BMW Automobiles
Presented by
Even number groups
2, 4, 6, 8, 10 and 12
Presentation Layout
• Automobile Industry
• Background of the case
• Business Environment Analysis
– Macro Environment – PESTEL analysis
– Porter’s Five Forces Analysis
• Automobile Industry
• Competitors and the automobile market
• Strategic capabilities of the company
– SWOT Analysis
• Strategic position of the company in 2004
• Gap Analysis and Strategy Formulation
• Five Years Action Plan
Automobile Industry – in 2004
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One of the most important industries in the world
Provides jobs for millions of people
Shape the culture and economy
People to travel and transport goods faster and farther
Mature business, mass production and a international business.
Manufacturing, Assembling in different places.
• Started with 300 units in production in 1880s today more than 60
millions per annum.
• Demand has significantly increased in Europe, Japan and USA, for
light vehicles purchases has increased to16.9 million US.
• Imported vehicles are higher than domestically produced in many
countries.
Automobile Industry – in 2004
• Trends of global trade and manufacturing flexibility
• Usage of computer system in manufacturing – CAD
CAM, helps to improve the quality
• Enhanced features, GPS Maps, Bluetooth hands free,
entertainment, digital display.
• Alternative energy sources for cars, such as natural gas,
electricity, ethanol, vegetable oil, sunlight, and water
(hydrogen fuel cells)
• Early stages strategies like production, product and
selling has changed to marketing, ethical and
sustainable orientation
BMW Company - Brief Summary
• Bayerische Motoren Werke was established during the First
World War
• Today Benchmark Automobile producer in the world
• One of the ten largest car manufacturer
• Originated in Germany and today one of Germany's largest
and most successful companies
• Manufactures cars and motor bicycles
• Three different brands, BMW, Mini and Rolls-Royce
• Very specialized in the manufacture of engines
• Innovative, quality, advanced in technology and has
premium market
• Uses a skilled German labor force and robots
BMW Company - Brief Summary
• Production of cars has up by 4.5 per cent in
2003 to more than 1.1 million (BMW, MINI
and Rolls-Royce)
• Total company growth is by 22.4 per cent
• Main competitors are Lexus, Mercedes Benz in
the luxury segment
Environment Analysis
BMW Company
Competitors &
the Automobile
Market
Automobile
Industry
The Macro
Environment
Macro Environment – PESTEL Analysis
Political
Legal
Economical
BMW
company
Environmental
Sociocultural
Technological
PESTEL Analysis – Political Factors
• EU Parliament accepted Automobile Manufacturer’s
Association voluntarily offer to cut the amount of CO2 emitted
from car exhausts over the next 10 years.
• Company Cars : 45% of UK market fleet car sector, favorable
deals on leasing, distortion of registration figures. Taxes meant
taking payment in lieu of company car and buying own smaller
car.
• From 2002 taxed by number of miles and emissions
• Legal restraints on competition within the EU car industry are
expected to drop substantially.
• Taxes and Duty – in UK MOT, price increased. Road tax is to be
directly linked to amount of emissions.
• Subsidies : Spanish government protection for Renault, Peugeot
and Fiat
PESTEL – Economic Factors
• Strong growth in the USA and Asia
• GDP (Gross domestic product) of the USA
grew on average by 4.4%
• Germany’s economic recovery, Germany’s
gross domestic product grew by 1.6%
• Asia region strongest growth, Chinese GDP
grew in 2004 by 9.5%, Japanese economy also
grew more strongly
PESTEL – Sociocultural Factors
– Demand for low-emission cars
– Fashions and taste - European trend towards
convertibles and MPV’s(people carriers)
– Redundancies - Layoffs at Longbridge and
Dagenham ( has been on a 4 day week). Ford 8000 job losses 2000 in Europe.
PESTEL – Environmental Analysis
• Offering low-emission car is a method used by car
makers to expand sales in the mature car market.
• GMs battery operated EV1 fell flat because it required
frequent recharging.
• Now the major automakers are investing in fuel cells –
devices that convert liquid hydrogen into electricity.
• Ford, GM, BMW and Honda all have announced plans
to market competing versions.
• Aluminium cars weigh half as much as similar steel
vehicles so fuel economy is improved by approximately
40%. CO2 reduced by 20% over vehicles lifetime.
