Market Entry Strategies Case Study

Smart Fortwo’s Entry into the US.: Smart Move?

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Abstract:

In 2005, DaimlerChrysler was the world’s fifth largest automotive group. DaimlerChrysler was a unique and prominent company in the global automotive industry. It had a product portfolio that ranged from small cars to sports cars and luxury sedans, and from versatile vans and heavy duty trucks to comfortable coaches. DaimlerChrysler AG was formed in 1998 by the merger of ‘Daimler-Benz AG’ (Germany) and ‘Chrysler Corporation’ (USA). Thus, DaimlerChrysler had a tradition of more than one hundred years, featuring the pioneering achievements in automotive engineering by both of its predecessor companies.

On 28th June, 2006, DaimlerChrysler announced that its unique and urban-friendly, fuel-efficient, subcompact ‘Smart brand (Smart)’ would enter the U.S. market. The company redesigned its original model ‘Smart Fortwo’ and informed that the new generation Fortwo would be available in the U.S. in three models from 2007. Americans, in general, did not like small cars as they were doubtful about the safety features of such cars. However, since 2003-2004, due to a continuous hike in US gasoline prices, there was a declining sale of the large SUVs and pickups. Hence, the company felt that it was the right time to bring its Smart cars to the United States. But, the US market was already flooded with fuel-efficient subcompact cars like Toyota Scion and BMW Mini Cooper. Some of them also had their US dealer network in place. Further, three Japanese subcompact cars were expected to enter the US market by 2006-2007. They were low-priced compared to the Smart brand cars. Therefore industry observers were skeptical about Smart’s success in the US.

Pedagogical Objectives:

• To understand the global automotive industry
• To understand the US automotive industry
• To understand the challenges in the US automotive industry
• To analyse whether ‘Smart’ will be a success in US.

Keywords : Daimler Chrysler; Smart Fortwo; Mercedes Car Group; Market Entry Strategies Case Study; Automotive Industry; Swatch; Subcompact car; NAIAS; US car market; Daimler-Benz AG; Chrysler Corporation; Fuel-efficeint car; Small car; Eco-friendly car; Two-seater car; Gasoline price in USA

Contents : 
Glimpses of DaimlerChrysler
DaimlerChrysler Group
About Smart
Smart’s Move to U.S.
Challenges in the US Market
Smart’s Small Size
Smart Fortwo Pricing
Availability of other Fuel-Efficient Subcompact Cars