An Over View Of The Bmw Company Marketing Essay

The symbol of performance, power and luxuriousness, all pooled into its power packed machines that are really a pleasure to watch, drive & own, is none other than the famous

i.e.

Bayerische Motoren Werke Aktiengesellschaft

which is

Bavarian Motor Works Corporation

as translated in the English

Bayerische Motoren Werke Aktiengesellschaft i.e. BMW AG is the manufacturer of automobiles that is famous in market with its high performance luxury cars. The History of BMW is one of cutting edge innovations and extraordinary automobiles. BMW history started with the pioneer creation in the filed of aviation engineering. BMW was founded as Bayerische Flugzeug-Werke by Karl Friedrich Rapp in year 1913 in Munich, Germany. Initially it was created for the manufacturing of aircraft engines. Then after the World War I the leadership felt strong need to adapt their small company’s production activities for the peacetime. Then in 1917 it was transformed into Bayerische Motoren Werke Aktiengesellschaft (BMW AG) which is the BMW which we know today.

Starting its journey from 1917, BMW in 1923, built the first motorcycle and then in 1928 bought a car factory with license to build a small car called the Dixi. BMW continues flourishing itself with a superior reputation and high quality of products. The expedition from Dixi, stepped into the milestone of its history when BMW gave the gift of Hybrid cars to this planet.

BMW is a brand, not just a company. The BMW brand manufactures automobiles built on engineering precision, manufacturing excellence, and performance. These days, BMW Group is a powerful international group represented all over the world with more than 96,000 employees and over 1 million vehicles sold every year and has worldwide subsidiaries and manufacturing plants in Germany, Austria, UK, the USA, Mexico and 8 other. The BMW Group has meanwhile become one of the ten largest car manufacturers in the world with BMW, MINI and Rolls-Royce brands which are the three of the strongest premium brands in the automobile industry.

Now I would like to comment on the Strategic position of the selected company in the next section of the report.

Strategic position:

In this section of the report I would like to discuss three main things which are:

Environmental Analysis

Resources and capabilities

Strategic synopsis

So now we will look these three in more detail one by one.

Environmental Analysis:

Environmental analysis includes:

The macro-environment and long term trends:

The industry structure and competitive environment

Customers, markets and market segments

Macro-Environment & Long Term Trends:

The effects of external environment on the strategies of an organization are difficult to predict when it is changing rapidly. Here we are using PESTEL analysis to determine the factors which can affect the organization’s strategies.

PESTEL Analysis:

The word PESTEL is the Acronym of:

P- Politics

E- Economical

S- Social and cultural

T- Technological

E- Environmental &

L- Legal

These all factors are the external factors which influence the organizations on broader level.

Now we will see how these factors can affect the whole industry and BMW.

Political:

The concept of globalization has also penetrated in automobile industry due to the creation of importing international facilities. Whenever products are being traded nationally or internationally it has to go through with different types of policies and laws.

These types of policies and regulations can impair the operations of company. The efforts to minimize or completely eliminate the non-tariff barriers will also affect BMW.

BMW can benefit from the Free Trade Area to reduce regional tariff.

Being global increase in taxation and import and export duties in some countries affect the company in its expansion plans.

Economic:

During the last year financial crisis affected the consumers in every part of the world and also every industry. So the consumer preferences are changing considerably towards more fuel-efficient vehicles.

The current rise in the oil prices and crisis in the gulf and the global decrease in the oil reserves shows the limitations. Consumers preferences changes considerably and they wish they could have automobiles which are cheaper to drive i.e. they need the fuel economy.

The exchange rate fluctuations also have positive and negative impact sometimes on the industry.

Social:

There are number of factors which affect the industry including:

The population of some countries is increasing which put pressure on the governments of those countries to redesign their public transport and make it more useful. This can affect the sale of automobile sector.

Increase in education and environment awareness is also compelling the people to decrease the use of their private cars. This can also affect the BMW, because the main target market of BMW are the young people who are considered to be most educated.

Technological:

Technological advancements were and will always be there to affect the automobile industry both in positive and negative ways.

The development and introduction of new technology in automobile industry force companies on huge investments. Recent advancements in the form of Hybrid, hydrogen and efficient dynamics all become possible with the huge investments. The one who early exploit evolution in technology to make their machines advance and focus on innovation will earn more revenues and get competitive advantage.

