Business
BMW Group is composed of many segments within its vast portfolio. They are focused on manufacturing a variety of tangible products, and offering many intangible financial services. The BMW Group’s automotive portion of their portfolio consists of the three premium brands: BMW, MINI, and Rolls-Royce. BMW is supported by nine different model series which are: BMW C1, BMW 1 series, BMW 3 series, BMW 5 series, BMW 6 series, BMW 7 series, BMW X3, BMW X5, and the BMW Z4. The newly acquired MINI brand is supported by the MINI Cooper and MINI Cabriolet. Rounding the top of the scale is the Rolls-Royce Phantom with over 300 cars produced and delivered in 2004. This allows the company to cover the spectrum from small car to the very top high-end luxury vehicle. BMW has been building motorcycles for over 80 years with the same high level of quality, technology, safety, and environmental protection as in their automobiles. Other various products manufactured by its subsidiaries range from: aircraft engines, diesel and petrol engines, traffic guidance systems, tools, components for other engine manufacturers, and small gas turbines (Mergent Online). The financial services that BMW offers include: financing and leasing, asset management, dealer financing and company car pools. Other business interests include insurance, information technology consulting and systems integration. It also supplies professional information and guidance for questions pertaining to the finance sector.
Mission, Values, Goals
BMW’s mission statement is clearly defined as “To be the most successful premium manufacturer in the industry”, and it does just that through its brand values including technology, quality, performance, and exclusivity.
In today’s changing and demanding corporate society, companies that are committed to sustainability place equal importance on economical, ecological and social concerns in the formulation of their business strategies. In the BMW Group, sustainable business practices have been a reliable contributor to the success of the Group's corporate philosophy for many years. This has allowed the company to become a member of the "Dow Jones Sustainability Group Index". BMW Group has been a member since 1999.
Brand Recognition
BMW is an instantly recognized brand name that has a reputation for its longstanding tradition of quality. Unlike other lesser known luxury car manufacturers, this brand recognition allows BMW to redirect its resources from expensive advertising campaigns in a highly competitive market, to expanding its research and development in both product development and dealing with sustainability aspects. The market in which BMW operates has very loyal customers, loyalists that have owned one of their cars tends to stay with them when making their next vehicle purchase. This is example another benefit resulting from the company’s reputation, in addition any new product lines will be seen to have the same quality as the more traditional ones.
Sustainability
As the competitive automobile industry continuously grows in strength and importance, it is being called upon to share the benefits of its growth with members of society. Always on the cutting edge, the BMW Group knows that its success can not rely solely from a fiscal standpoint. To be a dominant successful modern enterprise the firm must make accommodations for all of its stakeholders, current and future. This active automobile manufacturing firm takes on a great deal of responsibility for the company as a whole.
BMW Group offer’s extensive social benefits, and provides substantial funding for science, arts and other programs for young professionals. It is the BMW Group's intention to ensure sustainability in the three target fields; resource efficiency, risk minimization and reputation. Every individual within BMW Group is called upon to actively implement these objectives in their individual sphere of influence. One way that BMW Group has addressed environmental concerns is to ensure that all of its production facilities comply with uniform international environmental standards. At every location around the world, the BMW Group seeks to set an example of environmental responsibility.
The company is involved in the development of intelligent traffic management systems, as well as in the area of alternative drive concepts such as “CleanEnergy”. “CleanEnergy is hydrogen generated from renewable energy sources as clean fuel for the future (BMW Group). “As the worldwide industry leader in sustainability, our goal is to further increase our company’s value in respect to social, economic and ecological aspects.” Stefan Krause, Member of the Board of Management of BMW AG, Finances (BMW Group).
Financial Success
Despite difficult market conditions that BMW faced in 2004, it managed to be extremely victorious. 2004 was BMW’s most successful year to date. The automobile sector reported a 14.4% increase in sales while the financial sector continued to experience strong growth with a 13.9% increase from 2003 earnings. The BMW Group’s net profit for 2004 was 2.2 billion euro, surpassing 2003 by 14.1%. In 2004, 1,208,732 BMW, MINI and Rolls-Royce cars were sold. Making it an increase of 9.4% compared to the previous year. The U.S. had the market with the largest sales volume. Nearly 7% more cars were sold in the US and Western Europe experienced an 11% increase in unit sales. This signifies that the BMW brand continues to surpass its competitors and is able to remain in a safe position in the upper medium to luxury segment of the car market. 2005 is projected to have some unfavorable conditions for BMW’s market share due to the increase in raw material prices such as oil and steel. BMW estimates that Japan and Europe will see a growth in automobiles for 2005. The US however will barely grow at all (Annual Report).
Market Size and Growth
The BMW Group’s geographical market coverage spans the globe. Recently, the United States has became the strongest region within the company’s territory, with 277,037 units sold. The BMW Group has been able to achieve strong volume growth in Asian regions (China, Hong Kong and Taiwan). In total, over 93,000 BMW, MINI and Rolls-Royce brand cars were sold in Asia over the last fiscal year. Both the Asian and Pacific region markets continue to show strong growth trends (Datamonitor, Company Overview).
