Today, the BMW Group manufactures automobiles in a worldwide network comprised of 24 locations on four continents. There is also a further extension of sales network. The BMW Group is present in more than 130 countries with 27 own sales companies and a dealer network consisting of more than 2,000 independent companies operating at approximately 3,000 locations.
Innovation
The BMW Group is conducting research into systems that optimize the interaction between driver, car and environment in traffic situation. It linked the Telematic systems, online systems and driver assistance systems all together to increase the safety and efficiency of traffic systems as a whole.
The BMW Group is committed to compliance with the highest environmental standards. Progress in production processes continued to contribute to a trend of more efficient utilisation of resources and lower emissions.
One of the main objectives of product development is the on-going reduction of consumption and emissions. The BMW Group is working on advanced technologies in order to be able to fulfil its part of the commitment for 2008.
Personnel
As a result of the continuing product and market offensive, additional employees were recruited, mainly in development, production and sales departments. As at 31st December 2002, the BMW Group had a worldwide workforce of 101,395 employees. After adjusting for disposals and transfers of group companies, the equivalent headcount at the end of 2001 was 96,263 employees. The BMW Group has therefore effectively created 5,132 new jobs in 2002, and increase of 5.3%.
- Marketing of the BMW Group
1) The marketing objectives of BMW Group
“A vision is a company’s projection of what it wants to achieve in the future. It should be ambitious, relevant, easy to communicate and capable of motivating staff……A firm’s marketing objectives need to reflect the firm’s long-term aims/mission.” (Ian Marcousé P7)
Businesses use the abbreviation SMART to shape their objectives. SMART stands for specific, measurable, achievable, realistic& time constrained. There are many types of business objectives in the private sector, depending on the business situation and their general direction in the market. They are: survival, profit Maximisation, satisfying growth, and promotion of image.
“ The BMW built a robust customer and prospect database designed to: provide a comprehensive view of the automotive and financial services BMW customer; deliver short term, incremental revenue through opportunistic marketing programs; increase customer loyalty through understanding and ability to deliver relevant, timely communication and secure BMW’s place in its customers’ lives by identifying which households are good targets for additional BMW purchases”
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According to its objectives, its main objective is to gain more satisfaction from customers and expand its business by consolidating its current status then develops its potential market. In addition, the promotion of image is involved in its objectives. Relationship with customers and employees is key in a modern business and so a company is ever vigilant of how it appears to these people. For a company to be better that the competition it is important that they have the correct image and a better one than the competition.
2) Analysis of BMW market status
- Market size
“Market size is the measurement of all sales by all the companies within a marketplace. It can be measured in two ways: by volume and by value……Volume measure the quantity of goods purchased, and market size by value is the amount spend by customers on the volume sold.” (Ian Marcousé P14)
Here are the figures of BMW
Resource from the BMW Group Annual Report 2002
The table represents two aspects; one is the figure of its production which including BMW, MINI and Motorcycles, other one is the deliveries to customers. Obviously, the market size of BMW Group is extending and being vigorous. From 1998 to 2002, the production of BMW has been increasing steadily from 706,426 to 930,221, which is 31.6% increment. In 2001, the MINI was launched with the initial figure 42,395 and then the figure increased dramatically within one-year period. There was 227.5% increase in this brand car. On the other hand, the motorcycles production continued rising until 2001, in 2002, there was a slight decline in its production. From these evidences, which indicate that BMW has been trying to produce more products in order to enlarge its market size. It did not extend its market size unrealistically; on the contrary, it did an adequate research and investigated the demand of market before it was to enlarge the size. Because of this factor, its deliveries to customers’ figures had the same trend with the production changed except the situation of motorcycles. In the motorcycles section, its figure of delivery continued increasing although there was a decline production in 2002. The BMW Group decided to do this action because it wanted to control its stock of the motorcycles; a superfluous stock will increase its administrative cost, in addition, if there are too many motorcycles stocked in the storage, they would be out of fashion or out of date. In this case, consumers will not have the desire to buy any old style of motorcycles. According to those facts, it is definite that the BMW Group has an expert management.