PESTEL – Technological Factors
• Alternative energy sources for cars, such as
natural gas, electricity, ethanol, vegetable oil,
sunlight, and water
• Safety - Safety sells, air bags for passengers.
• Plant efficiency - UK plants 20% less productive
than best US plants because of work practices,
indirect labour costs and infrastructure
• Gizmos - New Daewoo MPV has a Playstation
option for passengers. Use gadgets to
differentiate.
PESTEL – Legal Factors
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Home country legislation
Host country regulations
International trade regulations
Environment protection, labor rules
Porter’s Five Forces Analysis
Potential
Entrants
Suppliers
Competitive
Rivalry
Substitutes
Buyers
Competitive Rivalry
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There high number of competitors as well as variety of
models competing in the market with similar technologies.
Major competitors merzadiz and jaguar because hand made
and prestige.
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Good relationship with clients and stakeholders
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Company uses different promotional materials
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BMW regularly undertakes research into its customers'
profiles looking at demographic criteria, such as age and sex,
lifestyle, their views on motoring and the way in which they
use their cars.
Competitive Rivalry
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There high number of competitors as well as variety of
models competing in the market with similar technologies.
Major competitors merzadiz and jaguar because hand maid
and prestige.
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Good relationship with clients and stakeholders

Company uses different promotional materials

BMW regularly undertakes research into its customers'
profiles looking at demographic criteria, such as age and sex,
lifestyle, their views on motoring and the way in which they
use their cars.
How BMW segmented its market ?
• BMW regularly undertakes research into its customers' profiles looking at
demographic criteria, such as age and sex, lifestyle, their views on motoring and the way
in which they use their cars.
•Information is used across all areas of the business, from the design and development
of the cars themselves, to the way BMW advertises its brands.
•Female customers tend to prefer open driving, reflected in a preference for the BMW 3
Series Convertible and BMW Z4.
•The spaciousness and interior versatility of the BMW X Models, X3 and X5, attract
modern families with children in their households (50%-60% having at least one child).
•3 Series and 5 Series Touring models are characterised by an active lifestyle, with an
exceptionally high interest in outdoor activities, such as water sports, cycling and skiing.
•Together with the Z4, the BMW 1 series shows the highest share of urban customers
aged 39 years or younger (40%). This truly makes the BMW 1 series, not only in terms of
its launch date, a young model in the BMW portfolio.
•our female customers tend to prefer open driving, reflected in a preference for the
BMW 3 Series Convertible and BMW Z4.
•The spaciousness and interior versatility of the BMW X Models, X3 and X5, attract
modern families with children in their households (50%-60% having at least one child).
•3 Series and 5 Series Touring models are characterised by an active lifestyle, with an
exceptionally high interest in outdoor activities, such as water sports, cycling and skiing.
•Together with the Z4, the BMW 1 series shows the highest share of urban customers
aged 39 years or younger (40%). This truly makes the BMW 1 series, not only in terms of
its launch date, a young model in the BMW portfolio.
Competitive Rivalry
BMW
Product/Series
Major competitors
.bmw 1 series
Mercedes A Class, Audi A3,Volkswagon Golf and Ford Focus.
BMW 3 seris
Audi A4, Jaguar X-Type, Mercedes C-Class, Lexus IS200.
BMW 5 seris
Audi A6, Mercedes E-Class, Saab 9-5, Jaguar S-Type,
Volvo S80.
BMW 6 seris
Jaguar XK, Mercedes SL, Porsche 911 and Lexus SC340.
BMW 7 seris
Audi A8 and S8, Jaguar XJ series, Lexus LS400,
Mercedes S-Class.
X3
Land Rover Freelander, Nissan X-Trail, Jeep Cherokee and Honda CR-V.
X5
Range Rover, Mercedes M-Class, Volvo XC90, Porsche Cayenne, VW Touareg.
Z4
Porsche Boxster, Mercedes SLK, Honda S2000, Nissan 350Z and Audi TT.
M range
M3 Coupe - Mercedes C55 and Audi RS4. M5 - Mercedes E55 AMG, Audi RS6,
Jaguar S-Type R and Porsche Cayenne Turbo, M6 - Ferrari F340 and Aston Martin
DB9.
Mini
Renault Clio, Peugeot 206, Toyota Yaris, Vauxhall Corsa, VW Polo, Nissan Micra.
