iv. Technological Factors
Advances in technology can have a major impact on business success as technology is vital for competitive advantage. The BMW Group undertakes various information technology measures relating to employees, organisational procedures, applications, systems and networks in order to protect itself from unauthorised access or misuse of data. The company's overriding objective is to develop transport concepts and technologies that maintain mobility without diminishing the quality of life. (bmweducation 2005)
v. Environmental factors
.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.
In accordance with the ICC charter, the BMW Group will take into consideration the efficient use of energy and raw materials, the sustainable use of renewable resources, the minimisation of all adverse environmental impacts including waste generation, and the safe and responsible disposal of residual wastes. All aspects of environmental impact will be taken into account in advance of any significant project.(bmweducation 2005)
- ORGANISATIONAL STRUCTURE
The BMW operates three business segments namely : Automobiles, Motorcycles and Financial Services. This requires different means of communication, distribution and expertise. The compay has wholly owned susidiary companies across the world, in Germany, UK, US, China, and Brazil. BMW Europe alone operates seven stand alone plants.
Strengths in Structure
BMW has a global geographic structure, with subsidiaries and plants all over the world,
grouping the organisation activities; including management, by geographic regions (Deresky, 2006). Competitive advantage may arise from the production or sale of a product adapted to a particular country (Deresky 2006).
Approximately 47 per cent owned by members of the Quandt family. This shareholding structure has a decisive impact on inter-firm relationships within
BMW’s global production network.The result is relatively flat hierarchy and management tends to be decentralised. However, strong management support is crucial in a centralised structure, as demonstrated by Ford,who have had industrial relations problems (Professional Engineering, 1999). As
BMW employs a bottom-up approach, employees participate in new product development, product modification and share decision making. This method is most frequently used in their Research and Development department.
BMW operates in foreign markets bringing it many opportunities for industrial
expansion into certain products or services, as well as increased efficiency of information
flow between countries.
Weaknesses in Structure
BMW's top management play a key strategic role in the development of new products,
however, management fail to give out specific and detailed work plans on these new
products to employees (Fang & Kleiner, 2003). A level of ambiguity is considered
healthy generating creative and innovative ideas, whilst leaving room for discussion by
top management and staff. Thus, strong guidance from top management is necessary to
avoid a potential weakness if top management and staff do not interact or work together
effectively and efficiently.
The vehicle production at BMW Great Britain, for example, meet local tastes and standards, being one of their strengths as designers and engineers are locally employed . However, when the parent
company gives autonomy to its Thailand subsidiary it risks problems arising from the
divergence of the organisations overall goals. Consequently, with
BMW using a global geographic structure, losses in efficiency and economies
of scales are experienced.
A huge amount of capital’s need to invest in training sales people to adapt to different cultures
- MARKETING
Much of the current company’s success in the UK can be attributed to the development of its marketing policy. Marketing is ‘The act or process of buying and selling in a market.’ (Kotler, Philip, and Armstrong, Gary (1993).
BMW has a competitive advantage over many other automakers because of their ability to integrate several marketing activities in a way that is consistent and interconnected.
BMW’s core competency is engineering and manufacturing “Ultimate Driving Machines.”
The advancement in car technology has contributed to the increase in car sales yearly as BMW models are built to various standards making the differences from 92% of cars on the road. Consequently, this led to a great car sale success as 64,160 car registrations for the BMW in 1998 putting them above rivals such as Mercedes and Jaguar. The BMW models have raced ahead of many other leading businesses because of the design philosophy and precision developments of cars such as Z5, Z8 or the public favourite the BMW.
The promotion and publicity of BMW plays an important part in the selling of cars. The main channel utilised by the whole sector is through the television. Advertising has been a key element on much of the BMW success adopted since 1979 using the same agency WORD. The brand image has built up by using 300 colour press adverts and more through a total of 64 different television commercials. BMW dealer also run their own local campaign with local press, radio stations and a bus advertisements provides the dealer with a central source for advertising. BMW are involved in major public events during Grand Prix and also key sponsors for the BMW Williams Formula1 team. The global publicity communicated through these promotion projects attracts more buyers into show rooms but more importantly to other BMW models.
A high emphasis on customer satisfaction is one of BMW’s strengths, as it
continually surveys its product users to target new ideas or recognise problems
BMW Financial Services enhances sales for BMW , since it has several programs such as leasing vehicles, and payment schemes for customers; which encourage vehicle purchases from all levels of society.
However, using these programs, it is evident that sales profits have a longer lead time
which may lead to increase bad debts, potentially affecting the credit rating of BMW. Also, in order to increase sales, a huge amount of capital’s need to invest in training salespeople to adapt to different cultures (Taylor, 2004).
