“The truth is that innovation is a key element for BMW’s success
in the premium market and one of the key motivations to buy a
BMW”
----- BMW Group
4/13/2015
BMW’s Innovation strategies
1
4/13/2015
BMW’s Innovation strategies
2
BMW MODELS VIDEO
4/13/2015
BMW’s Innovation strategies
3
Background Note
BMW founded as Aero-engine
manufacturing company in 1917
Restrictions b/o world war
Motorcycle and passengers cars
Series of acquisitions & joint venture
First motorcycle model BMW R32 in 1923
4/13/2015
BMW’s Innovation strategies
4
Followed by…..
Dixi (1929)
4/13/2015
315/1 (1934)
BMW’s Innovation strategies
319/1 (1934)
5
BMW 238 sports in 1936
..success in international racing events b/o lightweight construction,
outstanding aerodynamics, high performance and elegance….
Company prestige crossed Germany
4/13/2015
BMW’s Innovation strategies
6
Until 1950s BMW concentrated on limited no. of models and focus on other parts of Europe
BMW 507 Roadster
Powerful 3.5
lt., 8-cylinder
and lightweight
metal engine….
huge success in
automobile world
4/13/2015
BMW’s Innovation strategies
7
Rainy Days……
In 1950’s despite sustained effort to emerge as manufacturer of prestigious
vehicle faced bankruptcy on account of decline in motorcycle market
With the help of an industrial financer, Herbert Quandt BMW was able to
thwart takeover bid by Mercedes
Quandt exercised majority of BMW’s shares and initiated restructuring
exercise to bring company back on track
BMW 700, a small car, came as the much needed boost and BMW regained its
position in the market
4/13/2015
BMW’s Innovation strategies
8
As part of restructuring initiative, BMW focused on sports sedan leading to the
launch of its first of ‘New Range’ BMW’s in 1961
Greater emphasis on advertising & sales support, combined with improving
engineering and performance related aspects.
During 1970’s and 1980’s BMW expanded its operation in the USA Asia and
Australia… cars got perceived as more stylish brand than other German brands
like Volkswagen and Mercedes and became serious competitors to these brands in
the premium car business.
In 1989 BMW appointed Karl Gerlinger (master marketer) to lead marketing
division in the USA
Sales in the USA 1991…53,000 units. in 1992…. 66,000 units
Announced to set up new plant outside Germany … Spartanburg, South Carolina
(US) in 1992
In 1992 succeeded in outselling Mercedes in Germany
Acquired “ROVER” in 1994, production capacity increased by 3% to 503,526
units in 1995
4/13/2015
BMW’s Innovation strategies
9
 In 1995 introduced BMW 5 Series and Z3 Roadster as well
Positioned as elegance dynamic performance and safety
4/13/2015
BMW’s Innovation strategies
10
BMW enter into small and medium size car categories with “The compact”
1997 BMW 316g Compact and 518g touring version - first European natural
gas car manufacture.
BMW Diversification (1990’s)
BMW financial service
Bavaria Wirtschaftsagentur &Softlab
Bavaria Lloyd Reicburo
BETEK Bar-und Energietechnik
Kontron Electronic
4/13/2015
BMW’s Innovation strategies
11
BMW 1992
BMW 1998
Revenue
£ 15.97 billion
£ 32.28 billion
Net profit
£116 million
£ 462 million
In 1997 BMW ranked 69th among Fortune Global 500 companies
FIZ (Munich)
LITZ
BMW R&D Hub:
PATYO (California)
BMW Designwork & Oxnard Testing Facility (California)
4/13/2015
BMW’s Innovation strategies
12
One Sausage Three Different Length
BMW 3 Series
Focused on product efficiencies, constant generate new product/components
ideas, launched new upgraded product
4/13/2015
BMW’s Innovation strategies
13
BMW Innovation Management Model
1997 BMW approached “Business Innovation Consortium (BIC), USA”
Problems with BMW
Selection of best ideas
Difficulty in prioritizing the innovations flooding in divisions
What to do…
Selection of winning innovation with short cycle time
Integrating the innovation process into BMW’s core business process
4/13/2015
BMW’s Innovation strategies
14
By early 1998 BMW had created a well defined innovation management
process focused on
-- Unique selling propositions for each car to be launched
-- Breakthrough innovations
-- Concept cars to convey brand image at automobile shows
Role of IMP or NPD
Systematic channeling of potential innovations to actual product development
process
Ensured creative environment in the company
NPD
Innovation Research
4/13/2015
Innovation Management
BMW’s Innovation strategies
Innovation Transfer
15
Steps in BMW’s NPD process
Innovation Research
Global technology scouting
Virtual innovation agency (VIA)
Trend Analysis
Coverage of external and internal
invention sources
4/13/2015
Innovation Management
Innovation councils
Evaluation and selection
Resource allocation
Monitoring and reporting
Annual process
BMW’s Innovation strategies
Innovation Transfer
Definition of vehicle USP
Identification of innovations
ready for series development
Buy-in of vehicle project
16
Individual project were categorized under 4 categories
Potential Innovations
Must Innovations
Top Innovations
Breakthrough Innovation
4/13/2015
BMW’s Innovation strategies
17
The Result
By 2002 BMW significantly decreased the ‘time-to-market’ new products
and linked its revenue to the introduction of leading-edge product
Focus on strengthening its position as market leader in the premium segment
Adopted product offensive strategy,
increased R&D expenditure by 53%,
reduced time b/w idea generation and product development,
complaints came down drastically,
i-Drive technology, Active Steering
Revenue in 2002 $49.5 billion (9.9% increase compare to 2001), profit $2.36
billion (8.3% increase compare to 2001)
4/13/2015
BMW’s Innovation strategies
18
The result
4/13/2015
BMW’s Innovation strategies
19
The result…..
