Our Mercedes-Benz PESTLE analysis investigates how some macroeconomic factors, like Economic, Social, and Technological, affect the operations of Mercedes.
If I ask every one of you to make a list of the top five luxury car brands, I am sure each list will have at least one name in common, Mercedes-Benz.
Let it be in the all-time classy James bond movies or cool movies such as Justice League. We all have grown up accepting that Mercedes-Benz cars symbolize sheer wealth and power.
Our readers, who have been admiring cars made by Mercedes-Benz for ages, will love to read today's article since we will be giving some insight into the most admired vehicle brand, Mercedes-Benz. Moreover, we will also be conducting Mercedes-Benz PESTLE Analysis to identify the external factors that affect the brand's operations.
For years, Daimler-Motoren-Gesellschaft (DMG) and Benz Motorwagen continued to manufacture vehicles on their own. However, as they say, two minds are more significant than one. Soon after World War One started, both manufacturers realized the need to join hands to survive the economic crisis caused by World War One.
In 1926, both manufacturers merged together to establish Daimler-Benz AG. Since then, both companies have been working in a joint venture to produce Mercedes-Benz vehicles.
This merger has turned out to be the most beneficial merger for car enthusiasts.
It has been 96 years since then, and the collaboration of Mercedes-Benz has been manufacturing different types of vehicles, including the most famous luxury cars, 4x4 vehicles, heavy-weight vehicles, F1 racing cars, and whatnot.
Everyone seems to be a fan of Mercedes-Benz. However, some of you would ask what makes this brand so special. Well, today we will answer your question.
People admire the vehicles made by Mercedes-Benz a lot, and there are several reasons for that. However, one of the biggest reasons for admiring Mercedes is that from the beginning, its vehicles were considered a vehicle for the elite class.
You must have seen presidents or influential personalities of different countries using Mercedes. This is why it is so special and expensive. But, besides the face value, its vehicles are definitely advanced in terms of innovation and quality.
Looking at the brand's popularity, you can estimate how widespread its operations would be. Mercedes has its headquarters located in Stuttgart, Baden-Württemberg, Germany. However, it has manufacturing plants in 17 countries. Besides that, 93 of its offices are scattered on four continents.
Mercedes also has a large workforce. It employs more than 173,000 employees across the globe. Moreover, due to its widespread operations, it managed to generate revenue of $133.2 billion.
Since now we have discussed almost all the essential things of Mercedes-Benz, let's move ahead and carry out Mercedes's PESTLE Analysis. First, however, for that, you must get aware of what PESTLE analysis is.
The PESTLE analysis is a tool used to analyze how external factors such as Political, Economical, Social, Technological, Legal, and Environmental impact the operations of any business. This tool is used by businesses to plan and make future strategies.
Political Factors Affecting Mercedes-Benz
This is the first section of the PESTLE analysis. In this section, we will analyze the political factors that can affect the operations of Mercedes-Benz. Political factors hold great significance, especially for multinationals, as their operations depend on global political scenarios.
Political Stability
Mercedes is a very prominent name in the automotive industry. It has its operations spread worldwide. Although this is considered a positive thing. However, it also has some drawbacks.
For example, the operations of Mercedes are highly dependent on political stability. Suppose countries where it has to do business, are witnessing political instability. In that case, Mercedes will also observe disruption in its operations, leading to financial losses.
Due to the Russia-Ukraine war, Mercedes had to impose sanctions on Russia. Such political instability results in losses.
Taxation Policy
Besides the political stability, another political factor that would affect Mercedes-Benz would be the taxation policy adopted by the government. If a government adopted an investor-friendly taxation policy, it would be suitable for Mercedes. Otherwise, it would result in losses.
Mercedes-Benz should review the industry-specific taxation policies to ensure that the company is not overburdened with tax expenses. Currently, governments in developing countries are interested in reducing corporate taxes to attract foreign direct investment. Therefore, Mercedes should invest in such countries.
Trade Barriers
Being a multinational company, another political factor that would affect the operations of Mercedes would be the trade barriers imposed by different governments. For example, Pakistan's government recently imposed a ban on the import of luxury goods.
Such government policies would affect the operations of Mercedes-Benz.
Economic Factors Affecting Mercedes-Benz
Some of the critical factors that affect any business are economic factors since businesses are directly connected with a country's economy. Therefore, in the second section of the PESTLE analysis, we will discuss the economic factors that impact the operations of Mercedes.
Inflation
Mercedes has always been considered a luxury brand. This is because, during high inflation, people somehow manage to pay for necessities. However, it is always difficult to pay for luxury goods in case of an economic downfall.
Like any other business, inflation is one factor that creates problems for Mercedes-Benz. High inflation changes consumer behavior. Due to the high inflation, people's living standard worsens, leading them to spend less and save more.
Moreover, high inflation increases the cost of production for Mercedes. Due to this, the price of each vehicle is increased. All these problems caused by high inflation will discourage the consumers, and the sales of Mercedes will fall.
Interest Rate
Businesses always look forward to investing in countries with low-interest rates so that loans can be taken from local banks on good terms. Similarly, the decision of Mercedes to invest in a country or not would be based on the interest rate offered by that specific country.
Similarly, interest rate plays a very significant role in the sales of Mercedes-Benz. If a country's banks offered high returns on savings, people would save more and spend less. Hence, people would prefer to save in such countries instead of buying a Mercedes vehicle.
