The History Of Bmw Stretches Marketing Essay

Published Date: 23 Mar 2015

The History of BMW stretches back almost 90 years and has a number of achievements as its benchmark.The origin of BMW group date back to 1913 by Karl Friedrich Rapp, in Munich. Initially the company manufactured aircraft engines but when The Treaty of Versailles was signed in the same year, it prohibited BMW from building aircraft engines. In the year 1917 it was renamed as Bayersiche Motoren Werke (Bavarian Motor Works), or BMW, as we it know today.

In 1990 BMW re-entered the aircraft engine manufacturing business after forming BMW Rolls-Royce GmbH jointly with Rolls Royce. Today BMW has its head office in Munich, Germany and manufactures and sells motorbikes and automobiles having three premium brands being: BMW, MINI, and Rolls Royce cars. Today BMW has its presence in over 160 countries with 21 manufacturing units in four continents. It employs over 96,000 people and sells over 100,000 vehicles every year worldwide. The Group focuses on three cornerstone of vehicle maintenance expertise, which are Quality, Efficiency and Innovation. The BMW engineers enter the production developing innovative, convenient and drive-focused service features that ensure best performance.

In this section of the report we would emphasis on

Environmental Analysis

Resources and capabilities

Strategic synopsis

Environmental Analysis:

The macro-environment and long term trends:

The industry structure and competitive environment

Customers, markets and market segments

MACRO-ENVIRONMENT AND LONG TERM TRENDS

PESTEL analysis helps us determine the factors which majorly affect the strategies of a company

The word PESTEL is the Acronym of:

P- Politics

E- Economical

S- Social and cultural

T- Technological

E- Environmental

L- Legal

POLITICAL FACTORS:

The term Globalization has become an essential part of the automobile industry due to the demand in international market. Companies have to abide by many laws and policies.

Political Factors affecting BMW are:

a) Taxation Policy

b) Employment law

c) Foreign trade regulation etc.

ECONOMICAL FACTORS:

Economic changes affecting the group are:

During recession BMW had to strengthen its individual brands and the product portfolio in order to reduce the negative economic effects.

The currency rate changes also affect the company's policies.

Fiscal and interest rate policies have to be kept in mind.

SOCIAL AND CULTURAL FACTORS:

Social and cultural changes that can affect this company are:

The BMW Group has to make an effort to contribute actively to safeguard and develop the society at all its locations and beyond.

The Group has to derive the core themes of its social commitment from its corporate objectives and its corporate culture, which combines success orientation, cosmopolitanism and trust. These themes include traffic safety, education, intercultural exchange, HIV/AIDS fight etc.

TECHNOLOGICAL FACTORS:

This is a major driving force of an automobile industry in order to gain competitive advantage

Companies try to work on different policies to gain fuel efficiency.

They have to work on increasing the electrification of the drive train and hybridisation.

ENVIRONMENTAL FACTORS:

BMW has to go through the following environment factors.

a) Emphasising on recycling and reducing waste.

b) Abiding by the (Directive 2000/53/EC - the "ELV Directive") which keeps a check on dismantling and recycling of vehicles more environmentally friendly.

c) European Commission rules to cut CO2 emissions on new cars to 130 gms/km.

LEGAL FACTORS:

Companies have to abide by the corporate governance codes.

They also need to have a law for worker participation as well as workers benefits.

Other legal laws companies have to take into account are Dividend law, Compensation law, Stock Exchange laws etc.

The industry Structure & Competitive environment:

The industrial structure and competitive environment of firms strategically depend on strength of five forces, its analysis allow organization to develop their competitive advantage.

Now we will discuss each of the following in detail.

Threats of New Entrants:

There are a number of factors that affect the entry of new players in the automobile industry.

Large capital investment is required to enter the market.

There is sensitivity to reputation which acts as a hindrance.

An advanced technology is required for this type of an industry.

This is already an over-crowded segment and a new entrant will have to start from the scratch.

But the low cost manufacturers like the FORD can act as a threat in this segment.

Threats of Substitutes:

The threat of substitution will be the public transport or car pools etc. The options people are going for now days due to different reasons like cost cutting, global warming etc.

BMW has a threat of other brands also like the MERCEDES , GENERAL MOTORS, TOYOTA etc.

BARGAINING POWER OF SUPPLIERS:

The BMW Group emphasis that corporate sustainability can only be effective if it takes into account all steps of value chain. It sets standards for its Suppliers and partners. The suppliers have less say due to the fact that BMW operates on international network called INTERNATIONAL PURCHASING OFFICES (IPOs) whose job is to identify and validate local suppliers for both its local production as well as international production network. Therefore it would be right to say that suppliers have less power due to different sourcing strategies of the company.

