Mercedes-Benz Proposes One Key Fits All Locks on New Cars

Question

Hey All: Anyone willing to solve this case? I know that the analysis will go in the direction of "Cost-benefit analysis & maybe through NPV as well" but I am not able to get a profound grasp on this. Maybe anyone can try to solve this case by using even some hypothetical data? I would appreciate your help. Thank you

CASE:

he client Mercedes Benz is a multinational division of the German automobile manufacturer Daimler AG (FWB: DAI). Headquartered in Stuttgart, Baden-Wurttemberg, Germany, the company produces a full range of luxury cars, buses, coaches, and trucks.

Recently, the director of marketing at Mercedes-Benz suggests a bold change to the current design of car keys. Currently, two separate keys operate the car ignition and open the doors. The Mercedes-Benz marketing director proposes an innovative design where one key operates all lock mechanisms: a single car key can open the doors, as well as start the ignition, open the glove compartment and also open the trunk (boot) of the car.

How do you think about whether this a good idea or not?

Answer 1

Hey rosario77,

No expert here but I'll give me 2 cents.

First I would ask some questions to get a better feel for the situation:

1) What exactly does this new key do when compared to regular keys? I don't know any car that needs multiple keys to open doors/trunks/turn the car on - should I assume we are doing some type of scenario where cars actually require several keys?

2) What is the current stage for this new product? Still on the idea stage?

3) In the case of moving forward will this product be able to be patented?

4) What dictates this as a good idea? Increase profits? Does the client has a specific target?

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Regarding my structure I would focus on the following areas:

1) Customer's willingness to pay;

Will this new change actually increase the value of our product in the eyes of the customers and will it have any significant impact in the # of cars we sell or the price we are able to charge?

2) Cost Structure;

What will be the R&D investment to develop this new technology and how will this affect our ongoing cost in the future? right now the cost of a single key, when compared to the entire price of a car, is virtually nothing - will this new technology actually increase our variable costs moving forward?

3) The possibility of new markets.

In the case of developing this new technology and patent it, will we be able to use it in different markets? Maybe licensing it to other brands?

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My overall hypothesis is that this doesn't look like a good idea because the product doesn't bring any real value to the customers and doesn't decrease our variable costs to justify the investment. To validate my hypothesis I will need to study the areas I previously mentioned.

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This was just my rough ideas when quickly reading the case.

There are a few more areas I would go into more detail but for now feels sufficient.

Answer 2

Hi,

I must say this is a quite interesting question though there could be many reasons why a large company like MB would want to do this. Before I set up my structure, I would ask the following two questions:

1)Will this key be implemented in one particular area or all of the vehicles? (This would help me understand whether we're targeting one area or not)

2)Is the client looking to charge by replacing the use of the key or will this simply be included in the sales price of the vehicle? (This would help me understand whether they see this as an extra revenue stream for a vehicle key or simply care about brand awareness) - What is their goal? Or do they have one?

After that I would focus on the following three segments:

1)Profitability (If they care about this) - Finacial

-What is the incremental customers/attraction we could get by implementing this idea into our vehicles (or particular vehicle)?

-What is the cost associated with this implementation?

Overall, do I make money?

2)Brand Awareness - Non Financial (If they care about this part besides profitability)

-Would this help me differentiate the company in the eyes of the consumer?

-Could the value be quantified in some way either marketing/brand recognition/etc.?

3)Risks

-Besides thinking about potential contributions, what could go wrong with this implementation that could dramatically affect my business? (Thinking about the worst case scenario)

Overall, regardless of what you think, every company has an idea in mind of their actions. At least the person who came up with it thinks that it could solve problem x,y,z,etc. So it's best to double check if it really does what it's expected and also think of some additional solutions it could bring.