the electric cars as it is congruent with the original concept of being environmentally friendly.
Since its inception, Mercedes-Benz has maintained a reputation for its quality and durability. They can lose the Smart line completely and go by as one of the models of Mercedes Benz. However, the initial investment was too high and that exit barriers would require a large amount of fund as well. The more important aspect could be that of the long-term reputation if they were to drop the Smart line and shut down the Hambach plant as it would affect thousands of workers as well as the relationship with long term suppliers. Ethical issues could be raised which could ultimately affect the Mercedes brand as a whole. At this point, it would be wiser for Mercedes to fix the problem instead of abandoning it.
SMART should continually assess market conditions to adjust their branding strategy, vehicle designs and concepts. SMART should certainly utilize the Mercedes-Benz know-how on designs and innovative technologies while focusing on its electric vehicle as its core value, possibly through training programs. This would undoubtedly call for further integration between Mercedes Benz and SMART. The car would have looked innovative 20 years ago with its current design. While Smart cars may meet with wide acceptance in Europe, MCC may need to modify the product to meet consumers’ expectations if they would want to further expand and penetrate in other markets.
They should establish more distribution centers and spend more on advertisements, promotions and test trials as a market penetration strategy for their current products in their current markets. As Smart cars are primarily well known for customer personalization, they should offer a highest degree of customization to meet and exceed customer’s expectations. They should also look at a diversification strategy where they can produce compact buses and trucks for city use to further ease the traffic on the roads.
One more thing SMART should do is to broaden the target market. They need to make the electric/ hybrid cars more appealing for consumers of wider range.
SMART should focus on becoming the leader in the compact electronic vehicle segment, which could be achieved through design improvement, enhancement of technology. They could re-brand itself in terms of customers’ perception to meet that of a Mercedes lineup while maintaining its core value of being an environmentally-friendly compact in-city vehicle.