This report is focused upon a well known international brand. Bayerische Motoren Werke, the German motor manufacturing company better known as BMW. The BMW Group, which consists of the BMW, Rolls-Royce and Mini is known for its high quality automobiles and cites itself and its rivals as “â€¦premium automobile manufacturers.” (BMW, 2004,)
BMW was set up in the year 1916 and was known as a niche manufacturer. This was because the of their wide range of products, featuring from motorbikes to high performance vehicles. (BMW, 2005). In the past years, BMW cars have come under scrutiny and were recently given a ‘poor’ reliability rating in the consumer magazine “WHICH?” (WHICH? 2005), a factor BMW would need to overcome.
2. The Marketing Mix
Marketing mix consists of the 4 p’s, Price, Product, Place and Promotion as defined by Lancaster and Massingham (1998). From the research and materials gathered a brief overview of BMW’s Marketing Mix can be drawn up:
BMW is a well known brand and is known for its quality and performance and therefore it all comes at a price. BMW refers to itself and its rivals as, “…Premium automobile manufacturers…” (BMW, 2004). After analysing what is said we could deduce that a premium pricing strategy is used by BMW. In the past few years prices have enhanced further by the rising costs of raw materials and oil which lead to higher production costs for the companies. (BMW 2004).
Brassington and Pettitt (1997) speak of BMW “… uncompromised presence in its traditional £15,000 + market…” By reviewing this we can say that the price range is what counts a premium price and those car manufacturers that produce similarly priced automobiles will be considered competitors.
BMW produces similar cars using similar raw materials and production costs as other manufacturers but why is there a huge price margin between the car manufacturers? The answer is brand name. Because of the brand BMW are allowed to put up a huge price mark up on their motorcars and know that people would purchase them.
According to BMW they produce the best quality products. They offer a large variety of models featuring from lower cost motorcars to highly expensive cars. A worldwide increase in demand for BMW’s products in 2009 was up from the previous years, especially in Japan, Western Europe and the USA. (BMW 2009). BMW also manufactures Rolls-Royce and Mini, and all three brands including BMW are considered as premium automobiles. However Rolls-Royce is the high end automobile of the market. The car prices are extremely high and the product itself has been given the best features and approved worldwide quality. BMW introduced the diesel engine to their cars in the year 2000, as part of their product diversification and expansion. Now one in three BMW’s produced has a diesel engine. (BMW, 2004). BMW have tried to maintain new innovations to compete with their products in the market. All these new products comes with up to date modifications and spec which shows that BMW are interested in obtaining new customers and pleasing returning customers.
BMW are based in Germany and therefore they manufacture and deal with their products from there. Their Head quarters are in Germany. BMW lists the following countries as their key markets and their percentage of sales volume from each in 2005-2006. (BMW, 2006).
United Kingdom 12%
By looking at the table we can see that “Others” could include countries of which the wages/salaries of people are unaffordable. It could be 2nd or 3rd world countries or depending on their rate of income in the country. BMW’s main area of distribution is authorised dealerships that are in various locations throughout the United Kingdom. These dealerships offer BMW products for sale, also under lease and credit options too, with lease contracts up by 29.6% and credit contracts up 8.5% (BMW, 2004).
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BMW have recently planned to promote their brand worldwide, by opening up branches in other countries to introduce their products to their market. Currently BMW have opened a showroom in Kenya, Nairobi. Knowing it’s a 3rd world developing country. After they moved to Kenya they noticed that the roads are not good enough for the saloon cars and therefore have targeted all there 4×4 cars and off road cars to Kenya. They have been successful and have planned to stay and widen up into nearby African countries.
Promotion is a key stage or process for every business. Under the criteria Lancaster and Massingham (1998) cite the most important factors as: Personal Selling, advertising, sales promotion, public relations and publicity. BMW’s performance in 2004, which they have stated as their most successful year in its history (BMW, 2004). As mentioned previously their sales have increased, with a good promotional campaign being a key to their success.
BMW series range was advertises on world television. By observing the advert I noticed that all BMW’s are rear wheel drive, which made most sense when powering a car. The advert was so well promoted, as it showed the overall performance of the car on and off road and even showing the new features installed in the car.
BMW have recently given power to dealers to sell authorised BMW vehicles. This has attracted many people to the brand and has given BMW more opportunities to expand and sell more cars. This is a way of promoting as they offer good prices for the cars to the dealers. This allows customers to buy directly from BMW if they wish not to contact the dealers.
3. SWOT analysis
SWOT analysis is amongst the best and most well used tools when gathering audit information on a company’s Strengths, Weaknesses, Opportunities and Threats (Brassington and Pettitt, 1997). Strengths and Weaknesses relate to the current internal variables, which to an extent can be controlled, and Opportunities and Threats that are external variables, which the company has a little or no control over. (Lancaster and Massingham, 1998)
Strengths and Weaknesses
BMW have millions of strengths as a brand, company and their products. Currently BMW’s biggest strength is the wide range of products available which has been on the increase over years (BMW, 2007). As mentioned above BMW also manufacture and own Rolls-Royce and Mini Cooper which is a great strength, as it targets the entire market. So that everyone can afford a high end, quality vehicle. Mini Cooper provides a lower price range and a smaller concept car for users. The insurance group for Mini Cooper would be lower than BMW. However Rolls Royce is targeting the richer and more wealthy customers as their cars are priced at 4 times the price of an average BMW car.
