Posted: May 25th, 2022

Creative and efficient labor force in the globe

BMW Strategic Management

The Car Manufacturing Industry

Research has proven with time that the most creative and efficient labor force in this globe of conventional production has come from both Japan and Germany who lead the world in creative initiatives. Moreover, studies have also shown that the reason for these two countries being highly productive is because they follow their cultural heritage. There are only few luxurious brands in the car industry that even an infant recognizes and hence there are a few factors that need to be taken it into account when recognizing the strong and continue existence of BMW group in this heavily competed industry (Rothacher, 2004). Hence, the following trends visible were very visible in the growth of luxurious car brands in Germany and Japan. Understanding these trends could help others brands and products to establish their footing as well:

At the time of company’s establishment it was very important to make decisions regarding the production plant along with all the additional parts and tools that are located in trendy and acceptable markets all over the world. This was so because any wrong decision regarding these issues may have lead to failure in making a favorable image and the company may have incurred lesser profits (Rothacher, 2004).

2. Moreover, company’s top management started searching for the most efficient people and after recruitment started hiring the best workforce who fit in their aim of producing faultless and high value products. Researchers have shown that’s these conditions were extraordinarily fulfilled by both Germany and Japan (Rothacher, 2004).

3. In addition another very important variable is deciding the name of the brand. Researches prove that the quality and the brand of the car suits the suggested name. But studies have also proven that this variable may not a very important feature in making revenues for the short-term but it will most likely benefit it in long run. In this competition of producing most efficient cars in the world, Germany ranked first whereas Japan is at 2nd rank (Rothacher, 2004).

4. The image of the country is very important. Country should maintain its good image in the mind of other nations so that consumers respect the company of origin and because Japan was not very efficient in building its positive image as Germany so it did lag behind initially. However, numerous historical factors have shaped and altered Japan’s negative image (Rothacher, 2004).

5. Countries in the luxurious brand industry can also create good perception in the minds of other nations by maintaining good relationships with their neighboring countries. There is a chance of superfluous hostility among the regional economies and Germany understood that. This is primarily why Germany sought to help developing countries as it is operating as highly integrated economy on its own; this further helps Germany in retaining its positive image in Asian countries as well as in Europe and the Americas more so then any other country as well as Japan — its top competitor (Rothacher, 2004).

Germany has three major and most popular brands who take part in mass production of luxury cars i.e. BMW, AG and Mercedes Benz. BMW rules the market share among all these three companies because of their effective strategies where as Mercedes and AG have lost their market share because of the premeditated blunders. The purpose of this paper is actually to analyze the impacts of internal environment and external environment has on the decision making process of the top management of the BMW group of companies (Rothacher, 2004).

Moreover, we will focus on how much influence does the external environment has on the BMW’s internal organization’s structure by analyzing the growth trends in the company using SWOT and Porter Five Forces model. We will also analyze its overall market share and brand position in the world today.

BMW’s Business Endeavors:

BMW proves over and over again that they are one of the best companies when it comes to the production of luxurious, successful and high-quality cars in the world. The head office of this company is sited in Munich, a German city. The primary functions of the company include production, distribution and the marketing of their luxurious brands like Sedans, Convertibles and Coupes as well as various brands of motorcycles (Radinger and Schik, 1996). BMW operates and invests in three diverse industrial environments:

1. Automobiles,

2. Motorcycles and

3. Financial Services

Key Players

Following are few most influential and prominent persons in BMW who are responsible for decision making over the years:

1. The administrator of the Board of Management for BMW AG, Dr. Helmut Panke

2. The Director for HR and IR (Industrial Relations), Mr. Ernst Baumann

3. The director for Sales and Marketing at BMW, Dr. Michael Ganal

4. The Development Manager, Prof. Dr. Ing. Burkhard Goschel

5. The Director of Finance, Stefan Krause

6. The Production Manager, Dr. Ing. Norbert Reithofer

BMW — Competitor Analysis:

Mercedes group is the top competitor of BMW in market of luxury cars. This is similar with the respect to both the American and the European market. But when we talk about Western Europe, there are some more competitors that include Volkswagen famous for Audi, Bentley, Fiat’s famous for Ferrari, Alfa Romeo, Lanica and Maserati. In same manner Ford is also in the list with Land Rover, Jaguar, Volvo and Aston Martin that adds more toughness in the rivalry for the most valued luxurious car brand in Western Europe. More competitors include Porsche, Toyota, General Motors (with cars like Opel, Saab, and Vauxhall) and Renault (Pavelec, 2007; Kiley, 2004).

When we talk about Unites States, the major competition of BMW is with the Lincoln brand from Ford; VW — Bentley and Volkswagen’s Audi; Porsche; Lexus from Toyota and General Motors are also in the list with its Cadillac and Saab. Also, it can be clearly identified that the principal opponent of luxurious Rolls-Royce brand from BMW are Maybach and Bentley Sedans produced by DaimlerChrysler (Pavelec, 2007).

The following chart is drawn under micro approach and shows the trend of comparison of Coupe from BMW 1 series with its rivals.

