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Executive Summary
There are a number of challenges faced by organizations wishing to conduct business with other firms in a foreign country. The reason behind this is that the organization will be required to engage either in the importation or exportation of goods or services. The Emirates Motor Company has for many years engaged in the importation of Mercedes Benz from Germany into the UAE.
One of the major challenges that the organization has suffered is lack of sufficient funding. As such, the organization has not been in a position to fully exploit the UAE market. The company also has to deal with high cost of operations. Importation activities require firms to pay for shipping and loading charges for the goods. The importer also has to incur insurance charges. The costs result in an increase in the cost of commodities making them undesirable to customers. Delays in payment also make it difficult for the company to replenish its stock.
Introduction
Mercedes Benz is a Germany based manufacturer of automobiles. It is a division of Daimler AG. Mercedes Benz as a brand engages in the manufacture of a wide variety of automobiles which range from luxury cars, coaches, trucks, and buses (Coughlin & Ambrosio, 2012). Today, it is a multinational company with franchises spread across the world. The company is regarded highly both locally and internationally. It is known for its brands of luxury vehicles.
The three manufacturers currently dominate the world market for luxury cars. Over the past years, Mercedes Benz has been seen to engage in activities aimed at increasing its global presence. The company has been seen to open franchises in Asia, Europe, and the Middle East in order to take advantage of the rapid economic growth in the regions. The company has also been seen to keenly monitor its African market. It has opened a franchise in Egypt to help it conduct business with Africa more efficiently and effectively. In 2014 alone, Mercedes Benz sold 2.5 million cars.
Besides the manufacture of automobiles, the company also offers financial services. It performs this role through the help of Daimler Financial Services AG. The arm of the organization has aided the company to further penetrate the Middle East market. A major event took place in 2009. The company announced its operations in the Middle East. It introduced Mercedes-Benz Leasing Middle East. It also opened Mercedes-Benz Finance Middle East. The two new companies owned by Mercedes Benz had their headquarters established at Dubai, one of the regions making up the United Arab Emirates (UAE) (Coughlin & Ambrosio, 2012).
They were established with the aim of providing lease and loan services to private and business customers who wish to purchase pre-owned and new commercial and passenger automobiles from Mercedes Benz. The move has enabled Mercedes dealers to be in a position to offer customers with a wide range of financial services. In the process, the company has made it easier for potential automobile customer to prefer Mercedes Benz cars as a result of the wide range of credit facilities provided. As a result, the demand for the brand in the UAE has risen (Adler, 2006).
In this paper, the author will focus on Emirates Motor Company (EMC). The entity is a branch of the Al Fahim Group that is charged with the responsibility of running the automobile division. Today, EMC owns the largest Mercedes Benz facility in the world. The company engages in the marketing and distribution of Mercedes Benz vehicles in the UAE. It is also important to note that EMC also engages in the servicing of these automobiles ranging from luxurious saloon cars to large trucks.
To this end, the company stocks a wide range of Mercedes Benz genuine parts. Today, the company boasts of a prestigious clientele that consists of members of the business community, oil companies in the region, and most importantly the UAE government. The company obtains its stock from Daimler AG (Wiehager, 2011). Mercedes Benz V-class automobiles are however rearly imported into the UAE. In this paper, more emphasis will be put on the challenges associated importation of Mercedes Benz automobiles from Germany to the UAE. Among the challenges that will be discussed are delays in payment, high cost of operation, insufficient funding, as well as a huge domestic market for Mercedes Benz brands in Germany.
Literature Review
An Overview of the Emirates Motor Company’s Import Business
Most of the manufacturing activities for Mercedes Benz are carried out within German. However, some of the franchises in the UAE are involved in the assembly of the brand and sales of spare parts. Some of the outlets that deal with Mercedes Benz automobiles import finished cars from Germany with the aim of distributing them to their stores spread across the UAE. The Al Fahim Group and Gargash Enterprises are the leading dealers of Mercedes automobiles in the UAE. The Al Fahim Group owns the (EMC), the authorized distributor of the Mercedes Benz brand within the UAE (Coughlin & Ambrosio, 2012). Gargash Enterprises on the other hand is the official Mercedes Benz distributor within Sharjah, Dubai, as well as the Northern Emirates. The two dealers mainly re-export their cars to other countries in the Middle East.