Environmental:

Due to the increasing pollution problem and its affects on the ozone layer companies nowadays craving for renewable energy sources to make the automobile ecologically competitive.

Change in the consumer preferences towards the use of eco-friendly cars.

End of life vehicle take back and recycling

Legal:

Environmental rules and regulations on exhaust fumes get tightened around the world to diminish the emission of carbon dioxide.

Employment laws which vary from country to country affect many global companies.

Establishment of tax free zones

So these external factors given above generally affect the automobile industry as a whole and so to the chosen company which is BMW.

Now we will move towards the industry structure and competitive environment in the next section.

The industry Structure & Competitive environment:

The structure of an industry and ability of firms to act strategically depend on strength of five forces, their analysis allow organization to develop the competitive advantage.

Porters Five Forces:

Porter Five Forces includes:

Porter Five Forces tell us about the attractiveness of the industry. Now I will discuss them individually in the following paragraphs.

Threats of New Entrants:

There are many factors which are affecting the entry of new player in the industry. Analysis shows that there are strong commercial and competence barriers in the way of new entrants. The commercial barriers include:

Distribution Network

Brand Reputation

And competence barriers are:

Advanced Technology

Experience

The entry into the automobile industry is low also due to the huge capital investment and cutting edge technology. The development of new brand from scratch is not easy.

Threat of Substitutes:

The threat of substitute will be public transport in heavy populated countries, because people need parking for their cars and usually it is expensive so this substitute may be faster trains in the developed countries.

BMW has a brand image of being powerful and luxurious thus positioned in the exclusive car range where there exist many substitutes for BMW like Mercedes Toyota and GM. The threat of product-to-product substitution for BMW is relatively medium.

Bargaining Power of supplier:

In today’s business environment quality have led to a situation where only the most profitable and providers of high quality supplies could continue to exist. Due to the concentration process, the surviving suppliers have high bargaining power as they are getting large ordering volumes. So no one wants to compromise on quality especially in this automobile industry because switching to other supplier can also affect their quality.

BMW had a good supply chain management system. They have developed long term relationships with their suppliers which is very productive and helpful but still the final word lies more or less with the suppliers giving them more strength.

Bargaining Power of Buyers:

It is high because consumers – especially after globalization have many choices from which to select.

BMW and its competitors are positioned as in exclusive product range. Here the bargaining power of buyers is high because the consumers can decide the product according to the price range and also due to the environmental issues also affects the buyer’s decision making.

Competitive Rivalry:

The automobile industry is very concentrated, fix costs are high, transfer costs are low, and competition for its products is high. Due to these factors competitive rivalry among international carmakers is also high especially from the Asian Markets.

Key Drivers of Change:

The key drivers of change from the PESTEL and Five Forces Analysis discussion are:

The automobile industry grows in size as well as their scale of production which reduce costs of production and final price of their product.

Organizations have developed strong customer knowledge and special levels of service.

Access to distribution channels to create high barriers and to facilitate their survival.

Environmental issues

Development of new technology and

Branding of the products

Customers, Markets and Market Segments:

BMW has managed to position its self on the customers mind is superiority, performance, technologically advanced, quality automobile manufacturer.

Customers:

The BMW automobiles are sold to a special target market and appeals only to a particular stratum society. BMW vehicles are classy, stylish, comfortable and luxurious so the target customers of BMW are upper middle class to upper class young individuals, families and also businesses who focus on greater performance and sustainability.

Markets:

The markets that BMW would normally or likes to target are Sports Convertibles, Executive, Super Executive, Touring / Estate, Super sports and four wheel drive vehicles.

Market Segments:

BMW uses segmentation to identify specific buying characteristics. To find more information BMW looks at the geographic, demographic, behavioural, socioeconomic, and beneficial characteristics of society which helps effectively targeting the market.

Geographically, BMW Group is present in the world markets with 24 production and assembly plants, 43 sales subsidiaries and a research and development network. The main markets for BMW are Europe & North America.

The demographics of people who are able to purchase a BMW are men and women aged 30 – 50 years old. These people have a good image in their mind and the benefits required by these people are superiority, performance, reliability & quality.

Now I would like to throw some light on the resources and capabilities of the BMW in the next segment of the report.