Outlook

If one analyzed the present trend of economy in society today it would be safe to say that the high level of inflation and increasing unemployment should impact the luxury car producers as well. But, nonetheless, BMW manages to stay on safer side this economic breakdown and shows good progress in sales which simultaneously increases the level of profits. This makes the board members of BMW think and plan on continuing the overall investment rates in luxurious cars as they believe that the market will eventually puff up and they can get more profits easily while increasing the degree of growth and market share. Moreover, BMW is looking for potential markets so that they can increase their control and production. With this they are also working on financial aspects and are trying to improve the share value in existing market (Kiley, 2004).

The company wants to be on the same trend of earnings in 2011 as compared to their standings in 2010. They have to think about new strategies though if they aim to maintain the same level of sales because of the increase in steel prices and decreasing value of dollar which they have to face in 2011. Nevertheless the BMW Group of Companies has exhibited its satisfaction from all brands as there is an increasing trend of improved sales of all its brands. Moreover BM also plans to introduce introducing new cars once they catch up with their production resources. Company can face offshoot risks with this approach because of, as aforementioned, the external factors that include higher prices of steel and decreasing value of dollar. This approach however does show a positive demeanor from the company as it shows that the company is ready to face the problems with change and artistry as its identifying characteristics (Kiley, 2004).

Worldwide Locations

BMW has its branches out of its homeland Germany and also has various assemble plants worldwide which are more accurately presented in following table (Alan, 2005):

Country

Plant

Germany

Berlin Plant

Dingolfing Plant

Landshut Plant

Munich Plant

United Kingdom

Hams Hall Plant

Oxford Plant

Swindon Plant

United States

Spartanburg plant

China

BMW Brilliance Automotive Ltd., Shenyang (joint venture with Brilliance China Automotive Holdings)

Brazil

TRITEC Motors Ltda, Curitiba (joint venture with DaimlerChrysler)

Source: BMW

SWOT Analysis

This section relates to the points related to the potential Strength, Weaknesses, Opportunities and Threats of BMW. All of these have been gathered from the study conducted by Kiley (2004) as well as from the BMW Annual Reports from the years 2004, 2005 and 2006.

Strengths

Esteem and Renowned brand name is one of the major strengths of BMW group. BMW can easily be identified by its high quality products of automobiles. It’s a multi-brand company recognized worldwide by its name, in spite of its initial production patterns, which tended to be towards the production of high degree luxurious cars. This can be justified as Rolls-Royce is the most renowned and recognized brand as the exceptional all-luxury car in the world.

Three expensive and different top quality brands of BMW cars, which are discussed below, are it’s another significant advantage along with the incredible performance that has been demonstrated by each of these brands.

The importance provided to the Research and Development activities by BMW has also contributed a lot in its success; it has readily provided all the necessary variations that were needed to stay competitive in the industry. The amount which has been invested by BMW in R&D is the highest as compared to other firms. By not making enough improvement in its pattern of operations, it is not really an astonishing factor that BMW has to counter a strong and growing competition in the industry which demands changes internally as well. The impact of investing such a huge amount in R&D can definitely be seen by analyzing the new products demand and the quantity of their supplies in market. The production of Hydrogen Combustion Engine, Straight-six petrol engine -3 or H2R (1 and 2) etc. have also been focused on during different phases of production which have added value to its brand.

Weakness

BMW has a big flaw that its maintenance cost is very high, so much so that even when the ratio of its profit goes quite high, the company only manages to break even due to it high maintenance costs. In addition to that, both on international and national level, the competitive forces can neither be stopped nor controlled. This would certainly provide BMW with more competitive motivation to come up with strategies regarding cost effective methodologies and not focusing on just profits, this will enable them to meet the demands of the high end manufacturing process.

Opportunities

BMW group has a massive opportunity in the shape of European Union. The market shares in the fresh global markets can easily be expanded by BMW and the strong manufacturing position in Europe can easily be exploited by BMW.

Threats

BMW group has got a major currency game in front of it as an impending threat. One of such instances is the decrease in the worth of the brand in terms of the dollar currency. The BMW top line has faced a declining trend due to this and therefore in U.S. their profit has gone down quite rapidly. In addition to that, the raw material prices have also up due to the rise in the inflation rate, which has again hurt the profit margin and the capital turnover.

Porter five forces Analysis

Threat of New Entrants for BMW is low

Due to the high amount of capital required to get into the automobile industry, the chance of facing new entrants as a competitor is quite low and the professional competence required to create a sustainable challenge against BMW and its position in the market will also prove to be also difficult.

Threat of Substitutes for BMW is moderate

Planes, boats, subways, buses are always present for the people as a substitute. Hybrid cars and bicycles are options which also stand as substitutes — they are also environment friendly but well-known all over the world.

Power of Suppliers for BMW is moderate

Suppliers are the people who are responsible for the distribution, pricing and delivering of the product. The size of the suppliers who are operating in the automobile industry is usually medium or small; this business which is set up due to the collaboration of manufacturers and suppliers cannot be considered as a small business where the supplies surge and enjoy a high level of contribution in overall product positioning.

