Global Strategy: Mercedes vs. BMW

The world's luxury-car leaders are debating how big a company has to get to afford the new technologies their customers demand

When Daimler-Benz, the maker of Mercedes, took over Chrysler three years ago, it argued that globalization demanded not just speed but also size. Selling dozens of models in every price range, the reasoning went, was the only way a car company could afford the huge investments necessary to incorporate the latest technologies. That meant that if you were a small independent, you would have to merge--or face the Darwinian consequences. So Daimler coupled with Chrysler, Renault bought Nissan, Ford scooped up Volvo, and everybody mused that it was just a matter of time before the biggies gobbled up BMW and Honda,...

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