The first alternative is the purchase of a new auto producing business. The alternative automatically presupposes the introduction of a new unique brand, as well as exclusive production line. The second alternative is the possibility to take over such a prominent and profitable giant within the market of auto producing corporations as Mercedes Benz brand. Both alternatives for relevant and perspective investment have certain prerogatives, as well as drawbacks. Our agency takes the responsibility to provide all the necessary data, as well as make the relevant calculations on both variants. Moreover, we are taking the responsibility to compare both possibilities and underline the most efficient alternative in order to make the choice of the investors easier and more relevant. Besides, the profound insight into the current conditions, tendencies and further perspectives in the world of car producing companies may help in the process of decision making. The same function may be attributed to the in-depth insight into the innovations in the field.
Current Conditions and Further Perspectives of the Auto Producing Market
The decision to make a solid investment in the automotive sector in 2014 is a very serious and responsible step in the course of business activity. This step should be preceded by thorough and profound analysis of the whole scope of the automotive sphere in the current course of time. Moreover, the analysis should be made on the global scale, as well as within the United Kingdom territory in order to be as much objective and relevant as possible.
In order to comprehend the level of auto producing sector’s development and its current dynamics in the United Kingdom, it is necessary to involve certain relevant statistics data:
“The UK is home to:
- Seven volume car manufacturers.
- Eight commercial vehicle manufacturers.
- 10 bus and coach manufacturers.
- Eight major premium and sports car producers, and over 100 specialist brands.
- Eight Formula One teams.
- Strong premium brands – second only to Germany in global market share.
- Over one million vehicles and two million engines are produced in the UK each year.
- Automotive manufacturing levels are set grow to pre-recession levels by 2014.
- More than 75% of vehicles manufactured in the UK are exported.”
Therefore, it is quite evident that the amount of rival corporations is significant. As a consequence, the competitiveness of the brand the investors are planning to take over is to be on the high level not only to sustain the rivalry but also to give sufficient profits and to develop on the permanent basis.
The good news is that the automotive market in the United Kingdom is intensively developing. The positive dynamics is reaching 17% in the context of 2013 ramifications in comparison with the preceding year. The positive development of the automotive market in 2013 is considered to be directly connected with the constantly increasing demand for automobiles to be sold on the territory of the United Kingdom rather than for export purpose. It means the level of appeal in the context of the British customers is the crucial target to consider in case the new brand will be chosen. Furthermore, the demand among the European audience is expected to increase sufficiently in 2014. It contributes to further development of Mercedes Benz brand in case it is chosen to be invested in.
The global scale of the development of auto producing sector is considered to be positively developing, too. For instance, the tendency of automobile sector development in the United States of America is regarded as 80% higher in comparison with the results of 2009. The dynamics is obviously much faster and more perspective being compared with the tendencies in the European sector. The reasons the United States are more efficient and perspective in the course of their economic recovery involve such phenomena as faster pace of the overall recovery, the population of the USA is considered to be much more youthful. Furthermore, one more crucial reason concerns comparatively low fuel costs. Moreover, as a direct consequence of the closures forced by the frequent occurrence of bankruptcy the level of capacity became more equalled with the level of demand. Therefore, the USA is a very significant target for any alternative offered for the investment in the car making industry.
Hence, the conditions of the current development of car making industry are quite favourable and positive. It is even more significant that the perspectives are positive, as well. It is a good background for both new brand introduction and development of the worldwide famous corporation.
Innovations in the Car Making Industry
The concept of innovation is considered to be one of the most crucial, influential and perspective element in the whole course of development and improvement for any company in any sphere of business activity. The innovative approach, as well as the creative one, has appeared to be highly evaluated on the global scale as far as the customers demand constant development, improvement and qualitative alteration. Hence, it is essential to provide in the context of our consultancy report the outline of the most significant innovative trends in the course of 2013 activity.