Power of Buyers for BMW is moderate

While setting the deals with the buyers, the decision regarding the price bears a lot of importance. To decide what will be the most suitable way to declare the prices, consumer pattern has always been given a consideration.

Competitive Rivalry for BMW is high

As it has been stated earlier, BMW and its market share have always faced a strong competition from the giants of the global automobile industry (Honda and Toyota). Apart from that, the overall ratio of cars, which are environmentally responsible and friendly, has noticed a rise in their demand as compared to the cars which are considered as luxurious. Since pricing and level of comfort provided by the BMW has remained its key traits including the overall quality of its brands, BMW faces competition which is quite precipitous.

Customers

Digital media is one of the most beneficent resources in the market today i.e. It basically uses internet to amplify the customer portfolio. As there is a high growth in the fans and consumers of BMW in the recent years, it has used the internet efficiently to make these fans more conscious about their new products. The strength of the product from just one platform, such as the Facebook, is shown in the figure below depicting a large number of fans. These stats for February 2011 were extracted from the website of social bakers:

Products

BMW group has targeted a specified target market with some of its top listed products that covers a large variety of popular and familiar brands. According to the Annual Reports of 2006 and 2007 of BMW, the most famous and top brands of BMW are given as following.

BMW Brands:

Rolls Royce, MINI One, Rolls Royce Phantom, Mini, BMW 3 Series models: The group is capable of selling smaller cars under the brand image of Mini while Rolls Royce can be used to target the elite class because of the luxuries it offers.

BMW Series:

BMW 5 Series (25i Sedan, 530i Sedan and 545i Sedan)

BMW 6 Series models (Coupe and Convertible)

BMW Individual 6 Series

BMW 7 Series models (Sedan and Security vehicle)

MINI One D. Rolls-Royce 100EX (Centenary Experimental Car)

MINI Cooper Rolls-Royce Phantom (Centenary model), limited edition

MINI Cooper S

BMW X3 Series (X3)

MINI One Cabrio

BMW X5 models

BMW Z4 (Z4)

MINI Cooper Cabrio

BMW M. models (M3 Coupe, M3 Convertible, M5 Individual)

Below are few models of BMW. According to Annual Report (2009), one the most interesting part is that with regards to the environmental pressures asserted due to the global economies, an overall percentage of the CO2 emissions which have been done by some specified models of BMW are represented in the picture.

Annual Production

According to the BMW Group Annual Report (2009), table below present the yearly BMW brands production, that classifies the record initially in years and then country-wise.

Year

BMW

MINI

Rolls-Royce

Motorcycle

2005

1,122,308

200,119

92,012

2006

1,179,317

186,674

103,759

2007

1,302,774

237,700

1,029

104,396

2008

1,203,482

235,019

1,417

104,220

2009

1,043,829

213,670

82,631

Production by country

Country

Make

2006

2008

Models

Germany

BMW

905,057

901,898

Others

Russia

BMW

1,500

2,000

BMW X5, X6, 5-series

United Kingdom

Mini

187,454

235,019

All Minis

Rolls-Royce

67

1,417

All Rolls-Royce

Austria

BMW

114,306

82,863

BMW X3

USA

BMW

105,172

170,741

BMW X5, X6

South Africa

BMW

54,782

47,980

BMW 3-Series

Total

1,366,838

1,439,918

Source: BMW

Over the past ten years the international sales records by the BMW Group is shown in the table given below (www.bmwgroup.com ).

Global sales

Year

BMW

MINI

Rolls-Royce

Motorcycle

2000

822,181

2001

880,677

2002

913,225

2003

928,151

2004

1,023,583

2005

1,126,768

200,428

97,474

2006

1,185,088

188,077

100,064

2007

1,276,793

222,875

1,010

102,467

2008

1,202,239

232,425

1,212

101,685

2009

1,068,770

216,538

1,002

87,306

2010

1,224,280

234,175

2,711

98,047

Source: BMW

References

Alan, J.R. (2005). Six men who built the modern auto industry. Motor Books/MBI Publishing Company

Kiley, D. (2004). Driven: Inside BMW, the Most Admired Car Company in the World. John Wiley and Sons, p 5-211.

Pavelec, S.M. (2007), The Jet Race and the Second World War, Greenwood Publishing Group. Retrieved from http://books.google.com/?id=dSLBdP22fq0C&pg=PA31 on March 7th, 2011.

Radinger W. And Schick, W. (1996), Me262 (in German), Berlin: Avantic Verlag GmbH, p. 23.

Rothacher, A. (2004), Corporate Cultures And Global Brands, World Scientific, p. 239.

Annual Reports

BMW Group Annual Report 2001

BMW Group Annual Report 2002

BMW Group Annual Report 2003

BMW Group Annual Report 2004

BMW Group Annual Report 2005

BMW Group Annual Report 2006

BMW Group Annual Report 2007

BMW Group Annual Report 2008

BMW Group Annual Report 2009

Internet Pages

BMW homepage: www.bmw.com

BMW group homepage: www.bmwgroup.com

BMW Education: www.bmweducation.com

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