History of Importation of Mercedes Benz Automobiles from Germany to the UAE
There are a number of factors that affect the manner in which international trade is conducted. Of key importance are the political relations between countries. The nature of political relations between two countries determines the volume of trade that exists between them. International organizations, such as the World Trade Organization (WTO) and the UN Security Council can also have an influence on a country’s trade volumes. For example, the two can impose sanctions on a particular country. Such a country is no longer I a position to trade freely with others.
The entry of goods, as well as their exit into the country is hindered. The relations between Germany and the UAE are good. As such, firms that are based in the two countries carry out business among themselves with limited restrictions. Trade in automobiles between the two countries has been on the rise. Daimler AG, the manufacturer of Mercedes Benz automobiles has good business relations with the Al Fahim Group (Wiehager, 2011). Through EMC, the Al Fahim Group engages in the distribution and marketing of automobiles in the region on behalf of the Daimler AG.
External Analysis of the World Automobile Industry
In order to analyze the world automobile industry, we will conduct the PESTLE analysis. The PESTLE framework has six components. They are used to analyze external agents affecting the entity. The factors must be specific to the industry in which the organization is a player for them to make sense (Gould, 2012). The factors include those to do with political and economy environment. Others touch on technology and legal aspects of the business. Finally, there is the issue of the environment. Mercedes Benz just like any other brand is affected by these factors. The factors are external, which means that the company has no control over them. As such, the only option left for company is to modify its activities in a manner that helps it best deal with these factors.
Political factors have a great impact on the world automobile industry. To begin with, political stability is important if automobile companies are to successfully venture into a particular market. Political instability negatively affects the ability of automobile companies to conduct business (Plunkett, 2011). They lack the ability to set up premises in areas associated with political unrest. Political relations between countries also have an adverse effect on the automobile industry. Bad political relations between countries have negative effect on trade between them.
At times, country(s) may impose sanctions against another (Plunkett, 2011). Iran is one of the countries in the world that has had sanctions imposed on them. The reason behind the sanctions has been that the country has in the past decades engaged in the manufacture of nuclear weapons. Its activities have been viewed by many as a threat to world peace therefore necessitating the introduction of the sanctions. The United States of America (USA) has been on the forefront prohibiting local firms from conducting business with Iran. Other western powers, such as Germany, Britain, and France have also harshly criticized Iran’s nuclear programs. Iran can therefore not trade with these countries in all sectors including the automobile industry.
Players in the world automobile industry also have to cope with a wide range of economic factors. One of the major economic factors affecting the industry is the fluctuation in GDP. The situation has been most evident in Europe. Europe is one of the largest markets for automobile manufacturers. Further decline in GDP among the members of the European Union will result to a decline in sales volume (Gould, 2012).
A fluctuation in the currency exchange rates also has a widespread effect on the automobile industry. Changes in the value of a particular country’s currency will definitely have an effect on the prices of the automobiles. Subsequently, the purchasing ability of customers in that particular country will be affected. Volatility in the prices of oil also has an effect on the world automobile industry. When the prices of oil are low, more people will purchase automobiles and vice versa.
Social factors also have an adverse effect on the automotive industry. One of the factors that have had a major effect on the industry is the social status of customers. Those people who are of a higher social status tend to purchase luxury car brands, such as BMW, Mercedes Benz, and Audi (Jürgens, 2004). People of a lower social standard on the other hand tend to purchase cheaper brands of automobiles, especially those manufactured by Toyota.