According to Maurizio Brusadelli (2013) report in Thelegraph,
“The answer is that the UK has some real strengths, and manufacturers here need to play to them. The country has a wealth of technical skills and knowledge, as well as a strong history of innovation. Innovation is the key. By harnessing UK employees’ technical abilities, and developing strong research and development capabilities here, UK manufacturing organisations can use innovation to achieve a unique competitive position.”
One more significant aspect in the context of the innovative approach concerns the process of active and intense deployment of the innovative technologies targeted directly to tackle the current expenses of UK operations, providing the actual course of improvement of the overall manufacturing processes to decrease waste and improve the level of corporate profitability.
The significance and essential role of the innovative approach is quite evident. It is important not only to understand it, but also to implement properly and consistently. There are several crucial aspects of this process:
“It’s firstly essential to invest in innovation, whether that means investing in specific technology, facilities or (most importantly) people; giving your employees the skills they need to innovate. As well as training in the short-term, this means building a sustainable pipeline of talent. Culture is also critical. Manufacturers need to create a culture that fosters innovation, giving employees clear direction on where they can focus their efforts and allowing people to take risks.”
Furthermore, it is essential to provide the outline concerning the major innovations of 2013. It will help to get oriented in the course of existing know how and to see the space for further innovation.
It is significant to pay attention to the innovative approach with the environmentally friendly concern. It means that the innovative cars should correspond to one of the most urgent and crucial tendencies on the world wide scope in the current course of time – environmental care. The vehicle should make as little harm and actual pollution as possible. It is apparent that it is impossible to reduce the pollution the cars lead to at all, but the innovative and ecologically oriented approach thrives to this target. Therefore, this significant aspect should be taken into account.
One more crucial aspect to work on is the improvement of safety measures in the car. It is one of the major concerns within the car making industry in the current course of time. Such innovations will be highly evaluated by the customers and rapidly lead to the actual increase in sales and promotion of the brand.
Moreover, the innovations may be developed and implemented also in such significant aspects of car functioning as entertainment, design and usefulness. The innovations of the future are considered to be the available communicative technologies. It is essential to underline that the communication is regarded not only in the scope of person-car, but also in the scope of communication between the cars on the road. One more dream of every driver is a self driving car. This concept has a vast space for the improvement and adjustment. Hence, it is open to innovations.
The Concept of a New Car Shop
As far as our consultancy agency was provided with two alternatives for the potential investment, we start with the new car shop.
It is necessary to underline the apparent advantages the investors are to get immediately they introduce a new auto shop to the audience of counterparts as well as to the audience of customers.
The first evident advantage is the newly coined brand of car shop. It is always appealing and intriguing for the customers. Though, it may become a disadvantage, as well. The reason is that a new venture is an exciting subject for discussion and predictions, but the absence of trust of the customers is a direct consequence of the lack of experience and performance record of the company. Therefore, it may be a sufficient risk.
One more advantage is uniqueness of the shop. It is an apparent prerogative, but it requires much investigation and innovations as well as tremendous and impressive PR campaigns and exclusively creative approach. The costs for the presentation of the new shop will also include the introduction campaigns.
The perspective to provide uniqueness of the new car shop may be supported with the special corporate culture, motto or image of the shop itself.
The overall image and promotion issues are generally discussed. Now it is time to discuss the form of property ownership. It may be either purchase of a real estate or its lease. In order to reconcile all the existing and most influential pros and cons, it is recommended to regard a cash and flow analysis.
It is natural to assume the cash and flow analysis data for the first year of the business venture for each of the alternatives. We will start with the lease alternative.
The lease alternative presupposes the following compulsory costs spending:
- Lease terms: the average lease cost of the decent car shop in the locality will comprise $10 000 per month. Therefore, it will be $10 000 * 12 month= $120 000 per year.
- Next significant condition to be taken into account is combined federal and state income tax rate. It will involve the average sum of $8 000 per year.
- The cost of repair works and redesigning of the car shop will cost the investors approximately $30 000. Though, it is onetime expense. It is a significant and necessary investment in the future image and status of the shop.