Resources & Capabilities:

In this global environment every single organization need and possess certain resources and competencies. These resources and competencies help the organizations in its survival and also to remain competitive in their particular industries and markets.

Resources are of two types:

Tangible resources

Includes physical assets like plant, people and finance of the organization

Intangible resources

Includes non-physical assets like technology, brand name, reputation, consumer information and corporate culture, are invaluable to the firm’s competitive power

Resource Based Analysis of BMW:

Physical Resources

The physical resource of BMW includes technology, conventional designed and styled, successful segmentation according to the market, valuable supply chain network.

Financial Resources

These consist of the monetary resources a firm possess and in 2009 BMW’s Turnover € 37.95 billion, Gross profit of € 5.3 billion shows the strong strength in financial resources.

Human Resources

Highly trained and qualified labour force, professionals who are young and affluent

Intellectual Capital

Renowned engineering excellence, brand identity of being powerful, reliability and luxuriousness are the key intellectual capital for BMW.

Strategic Capabilities of BMW:

The strategic capabilities can be analysed in four different ways which are as follows:

Threshold Resources

Integrated supply chain, trained employees, wide spread production and assembly units are threshold resources.

Unique Resources

The unique resources which are the source of competitive advantage for BMW are its reputed Engineering excellence and high quality of labour force.

Threshold Competencies

The threshold competencies held by BMW are Quality, reliability, dealings and supplier relationship

Core Competencies

Core competencies in BMW can be Technology, speed of production and the concepts of ultimate driving machine and efficient dynamics

These were the resources and capabilities of BMW. Now we will look at the sources of cost efficiency with respect to BMW.

Sources of Cost Efficiency:

BMW can achieve cost efficiency four the following four factors which are:

Product/Process Design

Economies of Scale

Supply Chain

Experience

Product/Process Design:

It is a key cost driver and BMW is considered best due to its engineering excellence. It’s extremely reliable, lavish and leading. The new and modern technology allows BMW maximum utilization of the working capital.

Economies of Scale:

The economies of scale, is an important driver for the cost efficiency. It is being achieved by increasing production capacity of the BMW. The capability to swing its operations for less number of hours a week during slow demand and increase number of hours a week when there is high demand makes BMW more cost efficient.

Supply Chain:

The supply costs in BMW are managed by setting up manufacturing units at different geographical locations like Germany, USA, South Africa, UK and China. Due to this supply costs are reduced with assembly units operating more flexibly and reducing raw materials transportation costs.

Experience:

The cumulative experience is supposed to reduce the unit cost of BMW products.

BMW got almost more than 90 years of experience. The number of units produced increase every year which in competitive market situation should decrease the unit costs.

Value Adding Network

One organization can not manage all the value based activities from the design of the product to delivering the final product to its customers. Here comes the concept of Value Network.

The BMW derives value from its major business processes concerning all value chain activities. I have selected the value chain analysis because it describes all major activities within and around an organisation. The two main types of categories in value chain are:

Primary Activities:

These are directly concerned with creating and delivering a product

Support Activities:

They are not directly involved in production, may increase effectiveness or efficiency and it’s not necessary to undertake all of these into one business.

BMW has number of assembly locations as well as manufacturing units. Each assembly unit have its own supplier of raw materials. There is also an internal value chain of the assembly liners within themselves. The completed product is again reciprocated to the suppliers and collectively it gives rise to the value chain of the BMW. The organization has its own channel value chain and it is divided on the basic of design, price and geographical locations. The company offers its potential customers no. of different products. They are priced differently and segmented effectively in response to the target market or segment. There are also price differences according to the locations. For example BMW is priced on a slight lower side in the Asian markets as compared to America and Europe.

There are few limitations in some aspects because of the high complexity in the company the above discussion shows importance of value chain. Now I would like to give SWOT analysis of BMW.

SWOT Analysis:

SWOT is the acronym of:

S- Strengths

W-Weaknesses

O- Opportunities &

Threats

Let’s analyse what are the strength, weaknesses, Opportunities and threats of the BMW.

Strengths:

BMW is a renowned company with a high position in terms of branding and quality. This strength is particularly useful in market positioning, gaining new buyers.

BMW is able to sustain its market position effectively with its exclusive cars.