A growth market is far more likely to provide the opportunities for new product to be launched or new distribution initiatives to be successful.
There is a considerable growth in car market; this flourish of car market is due to various factors:
Economy growth. During these years, the world economies are booming noticeably, in other words the growth of real incomes is outstanding. People are able to use their increased disposable incomes to purchase more luxury goods such as cars.
Social changes. As there is more and more people choose rural to live, sufficient transports are needed for people to commute between residence and workplace. Some people may choose commute cars but in most developed countries, people would like to buy their own cars especially within the hike growth of economy. In addition, luxury cars such as BMW brand is veblen goods, that means as along with the price increase, people would like to purchase more because they want to show off how rich they are.
The ability of the suppliers to identify and meet consumer requirement. BMW designed the MINI and new BMW 7 Series according to the demand from consumers. There is not only the appearances of car can satisfy customers, but also the concept of “green image” magnetise more people to buy them.
- Product life cycle and portfolio analysis
BMW has a long history; in recent years the BMW Group has demonstrated ever more incisively its versatile potential. The former niche supplier has evolved into the world’s only multibrand car manufacturer with a portfolio exclusively comprising premium marques, all the way from the micro-car to the luxury segment, BMW designed.
BMW has a diversity of products, it designed BMW brand cars such as 3 Series compact and 3 Series Cabrio and then recently it introduced the MINI brand with high-performance model. It continues innovating and developing its products and in fact this is adapted to the product life cycle concept.
“The product life cycle shows the sales of a product over time.” (Ian Marcousé P29) As the graph shows:
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According to the situation of BMW, the MINI is at the stage of growth. Its sales figure is increasing significantly and getting more popular in the society. BMW Group has successfully done the new product development; it introduced a new type of car in order to offset the potential decline of other type of cars. BMW brand car such as 3 Series has reached its maturity then it is about to decline in sales because new technology will impact it and make it to be outdated. In this situation, the MINI can abase the influence from decline selling in saturated products.
According to the situation of the MINI brand car, it is considered as a “problem child” in the product portfolio analysis. “Product portfolio analysis examines the existing position of a firm’s products. This allows the firm to consider its existing position and plan what to do next” (Ian Marcousé P32). The MINI car is in a high growth market but has a low market share. The demand of family car has been increasing and there is a significant growth in car market, however, the MINI car has not dominated a large market share in car market. It may well provide high profits in the future, the market itself is attractive because it is growing fast and the product could provide high returns if it manages to gain a greater market share.
If BMW can do more investment and try to enlarge its market size and do not just focus in European countries, it may have the potential to be the market leader in the car marketplace. Nowadays, the BMW Group has now expanded its international production network with a new plant in Northeast China. BMW automobiles have been rolling off the assembly line in the new Shenyang plant, located in Liaoning province, since September 2003, the plant is a joint venture between the BMW Group and Brilliance China Automobiles for the Chinese market within several years. Production began with automobiles of the BMW 3 Series, followed by those of the BMW 5 Series. If the BMW Group planned to launch the MINI into China’s car market, or other developing countries, its market share would be enlarged then its position in the Boston Matrix (A graph which shows the market share of each of the firm’s products and the rate of growth of the markets in which they operate) will transfer to the “ Star”. As the figure represents below:
Resource from
In the case of being a “Star”, the MINI must have a high market share and are selling in a fast growing market. It is obviously attractive―they are doing well in a successful market. However, it needs to protect from competitors’ products. In addition, when the MINI reaches its peak of product lifecycle that is at the stage of maturity or even on the edge of saturation, the BMW Group has to develop new product or update it. Updating or innovation can prevent a decline in the product’s sales. This circular process is a theorem in business.
- Finance of BMW Group
Finance is a significant aspect in business. It is always considered as the artery in business. A satisfactory in finance can determine the destiny of a business.
- The finance status of BMW Group
In 2002, the BMW Group recorded a good performance in its finance report. There is a general increase in its income.