- It is also essential to pre-calculate the expected shop’s estimated value, in case the investors will be willing to buy it in a year. Taking into account the new repairing works as well as significant design the investors have provided initially, the cost of the shop may be increases on the general terms. Though, these issues may be discussed and regulated with the owner. Every case will be an individual issue.
- Actually, the lease conditions eliminate the level of responsibility and involvement of the investors. Therefore, in case the potential investors are not quite sure about the sphere of business activity, they are willing to participate it is the best alternative. It will require the least necessary payments, and the year term is enough to predict further profitability and efficiency of the whole business venture.
- The average overall expenses for leasing the real estate for the future new car shop establishment equals to the sum of approximately $158 000. The lion share comprises the costs for the lease itself. The regular expenses for improvement and development of the real estate property may require several more thousands in a row.
Now it is time to discuss the differences and the obvious prerogatives as well as drawbacks of the alternative of purchasing the real estate. In case the investors are sure and ready to perform in the aforementioned business venture, it is recommended to consider the purchase of the real estate for the car shop. The correspondent calculations and explanations are underneath.
The average cost of the purchase of the claimed level and size in the locality the investors are interested in comprises the sum of $600 000. The initial sum is quite a significant, but it is worth buying the real estate. The following comparison is a vivid and quite persuasive proof: the annual expenses of $120 000 will be a regular payment from the share of the actual profit the investors will receive whereas the purchase presupposes a one time payment and consideration of further profits on their own. It is a significant advantage for the business venture. It is necessary to emphasize that the investors will still be obliged to pay for the public service and utilities. Concerning the aforementioned level and size of the building the investors are interested in, the average sum of the payment will be $3 000 per month. It means that the annual expenses on the public service will be $36 000. Furthermore, it is necessary to include the potential expenses for the repairing of the building and design ti serve the purpose of the car shop. The expenses will be approximately the same – $30 000. Though, this payment will be also a significant investment for the future. The taxes will remain much the same. Other less significant expenses in the course of purchasing the real estate property may vary from $2 000 to several more thousands. Hence, the overall general payment for the real estate property and its functioning for the first year will approximately be equal to $680 000.
It is significant to underline the evidence of prerogatives the actual purchase of the real estate for the car shop has. First of all, in case the business turns out to be successful and profitable – and according to the research the has been already done, it most certainly will – the expenses will be recouped in the course of 5 years’ business performance. In any case, the initial capital is supposed to be invested. Therefore, it is better to invest in the real property a person can sell anytime or redesign to any extent, than to pay just for rent and have no factual rights afterwards. Moreover, the real estate may be always sold to another owner, and the price may be even higher taking into consideration the current tendencies and perspectives in the context of the real estate market conditions. The real estate property, especially in the locality and on the level the investors are interested in, may be considered as a perspective, efficient and consistent investment of financial assets.
The average sum is significant. Therefore, there should be some sources available in case the investors are not capable to pay it from their current financial assets. The possible sources to lend the aforementioned sum of money include banks and other financially oriented establishments. It is highly recommended to apply to the bank the investors are currently served at as far as it may appear the most credible source. The other alternatives will be developed in case of necessity.
Mercedes Benz Brand History and Perspective Aspects
In order to consider the possibility to take over the car shop of the brand name Mercedes Benz, it is necessary to regards the outline of the history the corporation has and it perspectives for the actual business venture.
“The Mercedes-Benz brand was born under a lucky star: the current trademark comprising a three-pointed star in a laurel wreath was created in 1925 – in time for the merger between Daimler-Motoren-Gesellschaft (DMG) and Benz & Cie., which together became Daimler-Benz AG, in summer 1926. This event marked the birth of a new car brand – Mercedes-Benz – and with it a shared aspiration to uphold the tradition of the world’s two oldest car manufacturers and ensure a successful future for both.”
