Case 10 The Summer Of 2006 Daimler Chrysler

Case10 2thesmart Carin The Summer Of 2006 Daimlerchrysler Announce

Case 10-2 The Smart Car In the summer of 2006, DaimlerChrysler announced that the company’s Smart car would be offered for sale in the United States the following year. Launched in Europe in 1998, the diminutive Smart had never turned a profit for its parent company. When Dieter Zetsche became DaimlerChrysler’s CEO at the beginning of 2006, the Smart car issue was one of his top priorities. At the time of the announcement, the Smart saga had been 15 years in the making. In 1991, Nicolas Hayek, chairman of Swatch, announced plans to develop a battery-powered “Swatch car” in conjunction with Volkswagen.

At the time, Hayek said his goal was to build “an ecologically inoffensive, high-quality city car for two people” that would sell for about $6,400. The Swatchmobile concept was based on Hayek’s conviction that consumers become emotionally attached to cars just as they do to watches. Like the Swatch, the Swatchmobile (officially named “Smart”) was designed to be affordable, durable, and stylish. Thanks to the success of the Smart car in Europe, several new models have been added to the Smart family, including the convertible Smart Roadster and the Smart Forfour (a four-door model). An SUV—the Smart ForMore—was introduced in 2006, while the original model was renamed the Smart City Coupé. An observer noted that “Buying a Smart is less like buying a small car and more like buying an iMac, a Blackberry PDA, or a box of take-out sushi.”

Early on, Hayek highlighted safety as a key selling point, stating, “This car will have the crash security of a Mercedes.” Composite exterior panels mounted on a cage-like body frame would allow owners to change colors by switching panels. Hayek also envisioned a vehicle that emitted almost no pollutants, thanks to its electric engine, with optional gasoline operation using a highly efficient, miniaturized engine capable of achieving speeds of 80 miles per hour. Hayek predicted worldwide sales of 1 million units, with the US accounting for about half.

In 1993, the alliance with Volkswagen dissolved, and in 1994, Hayek announced a new joint venture with Mercedes-Benz, investing 750 million Deutsche marks in a factory in France. The vehicle, named MCC (Micro Compact Car), faced production delays and cost overruns, leading Hayek to sell Swatch’s remaining stake in 1998. Mercedes aimed to combine ecology, emotion, and intellect in the Smart, with 80 percent of parts sourced from external suppliers, and located assembly in France to reduce costs. The factory’s efficiency was notable, with only 7.5 hours needed to complete a vehicle.

Smart City Coupé's European launch in October 1998 faced initial challenges due to concerns about stability. The UK market, however, showed strong sales, especially among fans of the Mini. Despite slow start, MCC reduced its annual sales target from 130,000 to 100,000 units. By 2000, the Smart exceeded revised sales goals, and the brand expanded with models like the Smart Roadster and Smart Forfour, as well as a Smart for Morn lawn mower adaptation.

In 2001, DaimlerChrysler researched US market prospects for the Smart amid rising gasoline prices, with competition from models like the Chevrolet Aveo, Toyota Yaris, and Honda Fit. The success of the Mini and Scion suggested potential for small cars, but the strength of the euro relative to the dollar posed challenges. The merger with Chrysler ended with Chrysler’s sale to a private equity group, and Smart became part of Daimler AG.

Penske Automotive Group took on the role of sole US distributor, aiming to sell 16,000 units in the first year, especially as gas prices rose. The company successfully sold 24,622 cars in 2008, but sales declined sharply in 2010, leading Penske to terminate the distribution agreement in 2011 and return distribution to Mercedes-Benz USA. Meanwhile, Smart USA launched a social media marketing campaign using Facebook and Twitter, emphasizing the brand’s message of living a flexible, minimalist lifestyle — “Less is more.”

Overall, the Smart story reflects strategic efforts to penetrate urban markets with innovative, eco-friendly cars, but its success has been influenced by timing, market perceptions, competitive models, and distribution strategies. Its manufacturing efficiencies and social media campaigns highlight modern marketing approaches in the automotive industry—yet challenges remain in establishing a lasting presence in the US market.

Sample Paper For Above instruction

The Smart car initiative by DaimlerChrysler exemplifies a strategic move to tap into the urban micro-mobility market with a focus on environmental sustainability, compact design, and urban consumer preferences. The core elements of Smart’s competitive advantage, brand promise, and positioning are rooted in its unique design philosophy, technological innovation, and targeted marketing strategies, all aimed at establishing a distinct identity within the crowded automobile industry.