BMW has highly qualified labour force that is a source competitive advantage

Use of advanced technology for its products, embark its products design, price and quality.

Effective supply chain management

Strong Financial Position

Weaknesses:

Competitors are producing their products with relatively low cost.

Overdependence on US and Europe market

Use of shared components i.e. if cars are using shared components or if they are too similar, it could lead to cannibalization of the sales of higher priced models.

Opportunities:

Use of advanced technology for the products in the coming years

Sales in developing countries like India and China

Developmental and manufacturing flexibility

Improved customer care

Threats:

Increase in competition in the luxury market segment

Fuel costs are increasing

Increase supply costs e.g. steel

So by looking at the above discussion we can say that it’s not a big problem for BMW to convert this type of weaknesses into strengths and threats into new opportunities.

After this all now I would like to throw some light o the strategic synopsis of BMW.

Strategic Synopsis:

BMW Group achieved positive group earnings for the 2009 financial year, despite the global economic. Company remains the automobile industry’s leading prestigious car producer.

Last year more than 1.28 million customers purchased a BMW, MINI or Rolls-Royce.

BMW is one of the world’s most innovative companies and is in very good situation with lots of new ideas and strategies for the future. They successfully mange to reduce fuel consumption and is the result of their wide-ranging goal of achieving lower CO2 emissions. This target embraces the following things:

The vehicles produced by the BMW Group are marvellous blend of dynamics and efficiency and are the market leader in their segments.

Efficient Dynamics technology is now common feature of all vehicles.

Currently BMW has the clear policy of fulfilling all laws related to emission.

In addition to the above points they also set a long-term reduction target which is from 2008 to 2020 the CO2 emissions of cars are to be reduced by at least another 25 %. To achieve this target and to move even closer to sustainable mobility, they are proceeding in a three step strategy:

BMW will continue to develop Efficient Dynamics technology.

In the medium term they will achieve greater fuel economy through electrifying the drive train and developing hybrid solutions.

In the long term, they are committed to electro mobility and the use of regenerative produced hydrogen.

The next….

They presented a concept car at the IAA 2009 that is powered by a three-cylinder turbo diesel engine and two electric motors which illustrate BMW Vision of Efficient Dynamics. Its design combines lightweight construction throughout with aerodynamic qualities.

Environmentally friendly automotive technologies

They are constantly working on reducing the environmental impact of their vehicles by adopting a broad range of further innovations designed to reduce the levels of carbon dioxide (CO2) and nitrogen oxide (NOx).

They are also investing heavily for the future projects and also in sites like India and China.

The “Strategy Number ONE” lays the basis and sets out a vision that is to be the leading provider of best products and best services in the year 2020 for individual mobility. Number ONE stand for “New Opportunities & New Efficiencies”

The main four pillars of Strategy Number ONE

Future,

Growth,

Customers &

Profitability

New directions with Strategy Number ONE:

BMW is heading towards the new direction under Strategy Number ONE. The company is also considering achieving economies of scale in an effective and efficient way with new collaborations and keeping in hand and relying on strategic partnerships with the best partners.

Company is focusing on increased use of shared modules between models and brands which will enable them to further reduce costs throughout the entire process chain, but still maintaining high quality.

The industry is currently in a period of tremendous technological change. In order to be successful on the marketplace, companies must find the right answers to the challenges of tomorrow.

“Our ideas and actions are geared towards the long term. Our strategy provides us with the plan for shaping our own future.”

Norbert Reithofer

The plan for future will be discussed now in the next section of report which is all about the strategic choice.

Strategic Choice

Here now I would like to discuss the strategic choices available to company using the following well known models:

Ansoff Strategic Direction Matrix

Expansion Method Matrix or Method of development

Porter’s Generic strategies &

So let’s see what options available to BMW according to current situation with the help of Ansoff Matrix. Then the possible methods of development followed by analysis of Porter’s Generic Strategies and explanation.

Analysis of Ansoff’s Matrix:

Ansoff matrix offers us four different kind of strategic options keeping product on one side and markets on other. These include

Market Penetration:

This works by giving existing products in existing markets and can be achieved by greater marketing efforts.

Product Development:

When we offer new products to existing markets it is known as product development.

Market Development:

Market development is a strategy of offering existing products to the new markets.