Actually, the Mercedes Benz trademark is regarded as one of the most prominent, worldwide famous perspective corporation in the car making industry. The keys to the success Mercedes Benz tends to enjoy in the current course of time comprise following such concepts in the course of the corporate performance as innovation, excellent level of quality, efficient performance, awareness of tradition, as well as the innovative approach and creative thinking.
It is essential to underline that the company provides not only excellent class of quality cars and absolute comfort for the customers, but also is famous for the gracious and stylish decisions in the car making process. The truth is the Mercedes Benz brand completely corresponds to the initial essence of the brand name’s meaning. The word “Mercedes” is a name of the Spanish origin that means “grace”.
Furthermore, it is significant to make an in-depth insight in the history of brand development. It demonstrates the major tendencies and the dynamics of the evolution Mercedes Benz experienced as a brand.
“The first vehicle to be fitted with the new engine, a 35-hp racing car, was delivered to Jellinek by DMG on December 22, 1900. This first ‘Mercedes’, developed by Wilhelm Maybach, the chief engineer at DMG, caused quite a stir at the beginning of the new century. With its low center of gravity, pressed-steel frame, lightweight high-performance engine and honeycomb radiator, it featured numerous innovations and is regarded today as the first modern automobile.”
It was 2 years later, in 1902 that the Spanish name ‘Merc?d?s’ was proclaimed to be the trade name for the newly appeared car making company. The company was legally registered on September 26 of the same year. It was the beginning of the exquisite story of success in the car making industry.
In the course of inflation and overall crisis after the World War I the former rival corporations, DMG and Benz & Cie., launched a syndicate together. It was a beginning of a new era for the brand, Daimler-Benz AG.
“At this point a new trademark was designed, which brought together the main characteristics of both the existing emblems – the world-renowned three-pointed star belonging to Daimler-Motoren-Gesellschaft was surrounded with its trade name ‘Mercedes’ as well as that of the equally famous name ‘Benz’, whose laurel wreath entwined the two names together.”
The further challenges and obstacles became a measure for the quality and supreme level the brand of modern Mercedes Benz tends to demonstrate for decades. The brand tends to satisfy the customers in all the crucial needs, preferences and demands. The car labeled as Mercedes Benz is a status car in the current course of time. Therefore, the car shop under the brand name Mercedes Benz is a significant, efficient and perspective investment of the financial assets. The famous brand, as well as excellent quality of the cars, will attract not only new customers but will be greatly appreciated by the constant ones.
Profit and Loss Account
Having presented the aforementioned conditions, descriptions and calculations, it is significant to provide also a profit and loss account for the potential business activity of the car shop.
The first profit and loss account will be calculated and subsequently discussed for the car shop under the Mercedes Benz brand.
The average cost of Mercedes car is considered to be $30 000. The target for the investors is to drive the business activity to the level of sales of 20 cars per month on the initial stage of the shop performance. Therefore, the turnover is to be $600 000. The cost sales of a car is $15 000, and the overall monthly cost sales – $300 000. Hence, the gross profit will be $600 000 – $300 000= $300 000. The overhead expenses should be taken into consideration in order to calculate the net profit. The overhead expenses comprise: heating and lighting – $2 000, other public service expenses – $2 000, insurance – $2 000, taxes – $8 000, advertising and promotion campaigns – $4 000, the staff salaries – $52 000. The overall sum will be $70 000. Hence, the net profit will be as follows: the gross profit $300 000 – the overhead expenses $70 000= $230 000. The final outcome is a significant sum of the net profit the contemporary car shop can provide.
The second profit and loss account will be calculated and subsequently discussed for the new car shop.
The average cost of the cars in case of new shop opening will be $22 000. The target for the investors is to drive the business activity to the level of sales of 15 cars per month on the initial stage of the shop performance as far as the newly opened business takes some time to become regularly successful. Therefore, the turnover is to be $330 000. The cost sales of a car is $12 000, and the overall monthly cost sales – $180 000. Hence, the gross profit will be $330 000 – $180 000= $150 000. The overhead expenses should be taken into consideration in order to calculate the net profit. In case the car shop is rented, the overhead expenses will cover the lease payment – $10 000, insurance – $2 000, taxes – $8 000, advertising and promotion campaigns – $4 000, the staff salaries – $52 000. The overall sum will be $76 000. Hence, the net profit will be as follows: the gross profit $150 000 – the overhead expenses $76 000= $74 000.