Resource from The BMW Group Annual Report 2002
As the table shown above, compared with the year of 2001, the revenue of BMW Group in 2002 had increased with 9.3% from €38,463 million to €42,282 million. There was a less percentage in its net profit that is 8.3% increase compared to the previous year, this is due to the increase in cost of sales, at 9.8%. Within cost of sales, the cost of materials increased less than, whilst warranty and goodwill expenses increased more than, the increase in revenues. On the other hand, its sales and administrative costs increased by 5.5%, which is also less than the increase in revenue. They represent 11.6% of revenues.
In 2001, the ratio had been 12.1% as a result of expenses for the launch of the new BMW 7 Series and the MINI. As the principle of business, firm needs to promote its new product and spend more money on advertising because the more information consumers are given, the more influence cause to the sales of new product. On the other hand, people need time to consider whether the new product is high quality, and once they are satisfied with it, the new product reputation can be widespread by people. In this situation, its revenues may increase gradually. The BMW Group launched the MINI in 2001 so that its sales sand administrative costs took up about 12.2% of its annual revenue.
Research and development expenditure has again increased sharply as a result of the continuing product offensive. According to the situation of more people is concern about the green environment; the BMW Group has systematically reduced waste and dangerous material used in production. At the same time, it has constantly improved its use of precious resources in all manufacturing processes. Now, the BMW is the worldwide leader in sustainable vehicle production.
2) Ratio analysis of the BMW Group
“Ratio analysis is an examination of accounting data by relating one figure to another. This allows more meaningful interpretation of the data and the identification of trends.” (Ian Marcousé P160) The future activities of the BMW Group can be predicted under doing the ratio analysis.
Net Profit Margin
“This ratio measures the relationship between the net profit and the level of turnover or sales made. It is given by the formula:
net profit margin= net profit
turnover (sales) * 100%
(Ian Marcousé P162)
According to the figures above, the net profit of 2001 is €1,866,000 and the sales are 1,000,984, so the calculation of the net profit margin is 186%. The net profit of 2002 is €2,020,000 and its sales are 1,160,364 so that its net profit margin is 174%. The starting figures of net profit indicate that as an automobile producer, the BMW Group had made a huge profit from selling cars and motorcycles. The net profit margin establishes whether the firm has been efficient in controlling its expenses. The comparison between 2001 and 2002 implies that the BMW Group has spent a lot of money on innovation and the development of its “green image” products; in addition, it had to put more expenditure on launching the MINI. A slight decline in its net profit margin is reasonable and inevitable. An increased net profit margin can be forecasted in next year because the MINI car has been in a strong position of the potential market. Furthermore, the enlargement of its production plant can benefit its sales.
- PEST analysis
The PEST analysis is used for all external activities that could affect the business. External activities are things that the business can have no control over. PEST stands for Political, Economic, Social and Technological. The PEST analysis examines the impact of each of these factors on the business. The results can then be used to take advantage of opportunities and to make contingency plans for threats
- Political factors
“The political factors have a huge influence upon the regulation of businesses, and the spending power of consumers and other businesses. A business must look at issues such as how stable is the political environment, will government policy influence laws that regulate or tax your business, what is the government's position on marketing ethics.” (http://www.coursework.info/e/page.cgi?page=view;link=34947&d=1&s=324c21ac2c8ea5e2496907309fd18780&U=rabbitwendy)
In 2002, the EU end-of life vehicle directive was enacted into law in all countries of the European Union, coming into force in Germany on 1 July 2002. The BMW Group has recognised provisions in the balance sheet to cover the obligations relating to the risk of collection, treatment and recovery of all end-life vehicles sold by the BMW Group to date. Provisions are also being recognised on an on-going basis for new vehicles as a result of its activities in vehicle recycling and the progress made in “Design for Recycling”.
The change in fuel prices, partly affected by the market and partly by the government tax policies, and the requirement to reduce the fleet fuel consumption and CO2 emissions set high demands on engine and product development.
The tax changes proposed by the German Government, in particular the tax treatment of company cars, could have a negative impact on car sales of the BMW Group in Germany.
