Crisler Corporation. Senior thesis, Детальна інформація

Benz and Chrysler Corporation was born. Schrempp, Chairman of Daimler-Benz and Eaton, chairman of Chrysler Corporation, began negotiations about possible combination of two large automobile manufacturers. “We are leading a new trend we believe will change the future, the face of the industry,” Eaton said five months later when the deal was announced.

The two chairmen acknowledged that the merger would not be easy.

Their own study of transnational mergers suggested that 70 percent failed to achieve the kind of success that had been anticipated.

As a result of the long series of negotiations, a new company named

Daimler-Chrysler was established. The company would manufacture not only cars, but commercial trucks, trains and rockets as well.

The goal of the merger was to create a company that would be able to stand better against other world leading car producers like General Motors,

Ford, Nissan, Volkswagen, Toyota and so forth.

With the creation of a new company, both of the old components were going to benefit from the following:

. Decreased R&D expenses per production unit

. Confluence of technologies of both firms

. Double strength in total

. Opportunities in new markets

. Decrease in price of materials bought from suppliers

Opportunities in new markets

Both Chrysler Corporation and Daimler-Benz operate in quite saturated markets (in terms of their current products). In order for them to grow, they will have to carry on those overseas markets, which means development of products in accordance with preferences of the new markets.

Developing new products for a different market segment or establishing an additional brand might have implications for the positioning of the existing product range. Penetration into completely new market segments for both companies would involve both high costs (new offices, stores, and advertisement programs) and substantial risks for the companies.

Another method for successful penetration and establishment in new markets is co-operation with another manufacturer who already has a successful brand and products in place in the segments where it is represented. In this way, the existing product portfolio could be broadened without any risk to each company’s brand identity and its associations of exclusiveness.

Daimler-Benz is well-known and recognized in Europe and USA for its high-quality cars and has firm customers; however, the opportunities are limited. The newly industrializing countries in Latin America and Asia, on the other hand, offer good prospects for growth—starting from a low level—to the premium products segment. To penetrate these fast-growing markets on any scale, however, it would be necessary to launch new, low- priced products, possibly combined with the creation of a new brand name.

The new direction will certainly require new funds and the company might not be able to handle this hard task alone. Another possible problem of penetrating the new markets in Latin America and Asia is, was the establishment of new offices, stores, research of new customer’s’ tastes, and advertisement. To cope with this obstacle to its success,

DaimlerChrysler seeks companies in those areas for possible merger, like

Daywoo, Mitsubisi and so forth.

Chrysler has not penetrated the European market very deeply. It certainly will be a good opportunity for Chrysler Corporation to start cooperation with Daimler-Benz in order to penetrate the European market without additional costs for opening its offices and stores.

At the same time, Chrysler has very a good market in North America and can facilitate Daimler-Benz’s deep penetration into that market with a new program of minivan production.

Decrease in Price of Materials Bought from Suppliers

One major benefit of the merger is that both companies can save lots of money on external purchases. First, saving will take place in purchasing raw materials from suppliers. Before the merger, both companies had to buy from supplier separately. Everyone knows this law of the market:

“the more you buy, the less you have to pay.” Now the companies purchase everything together and the quantity of one batch is doubled, this bad led to significant decrease in price on per-unit basis. For example,

DaimlerChrysler already saved $1.4 billions in 1998. In turn, decreases in price for raw materials will provide lower prices for the cars in total and increase compatibility of the new company.

Decrease in R&D expenses per production unit

Another positive aspect of the merger is that both of the companies can combine their efforts in researching and developing new products.

Before the merger each of the companies had to conduct research for itself and these costs were spread on per unit basis among all products. Now these costs are spread on a significantly larger quantity of products, which allows decreasing costs of the research and development per every production unit. In addition, intellectual powers of both companies will now work for one huge company—DaimlerChrysler. This factor will bring new, combined ideas into the new company.