Change in social status will therefore definitely cause a significant change in the industry. Gender is also a major social factor affecting the automobile industry. Females have been found to prefer smaller cars compared to men. It is important for automobile companies to consider these social factors when making a decision on what to produce. Automobile manufacturers also have to be careful when it comes to relating with their employees. Abuse of employees in the sector is harshly criticized by the World Trade Organization (WTO).
Public opinion is also a major social factor affecting manufactures and marketers in the automobile industry especially with the widespread use of the social media todaay. In a Daimler AG, the owner of Mercedes Benz annual shareholders meeting in April 2010, there were widespread calls for the company to end their association with Iran. A section of the shareholders at the meeting started what came to be referred to as the ‘Stop the bomb coalition’.
During the meeting, Dr. Dieter Zetsche’s, Daimler AG’s chief executive officer (CEO) announced that the company would cut down their volume of trade with Iran (Donnelly & Harrison, 2012). Trading was to be limited to old customers in Iran with more emphasis being put on fulfilling old contracts. The company was also to give up its 30% share it held Iranian Diesel Engine Manufacturing (IDEM). The company was a subsidiary of Iran Khodro. A resolution was also passed that Daimler AG would also desist from exporting three axes cars into Iran.
On 11th of November, 2010, Daimler AG, through their CEO announced that they had completely suspended their activities with Iran. Daimler AG feared that trading with the country would result in them being named and shamed as key supporters of the Iranian Regime. In the process, they would also stand the risk of losing contracts within the USA and other western countries opposed to the activities being carried out by the Iranian government. Mercedes was blamed for the exportation of Mercedes Benz Axor 2628 trucks into Iran (Donnelly & Harrison, 2012). There were fears that these trucks would later undergo some modification and used for military purposes. Such trucks can easily be converted into mobile rocket launchers a situation that can further Iran’s nuclear activities.
Technology is a major factor affecting any firm, in any particular market. It helps firms improve on the efficiency and effectiveness of the organization or the products it manufactures (Wang, 2013). The automobile industry is characterized by high levels of innovation. For example, innovations, such as cheaper airbags and seatbelts are common in the industry. Such technologies are associated with quick adoption. Firms operating in the automobile industry have to pay attention to such innovations.
The popularity of ‘green technologies’ in the industry should also not be ignored. Other technological factors affecting the industry include the rising demand of alternative fuels and the realization of the driverless car concept. Companies that engage in the manufacture of automotives have no option but to adopt these technologies in order to have competitive advantage over other players in the sector. The emergence of internet-enabled car systems is also a major upcoming trend in the industry.
Players in the world automobile industry also have to consider the legal factors affecting trade. It is paramount that any firm wishing to conduct business in any part of the world conforms to the rules and regulations governing the area (Miller, 2013). Legal issues facing the automobile industry range from the international, national, regional, and local levels. Any changes in these rules and regulations will definitely affect the automobile manufacturers and marketers.
One of the most common legal issues in the industry relate to the patents and copyrights with regard to innovation. Automotive manufacturers who come up with new auto devices and functionalities often tend to bar others from using them without their go ahead. At times, such innovations can be from members of the public. It is important that manufacturers obtain authorization to do so from these innovators before duplicating their technology. Failure to do so can result to legal suits that can see the company lose a lot of money settling.
Environmental issues also impact on players in the sector. Many environmental issues in the sector touch on the issue of pollution. Many environmental agencies have initiated campaigns that champion the adoption of green technologies (Wang, 2013). Such technologies are aimed at reducing the levels of pollution. Many automobiles companies currently produce vehicles that are powered by fossil fuels. However, the concept of bio-fuels is on the rise. Automobile manufacturers, such as Daimler AG have also come up with electric cars.
They are associated with minimal pollution levels. Most of the automobiles today are also attempting to adopt the technology. There has also been a change in the manner that automobile manufacturers used to dispose their waste. Today, manufacturers are not allowed to dump toxic wastes in public places or close to the water resources. Compliance with environmental regulations has also been viewed as an aspect of corporate social responsibility. Those who fail to comply are often shamed and this may affect their sales.