The decision of the EU Commission relating to the new Block Exemption Regulation for the sales distribution of motor vehicles will require substantial legal and structural changes to the current sales distribution system. The BMW Group has initiated measures, including the restructuring of sales distribution networks, in order to both counter the risks for sales and brand positioning and to avoid any possible negative impact on the high quality, safety and environmental standards of the BMW Group.
Economic Factors
“Marketers need to consider the state of a trading economy in the short and long-terms. This is especially true when planning for international marketing. A business needs to look at the Interest rates, the level of inflation, income growth, debt & saving levels (which impact available money) and consumer & business confidence.” (http://www.coursework.info/e/page.cgi?page=view;link=34947&d=1&s=324c21ac2c8ea5e2496907309fd18780&U=rabbitwendy)
The strong growth of the BMW Group achieved on all major international markets means that global key data such as the development of currency parities and financial markets are very significant. The BMW Group mitigates these risks by intensive monitoring of the markets and by the use of hedging instruments.
Economic fluctuations represent risk factors for future development. The BMW Group anticipates these risks by monitoring the market in detail and using early warning indicators. Risk is spread due to the worldwide activities of the BMW Group.
An escalation in the global political tensions could have a negative impact on the oil price and the economic situation as a whole, which, in turn, would have a negative impact on the business development of the BMW Group.
Social Factors
“The social and cultural influences are the elements that build society. Social factors influence people's choices and include the beliefs, values and attitudes of society. So understanding changes in this area can be crucial. It is very important that such factors as changes can impact purchasing behaviour consumer attitudes to your product & industry - environmental issues, the role of women in Society, attitudes to health, attitudes to wealth, attitudes to age (children, the elderly, etc.) Added complications when looking at social and cultural factors are differences in ethnic and social groups.” ()
According to the concept of “green image” products, people would like to purchase green goods rather than demerit goods. The BMW Group has already accepted this challenge, and developed a technology that represents the future of motor fuel. BMW Clean—Energy uses the most primary of all natural cycles: the water cycle. This cycle is the central concept of BMW Clean—Energy. Liquid hydrogen is generated from energy and water. In the engines of BMW hydrogen vehicles, the hydrogen combusts with oxygen again, and returns to water. BMW Clean—Energy simply follows the principles of nature.
Technological Factors
“Advances in technology can have a major impact on business success as technology is vital for competitive advantage for example, think about the potential impact that video-conferencing could have on the business travel market.”
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In information technology, the BMW Group undertakes various measures relating to employees, organisational procedures, applications, systems and networks in order to protect itself from unauthorised access or misuse of data.
- Conclusion
The BMW Group is a broad scope of investigation, its widespread distribution of production plants and the supreme after service besides the one-up technology, the future for BMW Group is very optimistic.
As a car producer, the BMW Group has to be ware and be wise to the current situation of car market. At recent day, cars are becoming one of the most primary transports in the society; this condition indicates that the car market will become more furious. As long as the prevalence of private cars, car sales are increasing sharply, this could be good or be bad for the BMW Group. The BMW Group can gain more profit from the increasing sales if it produces its cars with high quality and good service constantly, people will be loyal to the BMW and wish to purchase its cars even though there is various different brand cars can be chosen. A good reputation is the principle of business. Otherwise, if the BMW Group fails to be high quality of its cars but produce overfull cars, it may harm its prestige and affect its stock control.
Moreover, the BMW cars are considered as the high—class cars, most products are applied to rich people but not the poor people. If it can produce some normal car that can apply to the middle-class people, its market share can be expanded. On the other hand, its accessories and hardware of cars are expensive for maintenance, which can reduce the desire of people purchasing its cars.
In conclusion, the BMW Group has an efficient management and high standard production; its future depends on the external environment and internal activities. The potential opportunities are not just from outside environment but also the internal factors.
References:
Ian Marcousé(1999), Business Studies (second Edition), Hodder&Stoughton, Spain.
(P7, P14, P29, P32, P160)
The BMW Group Annual Report 2002, Published by Bayerische Motoren Werke, Munich
www. autointell-new.com
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