1. Mercedes Benz is a German multinational that specializes in manufacturing, marketing and supplying of luxury cars, buses, vans, trucks and coaches. Since it was started, over a decade ago, Mercedes Benz which is headquartered in Stuttgart, Germany has been able to position itself as one of the best manufacturer of high end vehicles. It is one of the German 3, which are the best companies in terms of producing and sale of luxury vehicles. The company has produced vehicles that are popular among the business executives, leaders as well as the people who use high end vehicles. The company has extended its product range by producing different series of luxury saloon cars and sports utility vehicles (SUVs) to meet the growing need by customers to have a variety of choice. This has also helped in countering the growing competition from other manufacturers like the BMW and AUDI.
As a way of expanding its market share and distribution network, the company seeks to venture into the Australian market. This is as a result of the growing need of their products in the country and the fact that Australians pay more for luxury vehicles. Choosing the most effective method of venturing into the new market is very crucial as this will determine the reception that the company’s products will get upon entry. In this case the best way of entering the Australian market that is flooded with competition from Japanese manufacturers is through joint ventures with established Australian companies. This will cut on the introduction costs as well as shield the company from numerous trade barriers that come with venturing into new markets (Yan, 3001). Through joint venture the company will also be able to cut on cost of introduction and marketing because the partner company will be able to use its established network to introduce the products of Mercedes to their consumers.
2. There are various factors that will affect the demand the company’s products in the country among them government policies, restrictions and trade barriers. The Australian Government is usually concerned with the Safety of its people. This has led the Australian authorities to carry out thorough scrutiny of the types and state of the products that are getting into the country to determine their standards and their effects on the people who will use them. The automobile industry in the country is highly restricted and any vehicle getting in the country has to have a vehicle import approval from the relevant authorities for it to be allowed into the country (Oatley, 2007). This is applied prior to shipment and any costs incurred for shipping without applying for the import approval is passed on to the importer. Failure to understand such requirement may increase the cost of importing and therefore, lower the profit margin for Mercedes.
The general economy of the country as well as the value of its currency is a great determinant in the level of sales and profits for the company. The policies that the government develop and implement will affect its economy and the value of the country’s currency. This will have a direct impact on the company’s business. The exchange rate that is determined by the value of a country’s currency plays a major role in determining how a company performs in a new market. This is because it has a direct impact on the pricing of the company’s products which in turn affects the demand for the products. Exchange rate affects the shipping cost and other operational costs which in the end affect the profit margins. In this case, the value of the Australian Dollar against the euro will be of great importance to the Mercedes Benz Company as it will determine the level of benefit the company will get from venturing into the Australian market. In other words, unstable exchange rates and increased government barriers limits the supply of the products due to high process imposed on the product to cover for the costs. The high price will subsequently result to a low demand as seen in the demand curve.
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3. The monetary exchange rate in Australia is conducted by a fluctuating or floating exchange rate whereby the value of foreign currency exchange is greatly affected by the market fluctuation in demand and supply. The nature of this foreign currency exchange rate system is likely to affect the development of Mercedes Company operations in the Australian market as there are uncertainties on the price of products as the exchange rate keeps shifting unexpectedly. The unstable exchange rates might also result in unstable economy which s a result may affect the sales of the products as the price will keep fluctuating due to changing exchange rates and this might result to reduced total sales or reduce total forecasted revenue.
Source: www.x-rates.com
The fluctuations in the exchange rate have affected businesses in Australia with the current exchange rate at 1.22 Australian dollars for one euro which is a significant increase which has been experience since early march. The exchange rates fluctuations for the past one year have affected the businesses in Australia and these fluctuations are expected to continue, a scenario which may affect the total sales of products particularly since the Mercedes SUVs requires a stable market currency in order to flow constantly hence making the expected profits.
References
Levy-Yeyati, E. & Sturzenegger, F. (2005). "Classifying Exchange Rate Regimes: Deeds vs. Words". European Economic Review.
Oatley,T. (2007). International political economy: interests and institutions in the global economy. Harlow: Longman.
Yan, A. (2001). International joint ventures: theory and practice. M.E. Sharpe Press.
