BMW

 Profile of the Entrepreneur

Founded in 1917, the BMW Group is now one of the ten largest car manufacturers in the world and, with its BMW, MINI and Rolls-Royce brands, possesses three of the strongest premium brands in the car industry. The group also has a strong market position in the motorcycle sector and operates a successful financial services business. The company aims to generate profitable growth and above-average returns by focusing on the premium segments of the international automobile markets. With this in mind, a wide-ranging product and market offensive was initiated in 2001, which has resulted in the BMW Group expanding its product range considerably and strengthening its worldwide market position. The company’s brand is extremely strong and is associated with high performance, engineering excellence and innovation. Indeed, the BMW brand is often cited as one of the ‘best’ in the world, and the company continues to launch a stream of innovative products as part of its battle with German peer Mercedes to be the world’s largest luxury car maker.

 

Brief description of the products

The R32 motorcycle, the first BMW motor vehicle.

BMW began building motorcycle engines and then motorcyclesafter World War I. Its motorcycle brand is now known as BMW Motorrad. Their first successful motorcycle, after the failed Helios and Flink, was the "R32" in 1923. This had a "boxer" twin engine, in which a cylinder projects into the air-flow from each side of the machine. Apart from their single cylinder models (basically to the same pattern), all their motorcycles used this distinctive layout until the early 1980s. Many BMWs are still produced in this layout, which is designated the R Series.

BMW K1200GT

BMW 1955 R67/3 was the last of the "plunger" models

During the Second World War, BMW produced the BMW R75 motorcycle with a sidecar attached. Featuring a unique design copied from the Zündapp KS750, its sidecar wheel was also motor-driven. Combined with a lockabledifferential, this made the vehicle very capable off-road, an equivalent in many ways to the Jeep.

In 1982, came the K Series, shaft drive but water-cooled and with either three or four cylinders mounted in a straight line from front to back. Shortly after, BMW also started making the chain-driven F and G series with single and parallel twin Rotax engines.

In the early 1990s, BMW updated the airhead Boxer engine which became known as the oilhead. In 2002, the oilhead engine had two spark plugs per cylinder. In 2004 it added a built-in balance shaft, an increased capacity to 1,170 cc and enhanced performance to 100 hp (75 kW) for the R1200GS, compared to 85 hp (63 kW) of the previous R1150GS. More powerful variants of the oilhead engines are available in the R1100S and R1200S, producing 98 hp (73 kW) and 122 hp (91 kW), respectively.

In 2004, BMW introduced the new K1200S Sports Bike which marked a departure for BMW. It features an engine producing 167 hp (125 kW), derived from the company's work with the Williams F1 team, and is lighter than previous K models. Innovations include electronically adjustable front and rear suspension, and a Hossack-type front fork that BMW calls Duolever.

BMW introduced anti-lock brakes on production motorcycles starting in the late 1980s. The generation of anti-lock brakes available on the 2006 and later BMW motorcycles pave the way for the introduction of electronic stability control, or anti-skid technology later in the 2007 model year.

BMW has been an innovator in motorcycle suspension design, taking up telescopic front suspension long before most other manufacturers. Then they switched to an Earles fork, front suspension by swinging fork (1955 to 1969). Most modern BMWs are truly rear swingarm, single sided at the back (compare with the regular swinging fork usually, and wrongly, called swinging arm). Some BMWs started using yet another trademark front suspension design, the Telelever, in the early 1990s. Like the Earles fork, the Telelever significantly reduces dive under braking.

In July 2007, the Italian-made Husqvarna Motorcycles was purchased by BMW for a reported €93 million. BMW Motorrad plans to continue operating Husqvarna Motorcycles as a separate enterprise. All development, sales and production activities, as well as the current workforce, have remained in place at its present location at Varese.[19] Husqvarna manufactures motocross, enduro andsupermoto motorcycles.