External Analysis of the Trade between the UAE and Germany in Automobiles
In order to conduct an external analysis of the trade between the UAE and Germany in the automobile sector, the PESTLE analysis framework will be used once again. The UAE is politically stable. It is considered to be one of the most liberal and peaceful countries in the region. Despite the recent political unrest in the Gulf region, the country has maintained relative peace and calm. As such, it is easy for EMC to conduct its import business.
The country also enjoys one of the simplest tax structures. It leads the world at position one. Companies operating in the UAE, such as EMC do not have to deal with complex tax frameworks. The government of the UAE has also signed a number of trade agreements. To begin with, the country is a member of the Association of Southeast Asian Nations (ASEAN). It is also a member of the Gulf Cooperation Council (GCC). In 1988, the European Union established bilateral relations with the member states of GCC. Companies operating in the UAE have benefited from such agreements through easing of foreign trade regulations.
In 2007, the UAE adopted stringent rules aimed at controlling the importation and exportation of goods. The law particularly banned the importation of goods that were deemed to threaten the country’s security. It has also been viewed to be in support of sanctions imposed by the United Nations (UN) on any particular country (Plunkett, 2010). The UAE federal government has also come up with a social welfare system that is comprehensive. Companies operating in the country are required to be mindful of the special groups in the country, especially women living rural areas.
Economic factors also affect the automobile business between Germany and the UAE. The country enjoys one of the lowest lending rates in the world. Interest rates between 2007 and 2015 have ranged between 1.28 to 4.75 percent. Inflation rates by beginning of March this year stood at 4.30 percent. They currently stand at 3.61 percent which indicates a downward trend. As such, the automobile industry in the country is likely to experience some rapid growth.
Approximately 53 percent of the country is employed (Farameh, 2011). 19.9 percent expresses no desire to work. The remaining close to 27 percent is unemployed. The number is rising with the influx of immigrants into the country. The per capita levels are also high at $63,181. As such, people have supplus income to spend on luxury goods such as automobiles. The country’s gross domestic product (GDP) is also experiencing rapid growth at 4.6 percent. As of 2013, it was at $ 570 billion with the industrial sector accounting for 56.1 percent. The UAE dirham also performs well against the key world currencies (Farameh, 2011). One UAE dirham equals 0.2722 US dollars. With the stable economy, there are minimal fluctuations which mean fewer challenges for importers, such as EMC.
A number of social factors have also been seen to affect trade in the UAE automobile industry. To begin with, luxury is the lifestyle in the country. Close to 50 percent of the population buy new luxury goods, such as cars while 49 percent are seen to purchase second hand items. Approximately 78.7 percent of the UAE population is aged between 15 to 64 years. It is estimated that about 73.9 percent of these individuals are immigrants (Laabs, 2009).
With the population growing at a rate of 3.282 percent, there is an expected growth of the number of people at the age bracket. The group is mainly consisted of working people who love luxury goods, such as cars. Although the UAE is currently the world’s richest nation, there is poor distribution of wealth and education. About 90 percent of the country’s wealth is owned by 0.2 of the local population. As such, only a small number of people have access to resources.
Muslim is the dominant religion. They are liberal people and love sports, such as street racing often with luxury car models. The UAE population has been viewed to put more emphasis on quality of goods. As such, many luxury goods, especially automobiles are recalled following quality issues (Laabs, 2009). Many people in the UAE buy Mercedes Benz automobiles following constant innovation by the company. The trend has been of benefit to EMC since people tend to influence each other’s purchasing behavior.
Majority of the people being youths, they want to go with the trendy car models. The country is also considered to be extremely capitalist in nature. Little emphasis is put on social policies. However, plans are underway to enact a legislation seeking to increase the duration for maternity leaves from 45 days to 6 months. The move will affect players in the industrial sectors since employees will require to be given longer leaves. Most of the UAE population spends their leisure time in sporting activities, such as car racing.
