Reference no: EM132847282
SMART CAR: Introduction
In 1994, the Swiss Corporation for Microelectronics and Watchmaking Industries (SMH) (read: Swatch) teamed up with Daimler AG (Mercedes-Benz) in order to develop Swatchmobile (read: SMART cars). The objective of the joint venture was to develop an innovative, subcompact, economy car designed to reach speeds of up to 130 km per hour while getting 115 km (72 miles) per gallon. The objective of the joint venture was to design and produce 200,000 cars. The international joint venture would combine Mercedes' knowledge of how to design and build cars with SMH's knowledge of microtechnology design and automated production.
The board of directors of both Mercedes as well as Smart decided to locate the international joint venture in Biel (Germany). Approximately 80 engineers were employed during the design stage of the vehicle. These engineers were initially recruited by both Daimler AG as well as SMH respectively and asked to work for the international joint venture. The common language that was spoken was German (A large section of Switzerland is German speaking). It was the first time that both organizations had worked together and it was unique that a watchmaker and a car manufacturer worked together in the car-making industry.
Background information
(Daimler AG) Mercedes Benz:
Daimler AG (commonly referred to as Mercedes-Benz) is a German multinational automotive corporation headquartered in Stuttgart, Baden-Württemberg. It is one of the world's leading car and truck manufacturers. The company was renamed DaimlerChrysler upon acquiring the American automobile manufacturer Chrysler Corporation in 1998, and was again renamed Daimler AG upon divestment of Chrysler to Cerberus Capital Management in 2007. As of 2020, Daimler owned or had shares in a number of car, bus, truck and motorcycle brands including Mercedes-Benz, Mercedes-AMG, Smart Automobile, Detroit Diesel, Freightliner, Western Star, Thomas Built Buses, Setra, BharatBenz, Mitsubishi Fuso, MV Agusta as well as shares in Denza, KAMAZ and BAIC Motor. In 2019, Daimler sold 3.3 million vehicles. By unit sales, Daimler is the thirteenth-largest car manufacturer and is the largest truck manufacturer in the world (source Wikipedia.com)
SMH (Swatch)
The SMH (Swatch Group Ltd) is a Swiss manufacturer of watches and jewelry. The company was founded in 1983 by the merger of ASUAG and SSIH to move to manufacturing quartz-crystal watches to resolve the quartz crisis threatening the traditional Swiss watchmaking industry. The Swatch Group employs about 36,000 people in 50 countries. In 2016, net sales were 7.533 billion Swiss francs (CHF), a decrease of 11% from 2015 results. The group owns the Swatch product line and other brands including ETA, Blancpain, Breguet, Glashütte Original, Harry Winston, Omega, Longines, Tissot, Mido, Hamilton, Certina, and Rado.
How should Mercedes-Benz and Swatch govern the international joint venture? Make sure that you first identify the threat of opportunism. You can then link the governance mechanisms to the potential level of opportunistic behavior. Please make sure that you explain your rationale and develop your solution in a structured manner.