The New Class (German: Neue Klasse) was a line of compact sedans and coupes starting with the 1962 1500 and continuing through the last 2002s in 1977. Powered by BMW's celebrated four-cylinder M10 engine, the New Class models featured a fully independent suspension, MacPherson struts in front, and front disc brakes. Initially a family of four-door sedans and two-door coupes, the New Class line was broadened to two-door sports sedans with the addition of the 02 Series 1600 and 2002 in 1966.

Sharing little in common with the rest of the line beyond power train, the sporty siblings caught auto enthusiasts' attention and established BMW as an international brand. Precursors to the famed BMW 3 Series, the two-doors' success cemented the firm's future as an upper tier performance car maker. New Class four-doors with numbers ending in "0" were replaced by the larger BMW 5 Seriesin 1972. The upscale 2000C and 2000CS coupes were replaced by the six-cylinder BMW E9, introduced in 1969 with the 2800CS. The 1600 two-door was discontinued in 1975, the 2002 replaced by the 320i in 1975.

BMW 3-Series (E90)

The 1 Series, launched in 2004, is BMW's smallest car, and is available in coupe/convertible (E82/E88) and hatchback (E81/E87) forms. The 3 Series, acompact executive car manufactured since model year 1975, is currently in its fifth generation (E90); models include the sport sedan (E90), station wagon (E91), coupe (E92), and convertible (E93). The 5 Series is a mid-size executive car, available in sedan (F10) and station wagon (F11) forms. The 5 Series Gran Turismo (F07), beginning in 2010, will create a segment between station wagons and crossover SUV.[20]

BMW 7-Series (F01)

BMW's full-size flagship executive sedan is the 7 Series. Typically, BMW introduces many of their innovations first in the 7 Series, such as the somewhat controversial iDrive system. The 7 Series Hydrogen, featuring one of the world's first hydrogen fueled internal combustion engines, is fueled by liquid hydrogen and emits only clean water vapor. The latest generation (F01) debuted in 2009. Based on the 5 Series' platform, the 6 Series is BMW's grand touring luxurysport coupe/convertible (E63/E64). A 2-seater roadster and coupe which succeeded the Z3, the Z4 (E85) has been sold since 2002.

BMW X3 SUV (F25)

The X3 (E83), BMW's second crossover SUV (called SAV or "Sports Activity Vehicle" by BMW) debuted in 2003 and is based on the E46/16 3 Series platform. Marketed in Europe as an off-roader, it benefits from BMW's xDrive all-wheel drive system. The all-wheel drive X5 (E70) was BMW's first crossover SUV (SAV), based on the 5 series, and is a mid-size luxury SUV (SAV) sold by BMW since 2000. A 4-seat crossover SUV released by BMW in December 2007, the X6 is marketed as a "Sports Activity Coupe" (SAC) by BMW. The upcoming X1 extends the BMW Sports Activity Series model lineup.

1 Series (E81) (2004–present) Hatchback, coupe and convertible

3 Series (E90) (2005–present) Sedan, coupe, convertible and wagon

5 Series (F10) (2010–present) Sedan and Wagon

5 Series Gran Turismo (2009–present) Progressive Activity Sedan

6 Series (F12) (2010–present) Coupe and convertible

7 Series (F01) (2008–present) Sedan

X1 (2009–present) Compact Crossover SUV/Sports Activity Vehicle (SAV)

X3 (F25) (2010–present) Compact Crossover SUV/Sports Activity Vehicle (SAV)

X5 (E70) (2006–present) Compact Crossover SUV/Sports Activity Vehicle (SAV)

X6 (2008–present) Sports Activity Coupe

Z4 (E89) (2009–present) Sports Roadster

A race-ready production vehicle. Since its debut, the M3 is heralded in enthusiast circles, in large part due to its unique geometry and award winning engines. The newest V8-powered platform became available the Autumn of 2007 in Europe, and second quarter of 2008 for the U.S. in coupe (E92), and later the cabriolet (E93), and sedan (E90) variants. Based on the 5 Series, the M5 is the M division's V10-powered version of the E60 5 Series.[21] The M6 is the M division's version of the 6 Series, and shares its drivetrain with the M5. The Z4 M, or M Coupe/M Roadster, is the M division's version of the Z4. The X5M is the M division's version of the X5, and the X6M is the M division's version of the X6. Both the X5M and X6M share the same V8 twin scroll twin turbo.