When it comes to technology in the UAE in automobile industry, it is important to note that the government of the UAE funds research. It does this through the National Research Foundation (NRF) established in 2008. It was designed in a manner that promoted innovation at public colleges and universities. Players in the automobile sector have also been seen to fund research. A good example is the Al Fahim Group which engages in extensive research in automobiles. With the growth of the sector, more funding is expected.
The UAE government is committed towards supporting world-class research and innovation. Players in the local automobile industry have also been keen to watch the emerging trends in the world market. Today, the UAE can be considered to be one of the most technologically advanced countries especially when it comes to the automobile sector. Intellectual property is also protected by the local government through copyrights and patents. However, there are potentially disruptive industries creeping in at the edge of the automobile sector. Such industries include air and rail-road transport.
Legal issues also have a major effect on the automobile sector. Plans are underway to introduce an anti-monopoly rule. The law is to ban the rising trend in the UAE where certain companies and agencies are given all the rights in the distribution of certain brands. Right to private property is also protected by the federal and the local governments (Haig & Haig, 2011). The government of the UAE has also developed an intellectual property regime that operates on internationally recognized standards. More emphases have been put on brand protection.
Customer protection laws are also in place. The UAE Law No. 24/2006 prohibits companies from engaging in the sale of sub-standard goods, fakes, as well as unfair business practices, such as hiking of prices (Farameh, 2011). Companies operating in the UAE are also required to provide employment opportunities to the local population. The UAE legal system through the Emirates Institute of Health and Safety (EIHS) requires that companies do not produce or sell goods that put both employees and consumers at risk.
Environmental factors have also been seen to affect the manner in which the UAE conducts trade in automobiles with other countries. The country’s population has recently been seen to champion environmental friendly cars. Although a majority of the country’s population was initially seen to love 4×4 models, customers in the region have become increasingly cautious of the environmental effects of the use of such automobiles. The realization of the concept of the electric car, thanks to increasing calls to automobile manufacturers to adopt green technology is a major environmental issue facing the sector.
Many buyers in the UAE today have expressed interest on such automobiles (Laabs, 2009). Environmental activist groups, such as Earth First and the Greenpeace movement have also put pressure on players in the automobile sector to adopt green technologies. There are also environmental protection laws that are enforced at the municipal level. Companies are given permits pertaining to water usage and air pollution. Clean up is done at the expense of the polluter. Permits may also be cancelled. Use of energy efficient technologies has also been stressed with the aim of reducing pollution levels.
Internal Analysis of the Emirates Motor Company (EMC)
In order to conduct an internal analysis on EMC, two frameworks will be used. The two are the PESTLE analysis and the SWOT analysis. The paper will begin with conducting a PESTLE analysis of the company and later the SWOT analysis. Once again, PESTLE analysis will look into the political, economical, social, technological, legal, and environmental factors affecting the organization.
PESTLE Analysis
Political environment
When it comes to political issues facing EMC, the organization is in good relations with the government. The company has conducted business in the UAE since 1962. It has also risen to the ranks of one of the biggest dealers in automobiles across the globe (Fich, 2009). As such, it is viewed by the government as one of its revenue sources.
The UAE government has also in many occasions been seen to purchase automobiles from the company especially Mercedes Benz Saloon cars for the police department. Following the widespread criticism against Iran, many multinational companies have desisted from conducting business with the country (Fich, 2009). Mercedes Benz is one of the companies that have been on the forefront cutting their ties with the country. As such, EMC no longer sells cars in Iran. The development negatively impacted on performance of the company considering that the demand for luxury automobiles in Iran is on the rise.
Economic environment
In economic terms, the EMC is a well established company in the UAE automobile industry. It owns the greatest Mercedes Benz facility in the world where showrooms and service bays are housed. However, Mercedes Benz dealers in the UAE incur high costs of operations by engaging in the importation of automobiles from Germany. Importation is an expensive practice. It increases the handling charge which translates to an increase in the prices of the imported cars. Storage space for the Mercedes Benz cars also has to be allocated in holding facilities.