BMW have also strengthened its position in Asia by opening more plants worldwide, including Shenyang, China, with its partner’s brilliance China automotive holdings ltd, which they believe will build up BMW’s positions in Asia. (BMW 2004). Due to the expansion it has given BMW larger market coverage, which Lancaster and Massingham (1998) note as one of the key attributes when analysing strengths and weaknesses.
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On the other hand every company have their drawbacks. In this case a company such as BMW would need to take all its weaknesses into consideration. In the year 2004 BMW was mentioned about its deprived performance in the motorcycle industry. BMW states that the economic circumstances of the motorcycle industry were very poor in 2004 (BMW 2004) yet they failed to capitalise in the increased number of registrations in Italy which went up by 12.8%, Spain which increased by 51.3% and the United States which saw an increase of 8.4% (BMW 2004). These markets combined equate to 32.7% of BMW’s motorcycle market in 2004 (BMW 2004). And for BMW not to take advantage of this suggests that their, “…market offensive…” (BMW 2004). Has not been as successful as it potentially could have been.
Opportunities and Treats
As stated above BMW have opened up new branches focusing on the Asia and USA markets. They could capitalise on this strengths as the economic growth of both Asia and USA are on the rise (BMW 2009). The overall countries GNP (Gross National Product) went up meaning that it would allow more customers to spend money. This is good for BMW. However the Chinese economy and GNP has been growing rapidly and therefore BMW have established to gain a lot of business from the economy.
A recognised treat that BMW could face is that the German economy and its GNP have been on the low with comparison with the USA and Asia. This is bad for BMW as it needs to make profits and in order to do this they need people who could spend. (BMW 2007). BMW have very little or no control over Germany’s economy, the threat can be summarised by BMW’s chairman when speaking of the strains on BMW into 2008, “…due to a combination of strong competition in the markets, the development of the exchange rate of the US dollar and higher price of raw materials.” (BMW 2007)
4. PESTLE analysis
Physical / Political
This aspects focuses on the environmental audit and to sustain the future, also referred to as the natural environment. (Lancaster and Massingham 1998). Which BMW has taken steps to address, BMW believes this covers, “Responsibility for economic development, for the environment and society.” BMW have considered following governmental rules to reduce emissions and produce cars which cause less pollution.
Germany’s poor GNP increase in comparison with other countries such as Asia and USA has demonstrated its poor growth in the global economy. The British pound, US dollar and Japanese yen currencies account for 80% of the BMW Group’s exposure. (BMW 2008). With such weak economic positions against a large proportion puts BMW in an economic risk situation.
A change in taste by the society has lead BMW producing BMW powered cars across their range, including convertible versions and the new upcoming battery powered versions. (BMW 2010). These have lead to one in three BMW cars being powered by diesel engines (BMW 2004). The change in consumer change could be due to the fact of raising fuel prices or governmental schemes to produce fewer emissions.
Recent technological advances by BMW include a dual-fuel car running on petrol and hydrogen. (BMW 2008). BMW’s innovation team believe that the future stands with hydrogen and battery/electrical powered vehicle. There would be high chances of petrol stations to have hydrogen filling features. This would create less emissions and pollution.
As per the last annual report 2009 the BMW group was not involved in any court or arbitration procedures whatsoever. (BMW 2009)
BMW have kept their brand strong by making environmental friendly cars. This is by producing a variety of cars to help people to find parking easily and to be comfortable in.
The Porter’s five competitive forces framework is a useful model for analysing the competitive nature of an industry, (Lancaster and Massingham, 1998, p.37) containing five competitive forces, which shall each be analysed:
Toyota with its new duel fuel, “Prius,” car has beaten BMW to launch such a car. Although it is not a new company, its Prius is a new product entry to the market.
The sharp rise in raw material prices in 2004 that lead to higher input costs for companies. (BMW, 2004, p.12) This poses a threat to BMW as this situation could lead to the suppliers of raw materials being in a more advantageous position.
The economic climate in 2004 lead to, “â€¦ a continuing reluctance on the part of customers to spend.” (BMW, 2004, p.7) Such a situation would require a strategy by BMW to find buyers who have the power to influence others. (Lancaster and Massingham, 1998, p.39)
Such products cans place a ceiling on prices, and competitors are more likely to use substitute products to enter a high profit market. (Lancaster and Massingham, 1998, p.39). Alternative and duel fuel cars, like the Toyota, “Prius,” as well as public transport can be considered substitute products in the car market.
The rise in prices for raw materials would affect BMW’s fixed costs, which in turn could lead to lowering prices (Lancaster and Massingham, 1998, p.39), but this is an unlikely solution for a premium automobile producer.
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