1M: Based on 1 Series (E81) (2011–present) coupe

M3: Based On The 3 Series (E90) (2005–present) Sedan, coupe and convertible

M5: Based On The 5 Series (F10) (2010–present) Sedan and Wagon

M6: Based On The 6 Series (E63) (2003–present) Coupe and convertible

X5-M: Based On The X5 Series (E70) (2006–present) Compact Crossover SUV/Sports Activity Vehicle (SAV)

X6-M: Based On The X6 Series (2008–present) Sports Activity Coupe

 

How the business started

A brief introduction of how the business started.

 BMW entered existence as a business entity following a restructuring of the Rapp Motorenwerke aircraft engine manufacturing firm in 1917. After the end of World War I in 1918, BMW was forced to cease aircraft engine production by the terms of the Versailles Armistice Treaty. The company consequently shifted to motorcycle production in 1923 once the restrictions of the treaty started to be lifted, followed by automobiles in 1928–29.

The first car which BMW successfully produced and the car which launched BMW on the road to automobile production was the Dixi, it was based on the Austin 7 and licensed from the Austin Motor Company in Birmingham, England.

The circular blue and white BMW logo or roundel is portrayed by BMW as the movement of an aircraft propeller, to signify the white blades cutting through the blue sky – an interpretation that BMW adopted for convenience in 1929, twelve years after the roundel was created. The emblem evolved from the circular Rapp Motorenwerke company logo, from which the BMW company grew, combined with the blue and white colours of the flag of Bavaria, reversed to produce the BMW roundel. However, the origin of the logo being based on the movement of a propeller is in dispute, according to an article posted in 2010 by the New York Times, quoting "At the BMW Museum in Munich, Anne Schmidt-Possiwal, explained that the blue-and-white company logo did not represent a spinning propeller, but was meant to show the colours of the Free State of Bavaria."

BMW's first significant aircraft engine was the BMW IIIa inline-six liquid-cooled engine of 1918, much preferred for its high-altitude performance. With German rearmament in the 1930s, the company again began producing aircraft engines for the Luftwaffe. Among its successful World War II engine designs were the BMW 132 and BMW 801 air-cooled radial engines, and the pioneering BMW 003 axial-flow turbojet, which powered the tiny, 1944-1945-era jet-powered "emergency fighter", the Heinkel He 162 Spatz. The BMW 003 jet engine was tested in the A-1b version of the world's first jet fighter, the Messerschmitt Me 262, but BMW engines failed on takeoff, a major setback for the jet fighter program until successful testing with Junkers engines.

By the year 1959, the automotive division of BMW was in financial difficulties and a shareholders meeting was held to decide whether to go into liquidation or find a way of carrying on. It was decided to carry on and to try to cash in on the current economy car boom enjoyed so successfully by some of Germany's ex-aircraft manufacturers such as Messerschmitt and Heinkel. The rights to manufacture the Italian Iso Isetta were bought; the tiny cars themselves were to be powered by a modified form of BMW's own motorcycle engine. This was moderately successful and helped the company get back on its feet. The controlling majority shareholder of the BMW Aktiengesellschaft since 1959 is the Quandt family, which owns about 46% of the stock. The rest is in public float.

BMW acquired the Hans Glas company based in Dingolfing, Germany, in 1966. It was reputed that the acquisition was mainly to gain access to Glas' development of the timing belt with an overhead camshaft in automotive applications.[13] Glas vehicles were briefly badged as BMW until the company was fully absorbed.

In 1992, BMW acquired a large stake in California based industrial design studio DesignworksUSA, which they fully acquired in 1995. In 1994, BMW bought the British Rover Group (which at the time consisted of the Rover, Land Rover and MG brands as well as the rights to defunct brands including Austin and Morris), and owned it for six years. By 2000, Rover was making huge losses and BMW decided to sell the combine. The MG and Rover brands were sold to the Phoenix Consortium to form MG Rover, while Land Rover was taken over by Ford. BMW, meanwhile, retained the rights to build the new Mini, which was launched in 2001.