Rolls-Royce
Phantom
Mercedes Maybach 57, Bentley Flying Spur, Maserati Quattroporte and Mercedes
S65 AMG Limousine.
2. Potential Entrants
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Potential entrants are very high when consider the car manufacturing segment
due to the extensive research and development, design, manufacturing and
marketing processes to be carries out
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Ex / When look at the Research and Development process of BMW it includes
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Carrying out innovative technologies, covering all aspects of the car include:
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The use of new materials
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Light-weight structures
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Mechanizations
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Communication technologies
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Efficient Dynamics
Best approved designs are developed to Series readiness in BMW's pilot plant,
where all conceivable tests and trials including acoustic, climate and crash are
carried out, are more or less similar to the other car manufacturers
2. Substitutes
• substitutes give high influence to the company since
substitutes can make a company lose the clients it has.
• The company makes sure that the substitutes won’t
give them much problem. They do this by proving that
the service and products they offer are the best quality
and are better than substitutes.
• They also prove that their service is better against
others by comparing and contrasting it with substitutes
so that clients can know the difference.
• The company also tries to offer products and services
superior than substitutes so that they can attract more
clients. By offering superior products
3. Bargaining power of the Buyers
• Bargaining power of the Buyers is high
• High number of car manufacturers which
serves the same customer segment of people
who appreciate driving fun and sporty, yet
elegantly designed cars
4. Bargaining Power of the Suppliers
• Is moderate bargaining power due to the fact
that majority of their key components are
build in – house using standard row materials
and large pool of suppliers on buying those
row materials
Strategic Capability Analysis
• STRATEGIC CAPABILITY OF BMW COMPANY BY
2004
• Value Chain, Value Network, Activity Maps,
Bench marking and SWOT Analysis can be
used to diagnose strategic capabilities
HOW BMW HAS ACQUIRED KNOWLEDGE?
• RESEARCH• ADVANCED TECHNOLOGY
• COMMUNICATIVE ACTIVITIES- brainstorming
activities
Strategic capabilities of the company
MANAGING STRATEGIC CAPABILITIES
• Extending best practices by being close to the buyers
which had allowed to segment the market effectively
– E.g.
BMW automobiles has been positioned
differently and price differently in the
various national markets
• Adding and changing activities
• Stretching competencies
– E.g.
They have build up a regional development
program promoting innovation at regional level
• Building on apparent weakness• E.g. Customers went for design and brand.
Ultimately BMW was more concerned
of acquiring distinctive unique identity.
• Targeted training and development
• E.g. They have employed a highly qualified labour
force
• E.g. Organizing training programmes
• HR policies to develop competencies
– E.g.
• Establishment of a mature modern apprenticeship
scheme, to provide qualified personnel for electrical
and mechanical maintenance at BMW’s Hams Hall
engine plant and to reduce regional skills shortages
• Building dynamic capabilities
• E.g.
– The company has been able to design a BMW 5 Series Grand
Turismo which is rich in sportiness, elegance, luxury and
versatility.
SWOT Analysis - Opportunities and threats
Strength
• BMW is well-established and strong brand name within the automobile
industry, which has been achieved mainly through quality production
• Using the reward of “world leaders in automobile” for the industries
prestige
• It can be particularly used in market positioning, gaining new buyers as
well as increasing profit margins.
• Having potential shares in Europe countries markets such in Australia, the
market positioning status, the company can continuously gain profit as well
as acquire the capital to support its project plans and business strategies.
• The models introduced by the company had been supported continuously
by the customers.
• The BMW X5 is another famous model within the Sports Activity Vehicle
line; the model had been enhanced with high-tech features, yet the model
remains unchallenged mainly through BMW’s pricing tactic.
• BMW has an access to major distribution channels which allows it to
market its products in the most effective way as well as distribute its
designs to several foreign markets.
• Years of successful business operation strengthens its capability to
overcome past and even new challenges with tried and tested strategies.
• This capability also allowed the company to introduce its new products and
implement strategies at the right time and place.
• Excellent working force with highly trained in technologies for production
and they have the capabilities to turn resources into advantages
• Diverse ranges of Products - BMW, MINI and Rolls-Royce and having an
excellent brand awareness
SWOT Analysis - Opportunities and threats
Weaknesses
• The development of new product models of the company produces
indefinite outcomes.
