"Driving a BMW, riding a Mercedes-Benz" must be familiar to everyone. Two sentences accurately describe the characteristics of the two cars. The "open" of driving a BMW refers to the car's top-notch handling, making driving a pleasure. The "sitting" of a Mercedes-Benz reflects the vehicle's focus and investment in the interior, giving passengers extraordinary comfort from sight to touch.
I once interviewed an experienced driver who has driven a BMW for many years, and his experience was “stable and refreshing”. As someone who only touched a manual Santana when I was taking the driver's license test, I have never enjoyed the thrill of driving a BMW, but I have deeply experienced the stinging pain that comes from the tailbone after sitting in a BMW for 2 hours. You really can’t sit on a BMW for too long.
Today I am not here to complain, I just want to use a financial perspective to understand the management implications of this familiar sentence in life.
Michael Porter and value chain
There is a theory in finance called value chain, which was developed by Michael Porter Porter was first proposed. Does the name sound familiar? right! Another theory, "Porter's 5 Forces Analysis", is named after him. He is a well-known management scientist in the world today and a professor at Harvard Business School. He is known as the "Father of Competitive Strategy."
Let’s introduce the concept and components of value chain. Simply put, it is to decompose the business and production activities of the enterprise into several components, which are: Research & Development - Design - Production - Sales (Distribution) - After-sales Service (Customer Service) . These parts are connected together like a chain to create value together, so it is called a value chain.
BMW’s R&D VS Mercedes-Benz’s design
BMW focuses on the R&D and upgrade of control engines. According to reports, the BMW Group's R&D expenditures in 2018 accounted for 6.5-7% of sales, about 7 billion euros, an increase of nearly 1 billion euros from 2017, and the profit before interest and tax has remained in the range of 8-10 for 8 consecutive years. Making the BMW Group “the automobile company with the strongest investment in R&D”. It can be seen that Research & Development is the most value-creating part of BMW's entire value chain.
Let’s look at Mercedes-Benz.
According to reports, Mercedes-Benz returned to the top spot in the world's luxury cars in 2017, relying on the successful appearance and interior design of new products, leading the "curved surface design" trend. In terms of interior space, Mercedes-Benz fully considered the needs of local Chinese families and designed the rear seats to be "incomparably comfortable". This news is really great. No matter how long I sit, my tailbone will no longer hurt. Therefore, Design is the most value-creating part of Mercedes-Benz's entire value chain.
If these two car giants exchanged the parts that they invested the most in, then maybe BMW would be more comfortable to sit in and Mercedes-Benz would be more exciting to drive, but the two of them would also tend to It's close enough to be mediocre.