Chief designer Chris Bangle announced his departure from BMW in February 2009, after serving on the design team for nearly seventeen years. He was replaced by Adrian van Hooydonk, Bangle's former right hand man. Bangle was known for his radical designs such as the 2002 7-Series and the 2002 Z4. In July 2007, the production rights for Husqvarna Motorcycles was purchased by BMW for a reported 93 million euros. BMW Motorrad plans to continue operating Husqvarna Motorcycles as a separate enterprise. All development, sales and production activities, as well as the current workforce, have remained in place at its present location at Varese. 

How the business gained success

  How the business gained success etc.

   The ups & downs of the entrepreneur & his/her business.

By the year 1959, the automotive division of BMW was in financial difficulties and a shareholders meeting was held to decide whether to go into liquidation or find a way of carrying on. It was decided to carry on and to try to cash in on the current economy car boom enjoyed so successfully by some of Germany's ex-aircraft manufacturers such as Messerschmitt and Heinkel. The rights to manufacture the Italian Iso Isetta were bought; the tiny cars themselves were to be powered by a modified form of BMW's own motorcycle engine. This was moderately successful and helped the company get back on its feet. The controlling majority shareholder of the BMW Aktiengesellschaft since 1959 is the Quandt family, which owns about 46% of the stock. The rest is in public float.

BMW acquired the Hans Glas company based in Dingolfing, Germany, in 1966. It was reputed that the acquisition was mainly to gain access to Glas' development of the timing belt with an overhead camshaft in automotive applications. Glas vehicles were briefly badged as BMW until the company was fully absorbed.

 

 

Business Strategies

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. [1]  

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.

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.  

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 such as BMW and Toyota are facing merger and acquisition threats from other manufacturing giants. Since they themselves have attempted to expand their territories within the industry, they now, in turn face similar action by i.e. the merger between Ford & Volvo, the GM acquisition of 20% of Fiat automobile division and Fiat buying 5.1% stake in GM in recent years. These actions set examples major manufacturers are trying to survive in the mass market through mergers and acquisitions.

“Merger speculation is sweeping through the global car industry as rumors circulate about Ford tries to acquire BMW & Honda.”(BBC News in 1.5.99)

Competitors present in the luxury segment, have products with similar features and components provided by BMW, diluting the brand image.

Risk of exchange rate fluctuation against euro as BMW has production plants around the world and it affects overall profitability of the company.

2. M.E porter’s model of the ‘5 competitive forces’ being threat of new entry, buyers power, customers power, threat of substitute and threat of rivalry, and the application of them to the BMW company.

The five forces help to understand competition in an industry or particular sector of such (refer Appendix 2). When considering the automobile industry it proves a useful tool to assess the competitive forces to manufactures and identifying the element of threats.

Threat of new entry

When considering the first element, threat of new entry is   favorable to BMW due to the huge initial overheads such as, the capital requirements for manufacturing, research & development, marketing & distribution of automobiles. Brand loyalty of the customers, towards BMW, forces new entrants to spend heavily in overcoming customer loyalty. The longstanding history of the BMW world renounced quality products poses therefore a minimal threat by the new entries.

Buyer’s power

Normally buyers pose a limited threat towards BMW unless concentration such as car rental companies, and bulk buying of Governments of large quantities of vehicles with specific components. BMW are very important to buyers where quality matters. BMW Customers seek product differentiation rather than price sensitivity, and these from the greatest majority.

Supplier’s power

Suppliers exercise considerable power towards BMW as the company uses specialized suppliers. Its product lines are dependent upon supplier’s manufacturing facilities. However the survival of BMW is an important factor for suppliers in protecting their future earnings and they will therefore compromise with BMW in   pricing, R & D to ensure their future survival.