CUSTOMERS, MARKETS AND MARKET SEGMENTS:

Bargaining power of buyers:

There is a high bargaining power with the buyers because of a large competitive rivalry in the industry which leads to a number of options available in the car industry. There is a wide available Price and Product range available for the buyers. Therefore the ultimate power is in the hands of the buyer and not the company (BMW).

COMPETITIVE RIVALRY:

There is a high Competitive rivalry in the automobile industry. This is due to the fact that the industry is concentrated, fixed cost is high, competition is high and also that each player wants to be ahead of its competitor by taking its innovation to the market as quickly as possible.

BMW Group has managed to have a good brand image amongst the young and the affluent. Today the other name for BMW is Quality, Performance and Technology.

CUSTOMERS:

The customers of BMW have one thing in common which is their appreciation of driving fun and sporty yet elegantly designed cars. The cars are classy, elegant and luxurious and target the upper class of the society. They study each segment of customers and try to target them individually. For example they made BMW 3 SERIES Convertible and BMW Z4 for females, BMW X Models for families with children etc.

MARKETS:

The target markets of the BMW Group are Sports Convertibles, Super Executives, Executives, Touring/ estate, Super Sports and Four Wheel Drive vehicles.

MARKET SEGMENTS:

The BMW Group uses segmentation to identify the buying characteristics. The company takes into account all the forms of segmentation like: Geographical, Demographical, Behavioural, Socioeconomic, etc. In order to target the market efficiently. Be it the Motor cycle or the Resale of cars the company takes into account each of the following segments in order to have successful business performance.

RESOURCE, CAPABILITIES AND STRATEGIC ASSETS:

Every organization needs and possesses certain resources and capabilities for its smooth running as they help a firm in its survival and maintaining its competitive edge. The different resources of BMW we would be talking about are:

FINANCIAL RESOURCES: The group has good financial back up. Recently it made a Profit of 126 million Euros in its third quarter. The firm works continuously to improve its Cost and Revenue to offset the impact of current market conditions.

HUMAN RESOURCES: All the employees are distinguished by their personal responsibility, flexibility and dedication. The group values its human resource by giving them attractive packages, financial benefits and employee family policy.

INTELLECTUAL RESOURCES: The group has renowned engineering excellence, its own brand identity, reliability and luxuriousness that acts as an intellectual resource for BMW.

PHYSICAL RESOURCES: BMW's technology, its conventional designs and styles, its effective segmentation of the market, its supply chain management all are its key physical resources.

INTANGIBLE RESOURCES: It goodwill with customers. Its brand name, its product quality, the durability and reliability of its product and effective supplier chain management all are its intangible resources.

STRATEGIC CAPABILITIES:

The strategic capabilities of the group can be divided into four parts:

THRESHOLD RESOURCES: The threshold resources of the group includes its dedicated employees, its supply and demand chain management, its integrated production and assembly units.

CORE COMPETENCIES: Favourable conditions for infrastructure, skilled labour force, ease of working conditions, technology etc all act as core competencies for BMW.

UNIQUE RESOURCES: Its engineering, future strategies ( ultra light weight carbon fibre reinforced plastics), quality labour force are its unique resources.

Strategic assets:

The strategic assets of BMW can be divided into four factors:

ECONOMIES OF SCALE: This plays a key role in any organisation as the main aim of the firm is to recover its high capital invested through larger volume of output. This group achieves this by adjusting its working hours according to its demand. The higher demand leads to more number of hours whereas reduce working hours when demand is low.

SUPPLY CHAIN: This is an important part as it includes the supply of raw material as well as efficiency of output. This acts as an asset for the BMW Group because it has its production units at different parts of the world which ensures supply chain working efficiently and reducing transportation cost.

PRODUCT DESIGN: this is a key driving force of any organisation and when it comes to BMW it is the other name for product excellence. Its designs are lavish, head turner and dependable. The Group makes maximum utilisation of latest technologies.

EXPERIENCE: BMW has been in the industry since the Second World War and experience it has no other company in the automobile industry can match and this gives it a competitive edge over others.