Socio-Cultural Factors Affecting Mercedes-Benz
Social factors highly influence the operations of a company. Therefore, companies must know how social factors such as changing demography and trends can impact the company.
This section will discuss some of the socio-cultural factors that impact the operations of Mercedes-Benz.
Demography
The demographics of different countries directly impact the growth and development of businesses. Therefore, a high population growth, primarily driven by an increase in the proportion of young people, combined with an increase in this segment's purchasing power, will benefit Mercedes-Benz.
Moreover, Mercedes has to keep a close eye on the demographic changes in the companies where it operates since it will have to adapt its marketing strategies according to the changing demographic trends.
Besides that, the company would have to hire employees from different ethnic groups within a country to send a positive message.
Social and Cultural Norms
The company that wishes to enter the market must conduct extensive research to gain local consumer knowledge. This would allow them to understand each country's different cultural norms, values, and traditions and adapt its offerings accordingly. Unfortunately, being an international company, it can be difficult for management at Mercedes-Benz to understand these nuances.
For example, some advertisements for Mercedes may be considered unacceptable in some countries while normal in other countries. Not understanding the cultural and social norms can really harm Mercedes. For this purpose, they can conduct extensive research to gain local consumer knowledge.
Technological Factors Affecting Mercedes-Benz
With every passing day, our reliance on technology is increasing. In the current century, technological factors impact businesses to a great extent. This section of the PESTLE analysis will shed light on the factors affecting the operations of Mercedes-Benz.
Innovation
Due to technological developments, innovation is taking place at a very fast pace. Businesses are getting automated and shifting to e-commerce. Moreover, they innovate to provide new and distinctive products to their consumers.
Being in the automobile industry, Mercedes-Benz has to keep a close eye on the upcoming innovation that is taking place. In addition, it has to stay updated about what technology its competitors are using and what sorts of products they are offering to its customers so that Mercedes can match or exceed their level.
E-commerce
Over time, the e-commerce industry has emerged, and many companies are practicing e-commerce to cut down their operations costs. Similarly, Mercedes can also look into e-commerce and decide if it is more beneficial for it to shift its operations online than to open a physical outlet.
Technological developments similar to e-commerce can help Mercedes-Benz minimize costs and maximize its profit.
Legal Factors Affecting Mercedes-Benz
This section of the PESTLE analysis highlights the legal factors that will impact the operations of Mercedes-Benz.
Businesses are always looking to avoid lawsuits to save money and reputation. However, in today's world, where governments make sure that the rights of people and entities are ensured, there are some legal factors that Mercedes needs to pay attention to.
Employment Laws
Mercedes-Benz is a leading manufacturer in the automobile industry with a strong brand image. However, it needs to protect its employees with strong workplace legislation and have employment rights like safety and fair treatment.
Suppose a company fails to put in place such meaningful employment law. In that case, it can easily lead to lawsuits and defamation of the company. As a result, profit loss is experienced.
To have a more positive reputation among employees, Mercedes-Benz should have a clear and consistent overview of the employment law enforcement in all countries it operates. It is also necessary to ensure proper mechanisms are placed to discourage discrimination from within or outside the company.
Consumer Laws
Mercedes-Benz depends on data protection laws to ensure consumer privacy in its online transactions and other operations. It must strictly follow the laws related to refund, discount, credit terms, quality, misleading advertisement, and maximum pricing.
Proper analysis of these laws can help Mercedes-Benz management better understand the local consumer protection regulations and market concerns. Moreover, in case of violating any such law, strict actions can be taken against Mercedes, resulting in financial losses and a damaged reputation.
Environmental Factors Affecting Mercedes-Benz
This is the last section of the PESTLE analysis. In this section, we will discuss the environmental factors that will affect the business of Mercedes-Benz.
Environmental Laws
To improve the image of its brand on sustainability grounds and in response to environmental regulations in many countries, Mercedes-Benz has to adopt responsible production practices. Shifting to environmentally-friendly practices is no doubt costly, and this will decrease the profit margins of Mercedes. However, little profit is still better than heavy losses incurred through fines and penalties.
A Shift to Renewable Energy
Over the years, a significant shift has been observed as the world is now abandoning fossil energy and shifting to renewable energy. This change has affected the automobile industry to a great extent.
Mercedes, one of the top automobile manufacturers, is also affected by this change. For around a century, Mercedes has held expertise in manufacturing engines that work on fossil fuels. However, they now have to shift to electric vehicles and compete with the existing electric car manufacturer, Tesla.
Mercedes-Benz PESTLE Analysis: Final Word
This article must have been a treat for car enthusiasts since, in this article, we discussed one of the top automobile brands, Mercedes-Benz. Initially, we discussed how Mercedes came into being. Then later, we shed light on the current operations of Mercedes.
We then proceeded to conduct a PEST analysis of Mercedes-Benz to see how some macroeconomic factors, like Political, Economic, Social, and Technological, affect the operations of Mercedes and added the Legal and Environmental factors for a complete PESTLE analysis.
In this article, we used PESTLE analysis to see the impact of external factors on Mercedes-Benz. However, earlier, we also used SWOT analysis to determine the impact of internal factors on Mercedes-Benz.
Besides getting an insight into Mercedes through this article, we are sure you must have learned about the PESTLE analysis framework. However, if you feel the need to understand PESTLE analysis in a better way, here are some of its examples that will help.