Threat of substitutes

Other forms of transport such as, trains, planes, buses and foot cycles prove a threat of substitution. Air travel become cheaper and more convenient compared with the car due to increasing traffic, unstable fuel price, parking charges, increasing accidents. Governments increasingly enforce taxes and charges on private motor vehicles to encourage motorists to use public transport   thereby minimizing traffic and pollution. It cause some concerns for the automobile industry as a whole rather than individual companies but still is not a threatening substitute to premium automobile manufactures.

The threat of rivalry

BMW is facing severe competition from its rivals in Germany as well as from other giant automobile manufactures, equal in size and power that compete in the same segment aiming at the same customer groups with similar products.

Japanese competitors competing in the premium segment offer products with a competitive price, which allows buyers to switch from expensive luxuries to inexpensive luxuries but with similar comfort and product features. (Eg. Lexus is a luxury car with similar product features and specifications to BMW, but cheap compared to other luxury cars as it was produced under a low cost strategy)

The rivals are strategically diverse. They have a different approach to competition and expansion.

High entry barriers impose by national governments to BMW products, as it is a specialized niche market even if they make losses or narrow profit margins to hang on to the market.

Market growth rate severely affects the rivalry among Companies competing in the mature markets, which means they cannot achieve growth without taking a market share from rivals and BMW do this. Taking all things in to consideration jockeying for position is the major threat to BMW’s survival and the company will have to alter their strategy to gain edge over their rivals in domination in the premium segment.

3. Analysis of the strategic capability of BMW and identification of the most important strengths and weaknesses of the company.

Core competences are the activities or process that critically underpin an organization’s competitive advantage.

Consider BMW’s core competencies

Their core competence is excellence in development, production and branding of high performance cars.

A valuable global brand, strong presence, and a comprehensive knowledge cover of the premium segment set the criteria for that competence .

Robust technology and innovative designs with the corporation of the World famous automobile designer group Steyr-Daimler-punch Fahrzeug-Technik (SFT) enabled BMW to re-develop the concept models designed by BMW engineers. Through this corporation, the BMW group has enhanced its dynamism and flexibility, making yet another milestone in the application of the BMW group’s product offensive.

Its products are not replicable, difficult to imitate by its competitors and cannot be substituted by another luxury vehicle manufacturer.

Engines with lower fuel consumption and higher performance using VALVETRONIC technology and a sequential M gear box (SMG) gained the edge over the competitors.

Management depth persistence using a more agile organizational structure with substantial economic operation and financial capability has strengthened the company. Appendix 4 illustrates good long-term share performance over the years helping to strengthen the companies’ position in the world market. BMW is ahead of other luxury manufactures due to their core products .

A highly skilled work force with extensive training and development procedures coupled with a “learning organization” concept as well as with state of the art Research and development centre, helped to exploit opportunities and neutralise threats, out performing the competition.

Value Chain is another basic tool for diagnosing competitive advantage and finding ways to create and sustain it, the subject that will dominate the chapters that follow. It provides systematic way to divide a firm in to discrete activities thus can be used to examine how the activities in a firm are and could be grouped.

Weakness

BMW is small in size comparison with competitors in the industry.

Its shareholder structure creates problems for the companies’ strategic implementation of policy in a changing environment.     

Lack of experience in multi brand production this has resulted in non-diversifications to other segments such as commercial vehicles and heavy vehicles, whereas competitors have spread over all the segments in the automobile industry. (Eg. Ford, GM)

BMW lost valuable time in their research and development programme due to the unsuccessful rover venture, which may have been better spend in developing research into commercial vehicle production.

4. Identification and analysis of the most important stakeholders in BMW.

Stakeholder is taking to mean a person, group or orgasination with an interest in the activities of BMW.” The strongest stakeholders view is that each stakeholder group has its own objectives, and the management has to reach a balance or compromise between them.

Stakeholder mapping can be used to help in realising their expectations and explaining to them the political context and the priorities of the ‘political agenda’ for the organization. It can be used to understand the likely reactions of stakeholders to new strategies, the ability to manage these reactions, and hence the acceptability of a strategy.

