German manufacturer Mercedes-Benz Cars is to spend €600m ($697m) on the assembly of the next generation of C-Class models at its plant in East London, South Africa. Factory space for passenger vehicle production will increase by two-thirds and include new logistic warehouses, paint and body shops and an upgrade of the assembly shop with the addition of three lines. The new body shop is being designed for higher capacities and features more than 500 Internet of Things-ready robots laying the foundation for Industry 4.0, the company said.

By utilising new methods, the paint shop will be more energy efficient and environmentally friendly, it added. With other planned initiatives, Mercedes-Benz expects the plant's overall energy consumption will be reduced by 25% per vehicle. The investment coincides with the 60th anniversary of Mercedes-Benz passenger vehicle production starting at East London. Markus Schäfer, who is in charge of production and supply chain on Mercedes-Benz Cars' divisional board, commented: "The investment is also a sign of our commitment to South Africa and efforts to revive economic growth."

The capital expenditure and expansion were made public during a visit by South Africa's President Cyril Ramaphosa, who said: "The announcement by Mercedes-Benz Cars to inject 10 billion rand in the South African economy signals the momentum we are making to realize the target of raising 1.2 trillion rand in new investment."

The C-Class sedans produced at the 3,300-employee plant are exported to right-hand and left-hand drive markets. The East London factory also produces Mercedes-Benz trucks and buses as well Fuso brand trucks.

The year 2018 marks the sixtieth anniversary of Mercedes-Benz passenger vehicle production at the East London plant. Over the years, the plant has evolved as a significant contributor to South Africa's trade balance and an economic multiplier for East London. Furthermore, the plant actively commits to the community of East London and the Eastern Cape. One example is the Mercedes-Benz Learning Academy (MBLA) - a flagship and sustainable Public Private Partnership in cooperation with the National Treasury and the Jobs Fund, demonstrates the commitment of Mercedes-Benz South Africa to empowerment and youth development in the automotive manufacturing sector. Since 2004, MBLA has offered world-class quality training and transferrable skills, qualifying hundreds of skilled artisans in the Eastern Cape.

Sources: https://www.automotivelogistics.media/mercedes-benz-to-expand-south-african-plant/21100.article https://www.daimler.com/innovation/case/connectivity/expansion-announcement-south-africa.html

 Questions

Consider the facts presented in the article. Analyse and argue the reasons why Mercedes-Benz would pursue this strategy in South Africa.

Consider the current state of international business globally. Critically examine why companies such as Mercedes-Benz have grown from small domestic entities into huge global contenders.

The pricing strategy of an international player such as Mercedes-Benz is determined by currency issues. Evaluate why Mercedes-Benz should deal with foreign currency fluctuations in order to sustain the business in the long run.

Keeping the general South African business environment in mind, critically discuss the issues that the leadership of Mercedes-Benz should keep in mind to avoid failure in this market.

Answer rating: 100% (QA)

1 Expansion Strategy in South Africa MercedesBenzs decision to invest 600m in expanding its plant in East London South Africa is likely driven by several factors Firstly it signifies a commitment to t... View the full answer