Exportation activities from Germany are carried out via sea transport. The cars also have to be off-loaded back to from cargo ships which increase the cost of operations. The shipping charges also increase the cost of the undertaking. Tariffs are also charged for the importation of the cars further increasing the operational cost (Bohlander & Snell, 2007). The price of the imported cars therefore tends to go up to compensate for the costs incurred. The Mercedes Benz cars are therefore unable to compensate with other luxury car brands, such as BMW and Audi which has assembly points within the UAE (Fich, 2009). The high cost of importation also drives many customers to go for cheaper car brands as well as second hand cars.
Social issues
There are also a number of social issues affecting EMC. To begin with, Mercedes Benz as a brand is viewed as a preserve for the rich. The reason behind this is that Mercedes Benz automobiles are expensive (Harrington & Niehaus, 2004). Only those of a high social status purchase from the EMC. Other Mercedes Benz lovers who cannot afford to purchase new cars often go to firms that deal with second hand automobiles.
As such, EMC sales have remained lower compared to other dealers who stock other cheaper brands (Laabs, 2009). The company has also been linked to the Iran administration. The reason behind this is that the company has been accused of conducting business with the Iran government. Despite Daimler AG insisting that Mercedes Benz ceased operations in the country, IDEM continues to manufacture a wide range of automobiles under Daimler’s license. Daimler AG has however denied any involvement with the IDEM stating that they are no longer responsible of the company’s manufacturing activities in Iran.
Technology
When it comes to matters revolving around technology, the EMC has not been left behind. It has been at the forefront in supporting innovation. The company has been seen to adopt the use of the green technology. Currently, the EMC stocks electric cars in its showrooms. For this reason, it has been viewed by many in the UAE as progressive (Lamoreaux, 2007). The company also stocks the latest releases by Mercedes Benz. Recently it unveiled the new 2015 S-Class Mercedes Benz, one of the newest models of luxury cars across the world. As a result, most customers go to EMC for the latest models.
Legal matters
There are also a few legal issues affecting EMC and its operations within the UAE. The brands stocked by EMC are compatible with the set standards in the UAE. For example, most German made cars are left hand drive. The UAE requires that persons driving on their roads own left-hand drives. Automobiles stocked by EMC meet this requirement. As such, there are very few cases or product recall to Germany following failure to meet UAE standards.
However, recent accusations of having conducted business with Iran have made customers all over the world raise questions concerning the ethics of the company. On matters of environment, EMC has been seen as one of the leading automobile dealership companies within the UAE that champion environmental conservation (Yang, 2013). The company has been able to achieve this by stocking Mercedes Benz automobiles that are electricity powered. The adoption of green technologies have added an element of corporate social responsibility on the company’s profile which helps increase its competitive advantage.
SWOT Analysis at EMC
With the help of a SWOT analysis, the author of this paper will be able to conduct an internal evaluation of EMC. Through the framework, one can analyze the strengths, weaknesses, opportunities, and threats (SWOT) facing the company.
Strengths
One of the major strengths associated with EMC is that it has one of the greatest facilities dealing with automobiles across the world. As such, it is able to accommodate a large number of vehicles compared to its competitors. The facility houses a number of showrooms and service bays. As such, the company is in a position to better serve its clientele. Most customers in the automobile industry want to view the available models before deciding on which to purchase.
As such, the expansive showrooms at EMC’s facility help customers to make informed choices (Fine, 2009). The company is also keen to stock the latest models. The expansive showrooms enable the company to have more space to accommodate new Mercedes Benz models that have just hit the market (Fine, 2009). It is also important to note that showrooms are an important marketing avenue especially in the automobile industry. They enable a company to showcase to potential customers what they have to offer.
