Bmw Strategic Analysis

Introduction “Sheer driving pleasure” is what BMW remarks as the major attribute of itself, “sheer driving pleasure” is what BMW puts as it’s home country slogan, but in what extend is it a pleasure to drive, or better run this multinational company in the aggressive automotive market? To answer this question and give a future outlook on what could be the strategic driving direction not only for its cars, shall be the emphasis of this report. Within this paper, one of the most successful car manufacturers shall be analysed in detail in order to explain its current market situation and to value its strategy.

First, a general introduction to BMW will be given, while several analysing tools are used in the second and main part of this study. Here the value chain model is used to give details about inner-company matters and serves as our internal analysis. Due to the size of this paper and overwhelming information for the external part, the authors decided to emphasize on the examination of BMW’s two major markets, Germany and the United States. Together these two make up for almost half of BMW’s total car sales and therefore represent the most important strategic positions.

For the external analysis of Germany, the home market, Porters Diamond is used, while the five forces framework is applied to the U. S. market analysis. The results of the conducted observations are compared and summarized in a final SWOT analysis, where upon the concluding future outlook for BMW will be based. Although the BMW Group also comprises financial services, software products and motorbikes besides the car production, only the latter is of importance for the strategic analyses given in this paper, since the automotive branch is responsible for 82 percent of the annual turnover.

In the beginning, the company and its history shall be introduced briefly: BMW is one of the leading European car makers of prestige automobiles, including the brands BMW, MINI and Rolls Royce. Established during the First World War, BMW manufactured aero-engines and remained leader in their production until 1945. Having survived the Second World War, BMW concentrated on the automobile production, introducing a wide range of cars.

Faced with financial difficulties and the threat of bankruptcy in 1959, this illustrated a lack of focus regarding the company’s strategy and planning. It was for the new main shareholder Herbert Quandt, who visioned the company’s strength of building powerful motors, to lead BMW to its historical turning point in 1961 when it launched the new model BMW 1500. Soon the brand was established as for leading engineering excellence, an attribute it still holds these days, adding brand characteristics such as power, reliability, luxurity, advanced technology and premium prices.

The target customer of BMW is the young, affluent professional, the company’s slogan “the ultimate driving machine” is dedicated to attract this peer group and it represents BMW’s strategic position. By the year 2003 BMW had more than 104,000 employees, and was responsible for three third of the group’s sales. Its’ plants in Germany, United States, United Kingdom, Africa and China have a remarkable flexibility, and the cheap production costs resulted in even higher profits. When BMW overtook Lexus in 2003 numerically, it sold more than 277,000 cars, of which MINI, the 3-series and the 5-series are the most successful models.

Nevertheless, BMW is still positioned somewhere between a niche and a major market player, pushing hard on the American and Asian market to reach its ambitious and demanding goal: to be number one in the premium car market. 1. Value Chain Analysis The following extract will outline how BMW derives value from its major business processes concerning all value chain activities. We have chosen the value chain analysis because it describes all major activities within and around an organisation. This analysis will be limited to some certain main aspects because of the company’s high complexity.

The outcomes will help to understand the strategic position of the organisation. Inbound logistics, operations, outbound logistics, marketing & sales and services are primary activities of the value chain and will therefore be discussed first. Supporting activities such as procurement, technology development, human resource management and firm infrastructure refer to all of the primary activities and will be discussed independently. 1. 1 Primary Activities Inbound logistics A specific German characteristic of its supplier system is the so called “Automotive Cluster.

” “A cluster is a concentration of institutions and companies in a particular branch of industry within a particular area. ” Companies can highly benefit from this factor through sharing competences, short delivery times and close co-operations. These are major influences on BMW’s inbound logistics, meaning that most of its aspects, like storing and distributing, are outsourced to their suppliers. Two major clusters of BMW are Leipzig and the so called “Automobildreieck” (automotive triangular) which includes the cities Dingolfing/Landshut – Regensburg – Ingolstadt. According to a research of the IWD (Cologne) about 20.

7% of all social insurance registered employees work for the automotive sector in the “Automobildreieck. ” The newly built plant in Leipzig builds block for the automotive and supply industries, the academic world and administration in East Germany. The organisation “Automotive Cluster Eastern Germany” evolved from these circumstances. To make such networks work, a lot of activities and projects must be planned and coordinated. A few facts of the logistic system in Leipzig reveal this complexity: The production methods are just in time and just in sequence in order to avoid large amounts of stock.