According to Appendix 8, more powerful stakeholders are those key players in the organization. The Qundit family owns 46% of the company shares and they are participating in managing the company as well. The secret for the company’s long-term success could well be their intervention in companies’ affairs.

The German government has much influence in the way that the company   conducts itself, as BMW is one of their national icons. BMW’s contribution to national exports influences the economic growth of the country. Considerable tax payments and high employment ratio of German nationals gives more power to the government over BMW.

Pressure groups like the media and environmental organizations have a high level of interest in the companies’ affaires and by attaining high standards in environmental practice BMW are able to get considerable free publicity as a result.

Employees and managers are important stakeholders in the company as a result of BMW’s   excellent staff relations, which is one of the best in the world automobile industry. They have obtained a strong position in the intense competition for qualified technical and management staff.

By providing a high-level of satisfaction and low level of employee fluctuation coupled with a high quality-working environment, they have been able to achieve many of an employee’s expectations and minimized the risk of know-how drift.     

The project “ supplier Relationship Management”(SRM) started in 2001 to improve communication between company suppliers and integrate them in to changing management process of the BMW group via on line portal illustrate BMW’s concern for their suppliers.

Specific objectives for the company over the next five years

BMW’s Future strategy is to continue to concentrate on market offensives in the premium segment while continuing to focus on quality, innovation and excellence.

Stretching the brand image by diversification is another option enabling them to remain in a highly competitive position. Globalization of the Mini in the years to come could be a suitable strategy in meeting the demands of the ever increasing small car market and by concentrating on a growth strategy may well result in meeting the market requirement of 2 million vehicles per year thus achieving the required economy of scale.

A Merging with a suitable competitor or forming alliances with other large automobile manufacturers could be other options enabling BMW to remain a viable manufacturer.

Acquisition of other premium brands and improving the product portfolio by introducing an enhanced range of vehicles from time to time could increase the competitive edge.

The future market situation of the automobile industry and influence from the Quindit family will have a significant impact on the prestigious Bayerische Motoren Werken in their future success.

5. Concept of Generic strategy and indication of BMW’s generic strategy.

The purpose of pursuing a business-level strategy is to give the company a competitive advantage that will allow it to outperform its competitors and earn above-average returns. There are three basic strategies a company can adopt: cost leadership, differentiation and focus. Opposing this is the “stuck in the middle” situation, which is described, in Porter’s “generic strategies” .

BMW concentrates on focus differentiation as it appeals to the psychological needs of its customers such as status or prestige.

It seeks a competitive advantage based on innovation and technological competency. The key function is R&D with customer responsiveness is its goal. After-sales service, distribution, and customer service functions are most critical. As a result, BMW is not just a prestige car, it is fast, reliable and technologically sophisticated. BMW focus their strategy using “differentiation approach”. Their main German rival Mercedes follows a similar strategy. Other rivals such as Lexus and Nissan concentrate in an approach based on cost leadership whilst manufacturers such as Ford and GM concentrates on offering cars in every market niche.

Identify BMW’s “distinct competitive advantage.”

BMW’s distinctive competitive edge lies on their core competence and business strategy of focus differentiation. A powerful brand image, renowned for the quality or its products was the foundation of the success of the company coupled with its management depth and superior technology. The current view amongst motoring correspondents is that the “BMW 5-series still dominates the executive class after 6 years of presence. More unbelievable is that even now no others can come close to its superiority. In fact, the 5-Series does not show any signs of ageing at all. It still looks handsome and is of high quality. It still has the best handling and ride. It still has the best 6-cylinder engines in the world and strong performance. The 5-Series shows the best German engineering can be. It is becoming a classic!”(Autozine awards 2002.Class winners: Best full size executive sedan)

Winning the awards for best compact Executive, Best sport car, best full size executive sedan, and best luxurious sedan in 2002 illustrate BMW’s distinct competitive advantage over the rivals.

6. Analysis of Suitability, Feasibility and Acceptability of BMW’s acquisition of Rover from British Aerospace in 1994.

BMW acquired Rover in 1994 at a cost of $ 1.3bn and disposed of it to the Phoenix Consortium for the symbolic sum of 10 pounds, in early 2000 after making huge loss of more than $ 3 billion in four years. 