In case the shop is owned by the investors, the overhead expenses will comprise: heating and lighting – $2 000, other public service expenses – $2 000, insurance – $2 000, taxes – $8 000, advertising and promotion campaigns – $4 000, the staff salaries – $52 000. The overall sum will be $70 000. Hence, the net profit will be as follows: the gross profit $150 000 – the overhead expenses $70 000= $80 000.
Hence, it is evident that the purchase is more efficient and profitable in the course of business performance in comparison with the rental alternative.
The Balance Sheet
The balance sheet is a significant and vivid demonstration of the actual availability and subsequent division of the financial assets the investors are to implement into the establishment and further development of the car shop business venture. As far as the financial sources are of 2 types – internal and external, it is necessary to pay attention to each type. According to the information the investors provided our consultancy agency with, it is evident that the external sources of financial assets will be necessary only in case of purchase of the real estate. As far as it is quite evident so far that this alternative is the most appealing one, the balance sheet will be elaborated on the basis of the alternative conditions.
Purchase of the car shop
Purchase of the cars
Other current expenses
|1 500 000|
Creditors due in the year
|1 100 000|
Net current assets, without creditors’ payment
230 000 * 12 = 2 760 000
Final net current assets
|1 760 000|
Hence, the balance sheet presents the following situation in case the business is chosen to be purchased on the aforementioned terms:
The amount of fixed financial assets is $500 000. The preliminary calculations show that the purchase of the car shop, as well as initial investment into the available cars for sale along with other necessary expenses, form the sum of $150 000. Therefore, the sum of $100 000 is needed to be taken as a credit from the bank the investors currently are served at as we have already mentioned above, or from other credible and reliable financially oriented sources. According to the preliminary profit and loss account concerning the choice of purchase alternative of Mercedes Benz brand the net profit is considered to be $230 000 per month. This net profit is real provided all the conditions and terms are closely and consistently followed in the course of business performance. As a consequence, the overall net profit of the first year business performance comprises the sum of $2 760 000. The investors have to fulfil the financial obligations for the creditors within a year. It means, the sum of $100 000 should be paid back to the creditors in time. Having deducted the creditors’ payments, we receive the final net profit the investors are supposed to receive in the first year of the business performance – $1 760 000.
The Final Advice to the Investors
All the profound insights and necessary calculations have been made in order to demonstrate all the advantages and disadvantages of both alternatives. The whole consultancy report was targeted at the provision of efficient, consistent and relevant outline to help the investors to make a decision about their future business. Finally our consultancy agency takes the responsibility to make the following recommendations to the investors: the most relevant, potentially profitable and perspective variant for the investment is the car shop under the Mercedes Benz brand. It is a worldwide famous and excellent quality trademark with tremendous perspectives as well as current achievements. Furthermore, the expenses for advertising and promoting campaigns may be significantly decreased in case the car shop will be presented as the Mercedes Benz brand representative. It is as well significant to underline the audience of potential customers attracted by the illustrious label and also the permanent customers of the brand. The second issue concerns the form of property to start the aforementioned business venture. Our consultancy agency advises the investors to purchase the real estate. First of all, it provides significant profits as far as calculations demonstrate in our report. The possibility to pay back the credits is absolutely real to be performed within a year provided all the directions and business requirements are properly and timely met. Moreover, the real estate property is a crucial and perspective asset in any case.
Thus, our consultancy report demonstrates the evidence that general conditions in the global car making and selling industry are considered to have positive dynamics and significant development. Therefore, the car shop is an appropriate and potentially profitable investment. The final choice is to be made by the investors on the basis of the presented data and calculations.