The luxury auto segment is growing rapidly because of growing demand from consumer preferences but also because automakers are finding this segment more profitable than the mass-market segment. It is obvious that BMW has a niche market, but more importantly, it may also have the competitive advantage over other premium auto producers because of its large number of clients that custom order their vehicles
The strong pressure, within the European market, forces the manufacturers to expand geographically, mainly in emerging and less developed countries. Increasingly, electronic components are used in cars for fuel injection, breaks, and a variety of other applications. In the future, developments in the electronics and information technologies will become even more important in automobiles.
THREATS
The auto industry may be in store for some drastic changes that could threaten premium auto manufacturers like BMW. Since many automakers are learning that the premium segment is growing rapidly and is highly profitable, an increase in competition will threaten BMW’s share of the market. Companies like BMW must struggle to maintain economies of scale. It is difficult to assess the repercussions of the current market recession, however it may be a concern in the future that recession ravaged BMW and owners could dump their cars when the leases run out, instead of signing up for new ones.
- The industry is saturated and highly cyclical, the over-capacity could lead to further consolidations. Additionally, the producers are forced to make their operations and actions more efficient through lean production and lean distribution.
- Auto manufacturers such as Mercedes Benz, Lexus, Cadillac and Jaguar are competing for share in the premium car market are considered close substitutes to BMW. BMW group operates at less than Minimum Efficient Scale but is able to do so because of high product differentiation and premium selling prices.
4. HUMAN RELATIONS
The BMW Group stands out as a model of responsible behaviour in creating and safeguarding jobs. BMW calls employees “associates” demonstrate an extremely strong identification with the company and clearly share its goals
In regard to management style, BMW accomplished the transition from a hierarchical culture to a culture of trust and teamwork, a culture more suited to an environment that is growing ever more complex and dynamic. The BMW Group stands out as a model of responsible behaviour in creating and safeguarding jobs. BMW calls employees “associates” demonstrate an extremely strong identification with the company and clearly share its goals.
BMW offers its employees a comprehensive palette of flexitime work schedules; sports, leisure and wellness programs; and measures for reconciling family and professional commitments.
BMW was introduced as the Associate and Leadership Model throughout the whole BMW Group. Values and convictions are lived in practice. The BMW Group strives to make this model the foundation for all human-resource activities. The central principle of “give and take” highlights the link between corporate values and monetary and career-advancement incentives. (bmw group)
Despite many strengths, BMW is not without its share of problems. The lack of
communication and cultural understanding has caused friction between operations in the
various countries, with different attitudes towards cost estimation, the lack of improvement
suggestions by German employees relative to their Asian counterparts. The
subsidiary’s production efficiency is inferior to that of the parent companies, as their
policy of helping customers in need of financial support is increasing the lead time for
receiving sales income; although it is great for sales satisfaction.
The report recommends that increased communication is the key to BMWs future
success. By unifying executive training, better understanding each other’s culture, and
standardising production methods, cost estimation, and achieving economies of scale,
the BMW plants will become closer to one another in terms of product quality
and production efficiency
Total Quality Control Management at BMW
BMW believe that quality is of key importance in every stage of the manufacturing process, from product conception to customer feedback. Principles applied are consistency and complete coverage of all requirements throughout the development and production process.
Quality control is achieved through a system of quality audits at every stage of the manufacturing process: the production of parts, components and in the assembly plants.
The same quality control principles also apply to suppliers of materials and components. All BMW suppliers agree to work to specifications of quality.
On arrival at the BMW (UK) Ltd. Vehicle Distribution Centre, all cars have a quality check and have a full pre-delivery inspection before being delivered to the customer. Every member of staff is fully responsible for the quality of their work.
The BMW management structure allows for the team to react quickly if a fault is found and groups comprising of employees from all levels are pulled together to work immediately on a problem should one occur.
Some of Deming’s 14 points are clearly seen with BMW’s approach. The cornerstone of the BMW Group's success is its strategic focus on developing customer-friendly innovations, coupled with an approach to innovations management that is unique within the motor industry.(BNET Busniess Network)
CONCLUSION
BMW has earned a reputation for high quality engineering and product development. BMW’s recent operating and financial performance has contrasted with many of the volume carmakers, particularly in Europe, who have struggled to improve relatively thin margins in the face of intense competition and overcapacity in the small car segments. The luxury carmakers like BMW, by contrast, have been able to consistently improve sales and profits in the premium-priced segment of the car market. BMW is currently bridging the gap between its strategic needs and the territorial assets in the form
of local supply companies through a ‘mediated’ process of technology transfer and industrial
upgrading.
Adjustments are needed to facilitate a positive strategic coupling process between global production networks and regional assets. (Blackwell Synergy)
In the near-term the future remains bright for BMW with sales and profits continuing to outperform competitors. The longer-term future, however, contains some significant challenges.
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