Diversification:

When we go for the new products and choose totally new market is known as diversification.

Choice for BMW:

After the careful analysis of Ansoff Matrix I would suggest two strategic choices for the BMW which are:

Product Development

Market Development

These two strategies are the best fit for the BMW because aims of the company can only be achieved if they follow both together. If we consider the discussion of previous section of this report we will notice the suggested strategies match with situation and position of BMW. Now let’s see how they will work for BMW.

Product Development:

Nowadays societies and governments are more concerned towards the ecologically friendly products and is the source of gaining competitive advantage. It is also necessary for the survival of any company especially in the automobile industry where carbon dioxide and nitrogen oxide are targeted most. So product development is very strong strategy for BMW.

Product development involves giving:

Hybrid Solutions,

Light Weight products

Efficient Dynamic system

Market Development:

Market development is also a very important aspect for the BMW’s future success. There are new untapped markets which has very high potential for growth. These include:

China

South Asian

Middle East (some countries)

Asia Pacific (some untouched markets)

These are the regions in which the economies are growing rapidly and these countries are full of educated young professionals who want car as status symbol and is also become necessity.

Method of Development:

BMW mainly grow through internal growth i.e. organic growth. Organic growth can be beneficial if it wants to grow in its home market but on the other hand keeping in mind the historical moves by BMW I would like to suggest the hierarchy of options according to their suitability for the growth on the international or global level. So BMW can pursue growth by:

Joint Ventures &

Acquisitions

The joint ventures and acquisition strategy is recommended for the BMW if they want to expand internationally. I have suggested these because:

In some countries we need to involve locals as there are some time restrictions on the percentage of ownership in the business by governments.

Local operators always have good knowledge of market.

The local manufacturer may have already developed supply chain system.

Local companies may have strategic relations with supplier.

They better understand the choice and preferences of consumers.

So it is better to go for some joint ventures on first place and then the second choice could be acquisitions.

Porter’s Generic Strategies:

According to Porter’s generic strategy BMW in the automotive market lies on product differentiation quadrant.

Through sustainable competitive advantage the differentiated automobiles of BMW are able to satisfy the needs of their customers. This allows BMW to desensitize the prices of their automobiles instead focus on the values that generate not only a comparatively higher price but also a better margin. BMW’s advantage of differentiation is created through additional value which is achieved through variety of means, such as quality, service, and brand image.

With this strategy they have served variety of customers all over the world which also differentiate their vehicles in the mind of customers. The customers of BMW are willing to pay higher prices.

Thus, successful differentiation by BMW allows customer loyalty, making customers less price sensitive and shielding the business from other competitors.

Recommendations for Action:

BMW has been claiming form last many years that it offers Ultimate Driving Machine to its consumers. It is consistently providing the product line that tells itself about the brand. BMW’s high quality and products with superior engineering excellence and performance has overshadowed other manufacturers in the market.

BMW has never compromised on its product quality and engineering excellence and brought the promise that people have expected from its brand which is Luxury, Power and Performance into reality. The secret of BMW’s success is the perfect alignment of its business strategy to its brand strategy.

Recommendations:

BMW starts earning good profits again after the recession of 2009. After recession now it’s the need for searching some new sources of profits. These new sources of profit can be achieved by the recommended strategies which include:

Product Development &

Market Development

By

Joint Ventures &

Acquisitions

This is the right time to go for such strategies because the companies want to come out from the financial crisis and they can easily go for joint ventures. BMW has the good financial resources in hand which can be used for these types of expansions.

This recession will be followed by the boom i.e. growth in the economies again and this will increase the buying power of customers especially in the emerging markets like:

China

South Asian Economies

So, they should focus on these emerging markets with their existing and new products. In the same time they should not stop focusing on their existing markets because they will give them revenue by the development of their products like:

Hybrid Cars

Efficient Dynamics

Light weight Automobiles

These types of innovations are obviously the finest way of sustaining and increasing the market share of company and attaining competitive advantage upon their rivals.

The future starts now……..

Speed is what defines change today – where standing still means going backwards. Every day we break new ground with our ideas. We are pioneers building our own future. We have world-class employees – a team that efficiently networks talent and knowledge. And a corporate culture where every individual outstanding achievement strengthens the BMW Group’s claim to leadership.