VALUE ADDING NETWORK:

All the processes of an organisation from the design to delivery of the product to the final customer is carried out using Value Added Network. BMW takes into account all the processes of the value network to carry on its processes because it has its assembly locations and manufacturing units around the world. There is also an internal assembly line. The BMW Group has its own value chain which is divided on the basis of Design, Price and Geographical locations. The company offers a range of products from "MINI" to the "ROLLS ROYCE". The products of the company are priced differently according to different target market. Example the BMW cars are priced a little cheaper in the ASIAN markets as compared to the AMERICAN or EUROPEAN markets.

The diagram given above is the value added network diagram used by the firms. It comprises of both PRIMARY ACTIVITIES and SUPPORT ACTIVITIES.

The SWOT Analysis of the BMW Group.

SWOT is the acronym of:

S- Strengths

W-Weaknesses

O- Opportunities &

Threats

The detailed study of STRENGTHS. WEAKNESSES, OPPURTUNITIES AND THREATS of BMW.

Strengths:

BMW is a well known company in terms of Branding and Quality. This strength has helped it achieve a strong market position.

BMW is the world's leading premium quality automobile manufacturer.

It has the capability to turn its resources into its competitive advantages.

BMW uses its advanced technology which enhances its products Design, Price and quality.

BMW's supply chain management is also its biggest strength.

WEAKNESSES:

People have a perception that BMW's prices will be high which acts as a negative point for it.

Competitors (TOYOTA, LEXUS) are manufacturing their products at a relatively low cost.

BMW is using shared components for its cars which are too similar. This is leading to cannibalization of the sales of high end models.

Opportunities:

A number of BMW's products are being sold even during economic crisis.

BMW has growing popularity in Asian growing markets.

BMW has improved its customer care which is also giving it good opportunities.

THREATS:

BMW is facing an increased completion in luxury market segment.

There is volatility in fuel prices in the market .

The company is facing price hike in its supply for example steel.

In nutshell we can say that BMW Group will not have a problem changing its weaknesses into strengths and its threats into opportunities.

Now we will do the STRATEGIC SYNOPSIS of BMW.

STRATEGIC SYNOPSIS:

BMW Group has always been the other name of high performance and cutting-edge technology. It has a competitive advantage over its competitors. Even in the current market crunch situations the Group managed to make profits and increase their sales.BMW Financial Services staff in their subsidiaries in order to analyze and optimize their business processes on their own.

Their innovations have led to a number of achievements for the company such as:

They have managed to reduce the CO2 emission levels of their all makes.

They use efficient dynamics in all the models.

All their existing models are market leaders in their own segments.

BMW has allocated their various products to different global production sites over a 12 year planning horizon. All their improved models have shown the transparency and flexibility of its strategic planning process.

The planning process of the company extends to a 12-year plan which is revised a number of times in a year and has to be approved by the board of directors of the company. They work out on their Products and Sales before they plan their Production Capacity. They aggregate the products to the level of derivatives of the product series like the sedan, coupe, touring car or the convertible. The company also works well upon each of its upcoming as well as the existing models even up to the extent that they have the decided starting date as well as the shut down date ready.

The BMW Group works constantly on the environmental impacts of their vehicle by adopting a number of innovations which are designed to reduce the levels of carbon di-oxide (CO2) and nitrogen oxide (NO2) emissions from their cars.

The Group is having a "STRATEGY NUMBER ONE" which sets out vision to be the leading provider of best products and services by 2020. The pillars the company would be using to attain this would be Future, Growth, Customers, and Profitability. The company will be focussing on increased use of shared modules between models and brands which will enable them to further reduce upon their cost and still maintain the high quality. Today the company sells BMW, MINI and ROLLS ROYCE covering the entire range and types of premium cars. Today it produces cars in eight different plants. They are continuing to develop efficient dynamics technology and would try and achieve fuel economy through HYBRID solutions.

The HYBRID models of BMW are expected to be available in 2010. The invention of HYBRID cars has made the company touch new horizons in context of technology keeping in mind the environmental issues. These developments have enabled BMW define its goals and its future strategies. The company has come up with HYBRID cars and E-CARS like the MINI-E which are environment friendly. This has given BMW a competitive edge over its competitors.

The company has managed to emerge quickly and effectively from the prevailing economic crises. They reduced upon their inventories, fixed cost and reduced upon the working hours on several plants. The company even performed well in the capital markets.

STRATEGIC CHOICES:

The strategic choices of BMW would be discussed using ANSOFF's GROWTH MATRIX

MARKET PENETRATION:

This means developing existing products in existing markets which is achieved by doing efficient marketing. BMW is having an upper hand in the EUROPEAN and NORTH AMERICAN markets. Its 3 series is still a leader in the premium middle class car segment.