Therefore “about 10,000 m? have to be delivered to the assembly line every day. ” To make these processes work there is a supply centre close to the assembly. It delivers pre-assembled parts like seats, doors or cockpits just in sequence to the assembly line. Such a complex logistic system requires a good communication network. To provide a logistic system which works smoothly around the world, BMW uses a special system called “Customer-Oriented Sales and Production”. It connects customers, dealers, suppliers and plants in one big network. Operations

The headquarters of the BMW Group is in Munich, Germany. The enterprise has a worldwide production network with a total of 22 production plants in twelve countries. These are the following: ?Munich*; Dingolfing; Regensburg/Wackersdorf**; Leipzig (BMW automobiles, *engines, **components) ?Berlin (BMW motorcycles) ?Eisenach (components) ?Landshut (components) ?Rosslyn, South Africa (BMW automobiles) ?Spartanburg, USA (BMW automobiles) ?Oxford, Great Britain (MINI automobiles) ?Goodwood, GB (Rolls-Royce automobiles) ?Hams Hall, GB (engines) ?Swindon, GB (components) ?Steyr, Austria (engines)

?Graz, Austria (BMW automobiles, Contract manufacture by Magna Steyr vehicle technology) ? Shenyang, China (BMW automobiles ? Joint Venture with Brilliance China Automotive) ?Curitiba, Brazil (engines ? joint venture with DaimlerChrysler) ? Rayong, Thailand; Cairo, Egypt, Kaliningrad, Russia; Jakarta, Indonesia; Kuala Lumpur, Malaysia (assembly of BMW automobiles) BMW’s production plants are linked to one another through many supply relationships. For example, “the plant in Leipzig sources engines from Steyr (Austria) and Hams Hall (UK) and body parts from the press shops of the BMW vehicle works in Bavaria.

” One of BMW’s benchmarks is its high manufacturing standard. The Leipzig Plant as well as the plant in Spartanburg, USA, are outstanding examples. The Leipzig plant advertises with modern and highly flexible manufacturing structures on its homepage. This statement is justified through certain facilities as for example the production buildings are based on the principle of short distances. The three basic production stages, body shop, paint shop and assembly line, are arranged in a circle around the central building.

This reassures good communication possibilities between the production areas. Additionally any future extensions can be added at minimum cost. Referring to data from February 2005 the plant covers about 208 ha area of work site and can produce on average 650 vehicles a day. Leipzig has a supplier volume about 500 lorries/10. 000m?. But also in the U. S. , BMW established a well built plant which is very flexible. Two, in terms of production, very different models, the X5 and the roadster, can be assembled on the same line.

Furthermore John Ettlie (Ph. D., Research Professor&Director, Technology Management College of Business) stated that Spartanburg is “the cleanest, brightest assembly plant I (he) have ever seen, with the quietest final assembly area of 15 plants I have visited over the years. ” As mentioned before, the Customer-Oriented Sales and Production (COSP) is a large network including all major parties of the value chain. Considering the production process it includes immediate binding order confirmations, information on the order status, on time delivery and a high flexibility. For example changes can be adapted until one week before assembly without changes of the delivery date.

According to the BMW homepage, “up to 120,000 BMW changes requests are realized per month. ” Outbound Logistics In total there are 18 retail organisations in Germany with 48 subsidiaries. They belong to the BMW retail organisation Germany, which purchases the cars of the original equipment manufacturer (OEM). The main philosophy is to purchase cars of the OEM on the basis of ? built to order’. It decreases the need for storing facilities and therefore reduces costs. Thus most cars of the brand BMW are directly delivered from the manufacturing plant to the retailer via outsourced transportation companies.

If a customer wishes to pick up the car in person, he can buy and order it in the local retail shop but pick it up from the according manufacturing plant. Marketing and Sales BMW has a very strong brand image which is well known all over the world. It focuses on the following values: technology, quality, performance and exclusivity. According to the BMW homepage, the company itself wants to communicate these values through the end product. BMW’s motto is: “Outstanding brands with an unmistakable profile. ” Furthermore BMW uses a variety of methods to promote their brand and products as for example with product placement, the ?

BMW Art Car Collection’, sponsorship and with BMWfilms. com. Special activities as the Driver safety trainings offered by BMW Germany underline the company’s image. The same institution in the USA is called “The BMW Performance Driving School”. Within these events BMW can combine social aspects like safety trainings with promotional activities for their latest models. To obtain a customer focused marketing platform BMW established a worldwide network. Its main department is in Munich as where its subsidiaries are present all over the world.

These departments work together with well-known marketing agencies concerning events and promotion issues. As for example in Germany, BMW cooperates with one of the most innovative agencies called ? Mediaplus’. They have been rewarded 2nd place for the “Konvergenz Award” in 2004 for creating the 1 series campaign “Das Prinzip Freude” (the principle of joy). It included a broad campaign of TV, online, print, outdoor and mobile services. “All activities were perfectly matched towards their target audience as for example the new created online platform www. prinzip-freude. de.

” The customer focused lifestyle trends as well as the persistent work on this campaign is outstanding for BMW’s promotion. As mentioned before, BMW sells its cars through branches of the BMW AG and by authorized independent dealers in Germany. Outside Germany BMW either has its own subsidiaries or works collaborates with independent import companies. In 2004 the BMW Group further expanded its international sales network as part of the implementation of its market offensive. It is now represented in 34 countries via its own sales companies as where more than 120 countries are handled by local importers.