Smart’s primary competitive advantage lies in its compact size, fuel efficiency, cost-effectiveness, and strong environmental positioning. Unlike traditional vehicles, Smart emphasizes urban agility, ease of parking, and low operating costs—features that resonate with city dwellers and environmentally conscious consumers. Its brand promise revolves around offering a stylish, safe, and eco-friendly transportation solution that caters to the needs of modern urban lifestyles. The brand positioning centers on maximizing the value of minimalism — delivering "less is more" for urban consumers who prioritize practicality, sustainability, and affordability (Kotler & Keller, 2016).

When comparing Smart to vehicles such as the Honda Element, Scion iQ, Kia Soul, and Fiat 500, it becomes evident that while these models share a focus on compactness and affordability, they each target slightly different consumer segments or emphasize different attributes. The Honda Element, for example, appeals to active lifestyles and outdoor enthusiasts with its rugged and versatile design, whereas the Kia Soul targets a broader demographic seeking fun, stylish urban transport. The Fiat 500 emphasizes Italian design flair and retro appeal, targeting fashion-conscious consumers. The Scion iQ, like Smart, is aimed at urban youth seeking molecular-sized transportation options. Although the Smart was an early pioneer in microcar design, the success of these other models indicates a highly competitive landscape, which raises questions about whether the Smart’s U.S. launch was timely or too late. With strong rivals leveraging branding, design, and pricing strategies, the Smart faced stiff competition, and its late entry could hinder market penetration (Shahin & Zairi, 2017).

The transfer of distribution responsibilities from Penske Automotive Group back to Mercedes-Benz USA posed significant implications for Smart’s future in the United States. Distribution channels influence brand visibility, consumer trust, and purchase accessibility; thus, the switch could impact customer reach, dealer support, and promotional campaigns. While Mercedes retains a stronger brand identity and broader network, Penske’s early efforts demonstrated innovative marketing and a dedicated sales approach. The termination may require re-establishing dealer networks and marketing strategies, possibly affecting sales momentum and market acceptance. However, Mercedes’ established infrastructure and brand equity could bolster Smart’s prospects if leveraged effectively (Holt & Cameron, 2019).

Evaluating Smart USA’s social media and digital marketing strategies reveals a contemporary approach aligned with modern consumer behavior. Utilizing Facebook and Twitter allowed Smart to foster community engagement, showcase unique brand values, and create viral content that resonates with younger audiences. Initiatives like “The Great Dumb Trade-In” and owner testimonials leverage social proof and encourage consumer participation. However, additional tactics such as influencer collaborations, targeted online advertising, and content marketing could further enhance brand awareness and loyalty (Lyons & Brennan, 2018). Implementation of interactive platforms like Instagram Stories or immersive virtual showrooms could offer richer consumer experiences and lead to higher engagement levels. Overall, Smart’s social media strategy effectively capitalizes on digital channels but can be expanded to include emerging technologies and more personalized communication to sustain growth (Turban et al., 2021).

In summary, the Smart car’s journey from conceptualization to U.S. market entry highlights strategic challenges and opportunities within the automotive industry. Its success hinges on maintaining innovative product features, refining distribution networks, and harnessing digital marketing tools to connect with environmentally conscious urban consumers. As competition intensifies and consumer preferences evolve, continuous adaptation and strategic positioning will be critical for Smart to sustain its appeal and profitability in the increasingly crowded microcar segment.

References

• Holt, D., & Cameron, G. T. (2019). Strategic Management: Concepts and Cases. Pearson Education.
• Kotler, P., & Keller, K. L. (2016). Marketing Management (15th ed.). Pearson.
• Lyons, G., & Brennan, L. (2018). Digital Marketing Strategies in the Automotive Industry. Journal of Marketing Communications, 24(4), 312-330.
• Shahin, A., & Zairi, M. (2017). Competitive Advantage of Emerging Microcars in Urban Markets. Journal of Business Strategy, 38(2), 45-55.
• Turban, E., King, D., Lee, J. K., Liang, T. P., & Turban, D. C. (2021). Electronic Commerce 2021: A Managerial and Social Networks Perspective. Springer.