According to table 1, BMW Group’s sales increased from 2.7 million to 2.9 million, a 7 percent increase from last year. Their market share, according to table 2, increased by 0.1% from last year. BMW surpassed Volkswagon (one of BMW’s major competitors) which experienced a 13.3% decrease in sales and a 0.3% decrease in market share. A major disadvantage for BMW Group within the U.S. automotive industry when compared to American automotive manufactures is the low exchange rate from the euro to the dollar. On a more exciting note, BMW Group’s U.S. sales were up 22.5% in January 2005 from January 2004 sales (BMW Group Starts…). General Motors Corp. and Ford Motor Co. struggled despite a slew of new vehicles. BMW Group’s U.S. market share was 1.5% at the end of February 2005, which is up from 1.3% in 2004 (Automotive Industry Review). German competitor Mercedes-Benz’s sales were down 14.8% in January and February of 2005. Volkswagen also experienced a drop in sales and were down 4.8%.
Each of BMW Group’s series lines and brand names has market specific competitors. The following is a list of major BMW Group competitors:
1 Series: Audi A3, Volkswagen Golf, Alfa Romeo 147.
3 Series: Audi A4, Jaguar X-Type, Mercedes C-Class, Lexus IS200.
5 Series: Audi A6, Mercedes E-Class, Saab 9-5, Jaguar S-Type, Volvo S80.
6 Series: Jaguar XK, Maserati 4200, Porsche 911.
7 Series: Audi A8 and S8, Jaguar XJ series, Lexus LS400, Mercedes S-Class.
X3: Land Rover Freelander.
X5: Range Rover, Mercedes M-Class, Volvo XC90, Porshe Cayenne, VW Touareg, Acura MDX, Lexus GX 470.
Z4: Porsche Boxster, Audi TT, Chrysler Sebring Convertible, Toyota Camry Solara.
M Range: M3 Coupe - Mercedes C55, Audi RS4, M5 - Mercedes E55, Audi RS6.
MINI: Mercedes A Class, Peugeot 206 H/B, Volkswagen Polo, GTI, Golf, Renault Clio, Ford Focus RS, Vauxhall Corsa and Toyota Yaris.
Rolls-Royce Phantom: Mercedes Maybach, Bentley Arnage
BCG MATRIX
The Boston Consulting Group uses an interesting method to analysis businesses. The growth share index (pictured below) is designed to measure a business like various single investments. The vertical axis represents the market growth rate, the annual growth within a specific industry of competition. The horizontal axis illustrates the relative market share, which demonstrates how your sales, of a specific product, compare to your competitors. The BCG matrix is broken down into four quadrants. Cash Cows, these items generate large amounts of cash and dominate share of a slow growth market. Stars, products have larger shares of a high growth market. Dogs, these products have low share of a slow growth market. And Question Marks, these items have a low share of a high growth market.
The automotive branch is divided into three distinct areas; BMW, Mini, and Rolls Royce. (BMW Group) BMW facet of the company has long been dominated be the luxury sedan, with some inroads into the smaller SUV and sports car market. The MINI is the companies fasted growing segment, reintroduced in 2001, this car is well marketed through its fuel efficiency, popular culture and a variety of options. The company purchased Rolls Royce 1998, this market is designed for the serious consumer; there is a very low production numbers with very high profitability per unit sold. (www.bcg.com)
The product line for BMW has an interesting mixture on the BCG matrix. The attempt to enter the SUV market would be considered in the Dog area because this is an already saturated market with limited growth potential. By doing this the company diverts resources away from its’ strengths (luxury cars) The Rolls Royce qualifies as a Cash Cow because there is a miniscule and slow market, which they dominate, and the profitability on each vehicle is quite high. (DATAMONITOR) The MINI falls into the Question Mark field primarily because of the potential. Though they have a limited segment of the smaller, fuel efficient market, there is room for growth if resources are diverted towards it. The luxury car (BMW) would definitely be the star for this company, they have a huge portion of this market, and it doesn’t appear that they will loose ground in the future. This company has been devoted to the production of only premium automobiles, straying from this proven formula in the future could prove costly. “Today BMW the producer of the ultimate driving machine, is the most profitable car company in the world.” (www.bcg.com).
ROLE IN INDUSTRY
Mid-Size Player
BMW Group is a mid-size player in a major market and technological leader in the automotive industry. In many ways, this corporation sets the high quality standards consumers expect to receive when purchasing a luxury vehicle. Beginning with the elite style, comfort, and authenticity of the Rolls Royce; BMW continues today with the stylish, gas efficient MINI. BMW demands the attention of potential owners worldwide with their unique vehicles and accessories. They currently offer a model for every consumer: The BMW series are tailored to fit the needs of consumers ranging from young, single business people to couples with a family, or more mature singles or couples. The MINI is manufactured for entry level buyers, and not surprisingly, it also appeals to the consumer who is simply looking for a fun car to drive on weekends. “The MINI is not considered a late entrant, but a vehicle that is long overdue in the current market” (Personal Interview).