PRODUCT DEVELOPMENT:

This means offering new products to the existing markets. The company is launching a number of new models in future that would expand its business like the BMW 3 series Limousine and Touring which are readily available in the European market. Some Concept and Hybrid cars would also be available in the near future.

MARKET DEVELOPMENT:

This means offering existing products to new markets. BMW is putting a lot of emphasis on entering new markets for its future prospects. It is focussing on markets like CHINA, INDIA and BRAZIL etc. The sales reached 90,536 up 38% in CHINA; 6,398 up 1195 in BRAZIL and 3,619 up 24% in INDIA, hitting a record. In these countries the economies are growing and there are young educated professionals who are going for such cars.

DIVERSIFICATION:

This means going for a new product and choosing a new market altogether. BMW has already achieved diversification through ROLLS ROYCE and developing its name in the Motorbike segment.

Methods of development:

The BMW Group can further develop itself through Joint Ventures or Acquisitions when they want to go global. This is recommended because:

There are certain restrictions on percentage of ownership in some countries.

The local operators have a pre developed supply chain system.

The local operators have good knowledge about the existing markets.

Having the manufacturing units near the production sites incur less cost.

The company is suggested to go for Joint Ventures as a first choice and Acquisition as second.

PORTER'S GENERIC STRATEGY:

According to Porter's Generic Strategy the BMW Group lies in the Product Differentiation Matrix.

BMW serves a large range of the markets but its cars are differentiated by its customers who are ready to pay a higher price for the brand as the company offers 'luxury' which has quality and features as compared to other brands like TOYOTA or GENERAL MOTORS. This allows the company to desensitize the prices and emphasis on values that lead to higher price but also larger margins.

The company has achieved differentiation through its value adding which is achieved through Quality, Service and Brand Image. Its production network also depends upon commitment and special know how of its employees.

These all factors have led the BMW Group maintain its Product Differentiation and today its Loyal Customers are ready to pay a higher price and helping them have an edge over other players in the market.

Today the BMW Group is perfectly in line with its available resources and capabilities .They have excellent engineering along with low cost operations and loyal customers. Their tag line "The Ultimate Driving Pleasure" is proving its real meaning today. It is also playing safe on its strategy in developing its name in upcoming markets.

RECOMMENDATIONS FOR ACTIONS:

The BMW Group can maintain its lead through the following strategies:

OPERATIONAL EFFICIENCIES

MARKET DEVELOPMENT

PRODUCT DEVELOPMENT

VOLUME LEADERSHIP

CUSTOMER ORIENTATION

SEGMENT LEADERSHIP

The BMW Group is working really hard over the years to maintain its position. This is the right time to work efficiently on the above mentioned strategies as the world is coming out of the recession phase. The Retail Partners are also working hand in hand with the Group by investing in their business and facilities during the financial crunch. The company has formed a strong retail network in Quebec. The company should work hard to be the sustainable leaders in the premium automobile industry.

The company can maintain social and ecological sustainability through efficient value chain, comprehensive product responsibility and commitment to conserve the resources available as part of its strategy.

The upcoming models of the company like the HYBRID models (Active Hybrid X6) and MINI-E (ELECTRIC) are both unique in their segments. These are developed to reduce fuel efficiency under load conditions and city driving but these can be worked upon to be efficient throughout a larger speed and on thrilling driving experience too. The BMW Group should also work upon increasing its sale of Motorbikes where it is currently lagging behind.

The BMW Group should also work upon emerging as market leaders in their new markets which they have entered recently like CHINA, INDIA etc. As the recession would be over soon therefore, it would give the customers more buying power. The come can take advantage of this right time to come up as market leaders in such developing countries.

The company should also work on strategies like, how the demand of the customers new or old can be fulfilled of different product variants efficiently, quickly and inexpensively. It should also think beyond just the vehicles but should also look into different fields like complete networking of information between vehicles, incorporating suitability and internet linked platforms. They can also improve the components that are used in the areas of safety and comfort in order to avoid accidents, have mobility concepts for congested areas and lead to intelligent navigation systems.

From the investment point of view the company is planning to have

A return on capital employed (ROCE) of more than 26% and sales between 8%-10% by 2012 from its automobile segment. The company can achieve these by improving costs and performance.

The BMW Group can also increase their Production Capacity at its existing plants where it sees its future demand to be more. It is already planning to increase the production at its U.S plant from 150,000 to 240,000 units by 2012. The same steps can be taken in plants in OXFORD and CHINA.