• BMW continuously strive to produce new models that would meet the
needs and satisfaction of the customers;
• Some time that will not elicit significant return of investment.
• The price of the product is another weak factor
• obtained a significant market share in the industry, the luxury market is
relatively smaller as compared to the general masses
• Even if the BMW cars have been equipped with the latest technology, the
final product will be very expensive for the customers to buy.
• Moreover, manufactured vehicles are shipped from its main factories in
Germany, the shipping rate further adds to the cost of the cars.
SWOT Analysis - Opportunities and threats
Threats
• BMW is operating within a highly competitive industry. In addition, the
industry is made up of equally strong brand names such as Mercedes
Benz and Jaguar.
• Various marketing risks are also considered as threats for the company.
Though BMW can apply any marketing strategy, its effect on the market
can vary.
• Unexpected crisis in the economy can greatly affect the profitability of the
introduced models; this could also affect the marketing efforts of the
company.
• New & existing competition in the world market and instant copy of the
introducing technologies by the competitors.
• Buyer sophistication and knowledge was an important to promote the sale
SWOT Analysis - Opportunities and threats
Threats
• Volatility in Price of Fuel and Consequences of the oil crisis
and Economic recession
• New legislations by the EU and the world trade organization
• Downward trend in the automobile profitability at 2003 end
period
• Market shift to globalization and makes extremely high
competition for customers and resources
• Currency exchange cost
• Customer expectation
• Diversification and branding establishment
• Environmental issues: Pollutions
SWOT Analysis -Opportunities and threats
Opportunities
• The company can make use of other marketing means, which could
promote greater customer satisfaction and loyalty.
• The ability of the company to produce quality products can be an
effective marketing tagline that could support future market growth.
• Based from its strengths, the company has the resources and channels
that could help in developing and conducting various marketing
efforts.
• New Products can be produced by the innovation management system
which is adopted by the industry
• Market shift to globalization and it has huge potential to promote the
sales not only in the Europe but even in the far east also.
• Can go for low cost labour in countries like China with the
technologies
• The company is very vulnerable to bad publicity; negative company image
can greatly affect the loyalty not only of the affected market but also its
customers worldwide.
• Mostly classic models are produced and focusing for that segment of
customers
• Even advanced in technology they are low in innovations.
• Substitute products or technologies in world market from mainly Benz
• Leadership threats as was happened in the Rover failure
• Innovation & Alliances of the new companies
• Customers demand change to more comfortable and relevantly cheap cars
therefore they can promote the mini with low cost
• Diversification range can be increased can be used in catch up the new
market
• Low-cost strategy & Differentiated automobiles are the possibilities
therefore company need managed to differentiate their products with low
cost.
Strategic Position of the Company
The vision statement
“Uniqueness through diversity, Leadership,
taking Risk & courteous”
The mission statement
"To become most successful premium
manufacturer in the car industry"
Strategic Position of the Company
The core values
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Uniqueness through diversity
Teamwork
Involvement in community
BMW Group's involvement in society and social programmes, such as:
– Increased road safety
– Promoting intercultural understanding
– Educational projects for children and young people
– Community relations
– Fighting HIV/AIDS - www.bmwgroup.com/socialcommitment
• Mutual respect
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Excellence through quality & innovation
Courteous
Responsive
Efficient
Strategic Position of the Company
Main Goal
Attaining financial success is the main goal of the BMW Group which, at the
same time, also provides a sound basis to allow it to accept responsibility in
environmental and social issues.
• BMW Group was the first car manufacturer in the world to create a
Vehicle Recycling Network.
• BMW invested around €20 million (Germany only) in 2004 into product
related environmental protection.
• Reduce fuel consumption and CO2 emissions (eg:Mini)
Strategic Position of the Company
Objectives
• Becoming the most successful supplier of premium automobiles in every
relevant market.
•To increase sales throughout the entire Asian region to 150,000 cars by the
year 2008.
Strategic Position of the Company
Current strategies
•Bowman’s Strategy Clock
focus on price based strategies to achieve more profits. also wants to have prices that
are unique from the competitors . (More like focused differentiation)
Internal growth through market and product development. – Launch a new model
every three months through to 2005, providing a range of premium auto mobiles that
ranged from the Mini to the Rolls Royce.
