BMW Business strategy

Introduction.

Having a powerful brand image forms the foundation of the success of the BMW Company, being one of the few multi model carmakers in the world to concentrate exclusively on the premium segments of the automobile market. The authentic BMW and Mini brands with their clear profile, distinctive quality, superior Technology, high reliability and commitment to the products fully deserve their market positioning as “The ultimate driving machine.”

The company was started in Germany in 1916 building aero engines and currently has a 97,275 strong work force operating in America, Europe and Africa.

1. Business environment in the car industry

Consolidation in the global automobile industry moved forward at a breath-taking place in 2001.The six leading groups General Motors, Ford, Toyota, Daimler Chrysler, Volkswagen and Renault accounted for almost 70% of the worldwide production of 563 million vehicles in 2001.Fierce competition in the industry tends to force the surviving dominants to rapidly change the strategic positioning of their vehicles by using more sophisticated technology and Variety of models.

Most auto experts and industry analysists agreed that global outreach was essential to provide protection against foreign exchange swings and local labour crises. They also agreed that a company had to produce 2million vehicles a year to achieve necessary economy of scale.

Appendix.1 describes PESTEL frames work, which categories environmental influence in six main types: political, economical, social, technological, environmental and legal.  It is a useful checklist to consider influence on global environment and identifies key issues in the automobile industry, where it has been possible to identify a number of structural causes of change in BMW.

The main driving force behind the decision of BMW to turn to globalization was competition from global players in Germany, the United States and Japan who are major competitors in the luxury segment. The automobile industry is highly globalised with many major manufactures operating all over the world. Automobiles built in one region are sold, with necessary changes, around the world. The main force for global convergence was the virtual disappearance of the national manufactures being squeezed out by the international giants and the standardization of markets across international boundaries. Forced by international regulatory bodies at regional level and fuelled by ever more intensive global communication.   

This caused problem to middle sized players like BMW and Fiat to compete with dominant players in the industry with small or differentiations not big enough to survive in the niche market.

Consolidation in the industry increased productivity and overcapacity, which lead to supply of motor vehicles in the market exceeding demand. It gave consumers more power by controlling prices. Fierce competition and cost structure lead many of the manufactures to change their strategy towards price competition.

Manufacturing in the automobile industry became more volatile with unpredictable fuel prices, parking space, increasing traffic, environmental pollution and creating a higher demand for smaller vehicles. Decreasing demand for saloons are shrinking the profitability margins for many car manufacturers.

Opportunities

BMW has a major Mini brand known all over the world which enable them to explore ways of enhancing demand in the small car segment. BMW converted the old BMC mini to a premium small car and the first such type to occupy this segment. It has become known as the first “Global small car”. The market for premium products began to grow faster than the overall market, especially in the small car segment. The number of customers who are unwilling to compromise on safety, quality and driving performance has increased at above the average rate. The same applies when it comes to the trend towards individual cars. With mini, BMW predicted that they would win 50% more new customers. (105,000 mini brand vehicles were sold in the first 9 months of its first launch in Europe, over the budgeted figure of 100,000 cars).

Increasing demand for premium brands in the Asian market is another opportunity for them to expand their territory. According to market analysis, Asia will be the number one growth area for   the automobile industry in 10 years time. China will be the dominant player in this context with a huge and booming market for BMW to penetrate.

Growing concern for environment pollution was an opportunity for BMW to gain the edge over the others by their research on environmental compatible methods of recycling end-of life vehicles, efficient waste disposal methods and research into alternative energy sources. They are the pioneers in innovative processes in final paint coating and for the introduction of power coating, which does not produce waste.

Internet and e-commerce is boosting potential for automobile manufactures by helping them to reach the customers quickly, predict the future demand, and personalize customer services and by   streamlining their production lines to be more productive and efficient in distribution. BMW with their Customer-oriented sales and production process (KOVO), a logistical and production process designed efficiently and focused towards customers. This helps them to maximize flexibility when changing individual orders and minimize the waiting time in taking delivery of the vehicle. The virtual centers located internationally allow potential customers to locate dealers and inquire about facilities such as test drives.  

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The BMW group continued to put forward its product and market offensive in the year 2001. Introduction of new 3series, M3 convertible, 7 series and launch of mini in the world market expanded their portfolio. Because of This, BMW was able to avoid the economic recession in the international market.

Entrance to the formula one Williams team, with the contribution of the BMW V10 engine opened up a new opportunity for them to merchandise 140 F1 products in 2001 with total sales of euro 17.3 million and to expand their market in Europe.

Threats

Middle size players ...

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