The service bays available at the facilities owned by the company also enable the organization to offer after sales services to customers. Such services include repairs and maintenance. In the process, they are able to gain a competitive advantage against their rivals (Bertelsen, 2012). The service bays also act as a strategy to promote the sales of genuine Mercedes Benz spare parts, one of the commodities retailed by EMC.
Weaknesses
Despite the strengths, there are also a number of weaknesses associated with EMC. One of the major weaknesses of the company is insufficient business financing. The exportation of automobiles is a costly undertaking. Any firm wishing to venture into the industry must therefore have adequate finances. The EMC is owned by the Al Fahim Group. The group has interest in other sectors of the economy, such as the hospitality, industrial, and manufacturing industries. As such, the group is not in a position to solely focus in the automobiles import business.
The groups finances have to be divided among its ventures. As a result, EMC has little chances of experiencing future expansion. Importation also requires payment of insurance policies to protect the company businesses. Like any other business, Mercedes Benz dealers, EMC also have to protect their investments through purchasing insurance policies. The company also only deals with Mercedes Benz products. As such, they lack variety for customers to choose from (Fine, 2009). Many low income customers tend to avoid purchasing automobiles from the company since they are of the view that it stocks products only affordable by the super rich.
Opportunities
There are a number of opportunities associated with EMC in the UAE automobile import business. The UAE automobile industry is one of the most attractive in the region. There is a high demand for luxury cars in the country. The UAE population has also been identified to be very selective when it comes to cars. They go for those that decked out using accessories. Mercedes Benz automobiles are exported into the country from Germany at a markup price of approximately 30 percent.
The increase in prices has largely been attributed to the installation of accessories, such as alloy wheels and airbags. The nature of the country’s population has offered the company with an opportunity to increase the sales of genuine Mercedes Benz spare parts and accessories. The large facilities owned by EMC also enable the company to stock many automobiles than any other dealer in the region. Another opportunity that EMC can exploit is the rising GDP in the country. As such, the purchasing power of customers has also increased (Bertelsen, 2012). The realization of the concept of the electric car by Daimler AG has also been beneficial to the company. It can take the read in the manufacture of such models in the region.
Threats
Besides the opportunities highlighted above, it is important to note that EMC is also faced by a number of threats. The most common threat in any market is competitors (Ahmad, 2013). In the UAE automobile industry, the company faces stiff competition from other players, such as BMW, Audi, Nissan, Toyota, and Ferrari among others. Competition has significantly reduced Mercedes Benz sales volume by EMC. The fact that the company does not stock other global brands makes it easy for other dealers to dominate the market.
Delay in payment is also a major threat to EMC. It often takes long for EMC to receive payment for the cars that have been delivered to customers. Coupled with the long shipping periods, the two pose a major threat to the success of the organization. Delay in payment results in reduced profitability for EMC. The reason behind this is that businesses depend on revenue obtained from past transactions to ensure continuity (Bertelsen, 2012). Failure by customers to pay for the cars exported to their country in time results to revenue shortages. As such, the company does not have enough funds to replenish stock.
Methodology
The study was conducted to establish the challenges faced by EMC in the importation of Mercedes Benz from Germany. The research was qualitative. The researcher used a survey to assess the view of EMC on the challenges that face their organization as they import their stock from Germany. The survey was a questionnaire prepared by the researcher.
It consisted of simple open ended questions. The questionnaire was to be completed by workers at EMC. Specialists in the organization, such as those who deal with import logistics and financial reports were also required to complete the survey since they were viewed to have better knowledge on the day-to-day running of the company. The surveys were later collected and analyzed.
Data for the project was also collected through a review of existing literature. The researcher sought to gather information from books and journals that were related to the research. Only recent sources were used for the research. The researcher believed that the use of current sources would be instrumental in gathering up-to-date data for the research. The resources used for the research were also cited within the work presented by the researcher. The practice introduced the aspect of authenticity in the researcher’s work.
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