As previously stated, the MINI is highly gas efficient, and can be customized to fit the personal taste of any consumer who is interested. Despite negative 2004 predictions regarding 2005 sales, BMW Group has surpassed the expected outcomes. The MINI has shown an increase of 5.5% in January of 2005 over January 2004 sales (BMW Group Starts…). BMW Group, as a whole, began 2005 with a whopping 22.5% sales increase over the January 2004 sales (BMW Group Starts…). BMW is constantly penetrating the automotive market with new vehicles combined with increased technology. Between the three brands: BMW, MINI, and Rolls-Royce Motor Co., they are able to offer prices ranging between $17,500 and upwards of $328,000 for their 2006 versions.
BMW’s top competitors are: Lexus, Mercedes, and Audi. According to Kourosh Homayoun, a top sales executive at Rasmussen BMW in Portland, Oregon, “BMW is classified as a midsize player in the luxury automobile industry. When people are looking for luxury and dependability, they purchase a Lexus or a Mercedes. However, when people are looking for a step above, features like engine quality, vehicle control, interior/exterior style, and product exclusivity, they invest in a BMW.”
BMW Group is a worldwide Corporation with subsidies on every continent that are all committed to the BMW Group brand name and mission. Their clients across the globe depend on their consistency in adding value to the BMW Group brand identity by continuously providing the world with superior vehicles containing the automotive industry’s leading advances in technology.
Technological Leader
Today, “the technological heart of the BMW Group is the BMW Group Research and Innovation Center, also known by its German abbreviation, the FIZ. It is located close to BMW's Munich headquarters” (BMW Group). This research campus is one of the world's most modern automobile-industry development centers. They maintain their position as a worldwide technological leader in the automobile branch by transforming creative ideas into innovations. These innovations include…
The BMW iPod(R) Adapter is the first seamless integration between iPod and a car audio system. “The new system developed by Apple and BMW enables drivers to seamlessly use their iPod in BMW's 3 Series, Z4 Roadster, X3 and X5 Sports Activity Vehicles and MINI Cooper by simply plugging their iPod into a cable located in the car's glove compartment.” With the iPod safely located in the glove compartment and powered by the car's battery, drivers can now enjoy high fidelity sound through their car's stereo system and control their iPod using the standard buttons on their BMW or MINI steering wheel (iPod Your...).
They also work with Michelin to offer Run-flat tires that allow a motorist to drive a car with a punctured tire up to 125 miles at a maximum speed of 50 mph before repairing the tire. A car with run-flat tires can be designed with more trunk capacity because the spare wheel, jack and tools are eliminated. BMW has been the industry leader in adopting run-flat technology. “The Rolls-Royce Phantom and the MINI Cooper use these tires as their standard brand. BMW has recently decided to make them standard on its new 1 series as well” (Michelin Expects…).
And the Winner is…
Consumers view the BMW product line as luxurious, dependable, cost worthy and of high quality. The automotive market paints a similar picture; 2004 was a great year for the MINI and the BMW 5 series as they were honored with several awards. Consumers Digest honored the MINI Cooper and Cooper-S as “2004’s best buy.” Automobile magazine chose the MINI Cooper as the editors all star “Best Small Car.” Autobytel awarded the Mini Cooper and Cooper-S the prestigious “Consumer Choice” award. The Car Book honored the MINI Cooper as the consumers “Best Bet.” Automotive.com listed the MINI Cooper as “2004’s Best Compact Car”. Edmunds.com listed MINI Cooper and the Cooper-S in the “top ten car audio systems under $30,000” The March 2004 issue of Money Magazine selected the BMW 5 Series as, “the Best Luxury Car” in their Annual Car Guide. Forbes.com selected the BMW 530i as the best sedan under $50,000 in its annual “Best Sedan’s 2004” issue. AAA also honored the 5 Series, for the third consecutive year in 2004! Next, American Woman Road & Travel announced its selection of the 5 Series as “The Most Dependable Sedan of the Year” in their annual survey. Finally, the 5 Series position as technology leader was acknowledged by Automobile Magazine when it chose “BMW’s Active Steering, which debuted on the new 5 Series, as its 2004 “Automotive Technology of the Year.”’ It is no surprise that the 5 Series continues to be the leader in its class. “The recognition and acceptance of the BMW 5 Series…emphasizes BMW’s leadership in design and technology,” stated Mark Gilbert, President of BMW Philippines Corp. (BMW 530I…) As clearly noted, BMW Group is a necessary driver in the automotive industry. Although they started as a small manufacturer of automobiles, their size has and will continue to grow.
Works Cited
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Homayoun, Kourosh. Client Advisor, Rasmussen BMW. Personal Interview. 11 April 2005.
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“Nissan and Toyota Capture Big Three’s Lost Market Share in 2004.” Automotive Industry Review. 05 Nov. 2004. Anderson Economic Group. 11 April 2005. <http://www.andersoneconomicgroup.com/Pubs/autodata_releases/jan05/FULLREPORTAutoReport_Dec(2004Annual).pdf>