BMW automobiles positioned differently and price differently in the various national
markets.
BMW also exercised a firm control on the supply chain and dealings and relationships
with suppliers, who mostly had maintained a long association with the company.
Market expansion to Asian countries
Gap Analysis &
Strategy Formulation
• Vision
– Be the most preferred brand for individual mobility
• Mission
– BMW strives for best practice in car
manufacturing industry, by consistently providing
innovative individual solutions, by excelling, and by
being prompt, efficient, Dynamics, Lower
emissions, more driving pleasure and diligent in
whatever do
Goals
The primary goal of the BMW Automobile is to assure
continued profitable growth. Its BMW, MINI and Rolls-Royce
brands will be further expanded. From 2005 to 2009 to
expand the production network, extend the sales network,
and for research and development, With a largely constant
number of employees.
Objectives
• To generate profits and independence to take on responsibility for
the long-term.
• Comprehensive investments in the expansion of the
production network, in research and development as well
as in the worldwide sales network and manufacturing to assure the
company’s performance ability for the future
• To interest in protecting the environment and natural resources.
(To be as environmentally friendly and conserving of resources as
possible)
• Comprehensive responsibility to its clients and their safety.
Objectives Cont…..
• strives
to increase production on a continuous basis
while consuming ever fewer resources in the production
process
• continuously increase the performance commitment and
capability of employees
• Developments of the surrounding social environment.
Strategy formulation
By Identifying potentials and knowing what the Company
represent, need to recognizing where the company’s
strengths lie and need to make the best use of every
opportunity.
Competitive Edge Through
Competitive Strategy
• Cost leadership = aggressively seeks efficient
facilities, pursues cost reductions, and uses tight cost
controls to produce products more efficiently than
competitors
• Differentiation = attempt to distinguish products or
services from that of competitors
• Focus = concentrates on a specific regional market or
buyer group
Fred W. Abel Model for States Analysis
• What
– Cars
• To Whom
– Sports loving youth
– Families with children
– Environmental friendly drivers
• How
– Developing cleaner cars through technological
advancements
– Reduction in prices through process developments and
global factor advancements
– Improve interaction with customers and efficient customer
chain management
– Differentiation & Focus differentiation
Using Strategic Clock to Analyze Strategies
Action Plan - Technology
Strategy
2005
2006
2007
2008
2009
Developing
cleaner
cars
reducing
per mile
cost
R&D and
designing
of a hybrid
car
Reduce the
amount of
emission
by 50% on
current
Prototypin
g and Trials
of hybrid
car on
targeted
segments
Commercia
lly produce
a hybrid
car
R&D and
designing
of a
hydrogen
driven car
Prototypin
g and Trials
of
hydrogen
driven car
on targeted
segments
Commercia
lly produce
Hydrogen
driven car
R&D and
designing
of a
electric car
Action Plan - Operations
Strategy
2005
2006
2007
2008
2009
Reduction in
prices through
process
developments
and global
factor
advancements
Outsource
non –
essential
parts from
lower
price
quality
suppliers
Open an
assembly
plant in
India
Develop the
Indian
assembly
plant to
manufacture
limited car
types
Open an
assembly plant
in China
(Through Jointventure)
Extend the
assembly plant
in India to a
manufacturing
plant
Extend the
assembly
plant in China
to a
manufacturing
plant
Action Plan - Marketing
Strategy
2005
Focus
Promoting
differentiation BMW to new
market
segments with
minimum
product
differentiation
2006
2007
2008
2009
Develop
new
models
to meet
changing
customer
taste
Attract new
market
segments
in overseas
via
marketing
campaigns
Launch and
hybrid
versions
Focus on
Asian
market
(More
spaces
cars)
Launch and
hydrogen
versions
Action Plan – Marketing Cont.
Strategy
Improve
interaction
with
customers
and efficient
customer
chain
management
2005
Revamp
the web
site to
abstract
more
customer
feedback
2006
Develop
and
implement
a Supply
chain
manageme
nt system
2007
Develop
Customer
relationship
Management
system by
integrating it
to R&D
Standardizing
the after
sales services
globally
2008
Revamp
and
complete
Enterprise
support
system to
support
process
2009
Implement
and enable
automated
ordering
and
delivering
through
complete
process
integration
Thank You