Alliance between Swatch and Mercedes Benz

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Introduction

Today, all forms of businesses are extensively globalized, operate in increasingly competitive markets, are driven by the internet, and are conscious of speed. The new business world has created complicated challenges for managers (Wintzer 2007, p.2).

These challenges are accompanied by claims of top management misconducts, ethical mistakes, and exorbitant executive compensations (Atomic Dog Publishing 2001, p.2; Morden 2007, p.4; Certo 2000, p.166). For this reason, corporate leaders are under unmatched pressure to respond to strategic challenges faster, responsibly, and with greater certainty (Atomic Dog Publishing 2001, p.2; Parthasarthy 2006, p.47).

As a result, effective strategic management is critical for survival of all organizations including the well established firms. A strategy refers to plans made by the top management to develop and preserve its competitive advantage (Atomic Dog Publishing 2001, p.2; Saloner, Shepard & Podolny 2006, p.25).

Strategic management is wider than a strategy; it refers to a process that entails an analysis of an organization’s environment by the top management before designing a strategy and plan for putting it into practice and controlling the strategy (Atomic Dog Publishing 2001, p.2; Griffin 2011, p.67).

Strategic management involves considering what must be done before formulating a strategy by evaluating the success of an executed strategy.

Resources brought by Swatch and Mercedes Benz into their partnership that came up with Smart car

The process of making Smart car started in 1994 after a deal was sealed between Daimler-Benz, maker of Mercedes-Benz and Swatch, Swiss watchmaker (Hitt et al 2011, p.248; Metais & Pin 2001, p.1). A joint venture of the two companies created a firm known as Micro Compact Car AG whose headquarters were located in Biel, Switzerland.

After announcing the deal, three co-directors were appointed to head the new company, which was later to be known simply as the ‘Smart’ after moving to Germany from Biel. The directors were engineer and designer Johan Tomforde and financial administrator Christopher Baubin from Daimler-Benz and swatch marketing manager Hans Jurg Schar.

SMH (makers of the swatch watches) contributed 49% of the initial capital of 50 million Swiss francs while Daimler-Benz contributed the remaining 51% (Metais & Pin 2001, p.1).

The company comprised of two branches namely MCC GmbH based in a suburb of Stuttgart known as Renningen charged with the responsibility of designing the car. Hayek’s SMH Auto SA, was to design electric drive system for the car, while Hayek engineering would appraise the design and manufacturing of new car (Metais & Pin 2001, p.2).

Nicolas Hayek, the Swatch inventor, contributed its design philosophy while Daimler brought in the quality and engineering genius of Mercedes-Benz (Lewin 2004, p.248). Hayek had an idea of developing a new car using the same form of manufacturing strategies and personalization elements used to popularize Swatch watches (Metais & Pin 2001, p.1; Bidault & Despres 1997, p.2).

He strongly believed that the automobile industry had for long overlooked an area of potential customers who wanted a small and classy car. The partnership between Swatch and Daimler-Benz revolves around their respective knowledge about their areas of expertise (Metais & Pin 2001, p.1; Bidault & Despres 1997, p.2).

On one hand, Mercedes for its engineering ingenuity and, on the other hand, Swatch has a cutting edge for the plastic expertise (Bidault & Despres 1997, p.2; Hjorth 2003, p.103). The outcome of a combination of these features has been a superior brand whose competitiveness in the sophisticated metropolitan automobile market is remarkable and hard to beat (Lee& Carter 2005, p.198; Warren & Rhodes 2006, p.271).

However, the road to its current market position has not been smooth all the way. For example, in May 1998 (the same year when smart was put in the market for sale) its poor sales had rumours going round that the project would be terminated and that the city car was given an ultimatum of six months to prove itself (Derdak & Pederson 2000, p.103).

Fortunately, by year 2000, its sales started to increase and the company, in fact, achieved its goal of selling eighty thousand vehicles that year (Metais & Pin 2001, p.1).

This tremendous success has been attributed to ex-Swatch founding partner Hans Jurg Schar whose sparkling marketing vision culminated into the powerful brand distinctiveness that Smart is enjoying in today’s competitive metropolitan automobile markets (Lewin 2004, p.248).

Some observers argue that, it is the strength of the identity he created that has enabled the smart car to overcome various disasters with its repute to a large extent unspoiled (Lewin 2004, p.248).

Lewin (2004) posits that, Nicolas Hayek “was the inspiration and mentor behind the smart idea…Jurgen Hubbert…the project’s guardian angel” (p. 248). In a nutshell, each partner brought a fair share of material resources and the ideas needed to drive the project and make it a reality.

Who gained the most?

Both Swatch and Daimler-Benz gained equally from this strategic partnership. Hayek, rather than competing, he chose “to cooperate with another company in the automotive industry because he feared industry players would be threatened by his original idea of Swatchmobile” (Metais & Pin 2001, p.1). This choice relieved SMH of the cost of launching a distribution network and entering a new industry.

On the other hand, Daimler-Benz’s overall competitiveness in the industry was boosted by the new stylish city car associated with it since it was well known within the industry than Swatch.

In addition, Daimler Benz was also relieved off the costs of making its own idea of Mercedes City Car a dream come out true. Both companies created a platform through which each would safeguard its competitive advantage in a fast changing business world thanks to ICT and accelerating globalisation.

Conclusion

The success of any company in different industries, in a globalised world of business, is faced by various challenges that require decisive, quick, and responsible responses.

Hence, effective strategic management skills are critical for all corporate leaders as demonstrated by Swatch CEO, Nicolas Hayek, and Daimler-Benz executive, Jurgen Hubbert. Their unique ideas and strengths have lead to a superior brand that other competitors strive to beat.

Reference List

Atomic Dog Publishing. 2001. Fundamentals of Strategic Management. Web.

Bidault, F., & Despres, C., 1997. Innovation: The Race to Learn with Partners. Web.

Certo, S. C., 2000. Modern management: diversity, quality, ethics & the global environment. New York, NY: Prentice Hall.

Derdak, T., & Pederson, J. P., 2000. International directory of company histories. USA: St. James Press.

Griffin, R. W., 2011. Fundamentals of Management. New York, NY: Cengage Learning.

Hitt, I., Hanson, D., & Hoskisson, R., 2011. Strategic management: competitiveness and globalization. Melbourne, Cengage.

Hjorth, L. S., 2003. Technology and society: a bridge to the 21st century. New York, NY: Prentice Hall.

Lee, K., & Carter, S., 2005. Global marketing management: changes, challenges and new strategies. New York, NY: Oxford University Press.

Lewin, T., 2004. Smart thinking: the little car that made it big. New York, NY: Motor Books International.

Metais, E., & Pin, R., 2001. From subversion to normalization: from the Swatchmobile to the smart. Web.

Morden, T., 2007. Principles of strategic management. New York, NY: Ashgate Publishing, Ltd.

Parthasarthy, R., 2006. Fundamentals of Strategic Management. London: Houghton Mifflin Co.

Saloner, G., Shepard, A., & Podolny, J. M., 2006.Strategic management. New York, NY: John Wiley.

Warren, J.P., & Rhodes, E., 2006. Smart design: greening the Total Product System. In J. Sarkis (Ed.), Greening the supply chain (pp. 270-279). UK: Springer.

Wintzer, E., 2007. Global Competition and Strategic Management. New York, NY: GRIN Verlag.

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