4/13/2015
BMW’s Innovation strategies
20
The Result…..
$29,400
$75,600
4/13/2015
BMW’s Innovation strategies
21
Source: - http://www.businessweek.com/magazine/content/03_23/b3836005_mz044.htm
4/13/2015
BMW’s Innovation strategies
22
BMW
4/13/2015
BMW’s Innovation strategies
23
Marketing Mix
Product
BMW 3Series : Sedan, Coupe, Convertible, Touring, Compact
BMW 5Series : Sedan, Touring
BMW 6Series : Coupe, Convertible
BMW 7Series : Sedan
BMW Z4 : Roadster
BMW X3
BMW X5
BMW M : Sedan
Mini One
Mini Cooper
4/13/2015
BMW’s Innovation strategies
24
Price
BMW price range are from £ 16,000 to £ 60,000
Place
Globally
4/13/2015
BMW’s Innovation strategies
25
Promotion
Same advertising company WCSR since 1979
James Bond film The World Is Not Enough (Z8 before its launch)
Austin Power 3-Goldmember -( Mini cooper)
“VIRAL MARKETING”
BMW Films (e.g.. ‘The Hire’ - increased sales
by 12.5% in 2001 compare to 2000
Marketing campaign ‘The Ultimate Driving Machine’
Golden Eye: BMW Z 3
Tomorrow Never Dies: BMW 750iL, R1200 Motorbike
4/13/2015
BMW’s Innovation strategies
26
segmentation
Geographic
Region
Density of area
Globally
Urban
Demographic
Age-above 30
Income-$ 25,000 and above annually
Occupational-professional, Businessmen
Psychological
Personality
Extrovert, Novelty seeker
Learning involvement high
Perception
low risk
Attitude
positive
4/13/2015
BMW’s Innovation strategies
27
Psychographic
Lifestyle segmentation
Socioculture
Social class
Behavioral
Benefit
Loyalty status
Readiness stage
4/13/2015
---status seeker
---middle upper and upper
---safety, elegance, technology
--- medium
---aware, interested
BMW’s Innovation strategies
28
Positioning
Attribute
Image
Differentiation
Image
4/13/2015
BMW’s Innovation strategies
29
SWOT ANALYSIS
STRENGTH
Diverse ranges of Products - BMW, MINI and Rolls-Royce
Strong Cash Flow Position
Increase turnover and trading profit
Strong Balance Sheet
World's leading Premium Quality Automobile Manufacturer
Brand Awareness
Human resources
Capabilities to turn resources into advantages
4/13/2015
BMW’s Innovation strategies
30
WEAKNESSES
Perception of High Prices
Customer disinterest
Environmental issues: Pollutions
Buyer sophistication and knowledge
Substitute products or technologies
4/13/2015
BMW’s Innovation strategies
31
OPPORTUNITIES
New Products
Market shift to globalization
Innovation & Alliances
Customers demand change to more comfortable and relevantly cheap cars
Diversification
New Technologies in Automobiles
4/13/2015
BMW’s Innovation strategies
32
THREATS
New & existing competition
Volatility in Price of Fuel
New legislations
Consequences of the oil crisis
Economic recession
Market shift to globalization
Far-East Automobile companies expansion
Extremely high competition for customers and resources
4/13/2015
BMW’s Innovation strategies
33
Need
--------
Acquired Need)
Ego need (Self Esteem, Prestige, Status)
Goals
--------
Product Specific Goal
Motivation
-------
Emotional Motive (Pride, Status)
Personality
--------
Superego, Compliant/Aggressive Individual
Personality trait
--------
Social character
--------- Other-directed
Optimum stimulus level
-------- High
Variety/Novelty Seeking
Exploratory Purchase Behavior
4/13/2015
Low dogmatic
BMW’s Innovation strategies
34
Cognitive Personality
-----
Low NC
Brand Personality
-----
Sophistication
Makeup of self-image
------
Ideal Social Self Image
Learning
------
Level of involvement
-------
Stimulus Discrimination
------
4/13/2015
Cognitive
very high (Extensive Buying)
BMW’s Innovation strategies
35
4/13/2015
BMW’s Innovation strategies
36