BMW wanted to move in to other segments of the automobile industry as the business environment began to change in the early 90’s. BMW group foresaw the up rising threat from its competitors and wanted to build an empire by becoming a major player and by defending themselves from the forces ranged against them by securing their position.

Initially they had held an interest in Rover as it had £2 million threshold with product range of Land rover, Mini, Rover and GM with competitive growth rate. (Land rover 1993:growth rate 9.7%). The Rover product range had different brands all over the world and it was therefore suitable for use by BMW to expand their global production across the different segments. Similar production volume and the Rover’s performance stimulate the desire to takeover Rover.  

A hidden motive behind the merger was the CEO’s personal aspirations of securing his position thereby enhancing his personal and financial prestige.

The SWOT analysis in Appendix 11 illustrates the suitability of the merger between BMW and Rover.

Mass production rule did not fit in to the luxury segment, while Rover and BMW were too different companies in innovation, financial strength and brands.

Insufficient culture management between the two teams was the major reason for the failure. Cross boarder merger bought two different cultures together where differences in the organization of two national icons could not fit together. The British found it easier to adapt to the flexibility methods used by Honda rather those used by BMW.A former Rover executive phrased it like this “ The British are too polite to be honest, the Germans are too honest to be polite.”

The acquisition of Rover by BMW proved unable to add any value to the company. There were no synergetic effects. They simply couldn’t integrate all the activities. BMW had not considered the cultural process of assimilation, hybridizing or separation. When they went in to implement their management it was too late. .

Building large batches of cars at one time with little or no variation between those in each batch was Rover’s production strategy while possesses the high expensive plat form strategy for Land rovers. But BMW’s had different approach for production whereby constructing each car individually with different features such as air bags, colour and left hand right hand driving was the norm.

BMW had sound feasibility for the acquisition as it had made a profit for last 40 years continuously and so had a strong financial position to back its idea of acquiring Rover and investing in that companies’ developments. BMW was well aware of the rover’s high break-even point and expected to incur losses for three years and thereafter commence profit making.

“BMW knew that Rover would require considerable new investment and that it was likely to make losses for some years.  Also they would need to develop new models.”(Allan John MP: March 2000 “The future of the motor car industry”)

Over estimation of the synergy and underestimation of difficulties following the market pressures due to the high value of the pound cause severe problem for BMW.

“Euro-skepticism & BMW’s unimaginative ownership may finally have killed Rover, but this calamity was longer in the making than the making than the last few years. It is culmination of decades of institutional failure, managerial incompetence, government inadequacy, poorly led unions & nerve business culture.

High exchange rate astonishingly high, fell back briefly & then reached a new peak following the ERM debacle, making car manufactures last only for the congenitally stubborn. ” (Will hulton: Sunday march 19,2000 The Observer) 

BMW runs global purchase system (GPS), which manages and administers its worldwide procurement of goods and services. The system can identify the value of purchase made with any supplier. BMW wanted to take advantage of supplier’s volume related discount on the entire group’s spending, but rover couldn’t fit into the GPS and disposed of it as an expensive and impractical project. If they had not done this they would have saved $4.8 M per annum. [4] 

The damage done to the company’s image and reputation in the United Kingdom and resultant loss of research and development time taken together with the  $ 3 billion financial loss, included the CEO of BMW to step down and a consequent reorientation of companies’ strategy, demonstrated the stakeholders expectation in the merger. 

The foresight shown by the BMW executive in acquiring the Rolls Royce brand name and the resultant expenditure in a new factory at Good wood

U. K has yet to prove its worth

 

How company got its name

The history of BMW product designations

Ever wondered how BMW’s get their names? The history of the nomenclature for aero (airplane) engines, motorcycles and cars is marked on the one hand by enduring lines and on the other by surprising twists and turns.

As the company started out building aero engines, it was ancient history that provided BMW with the inspiration behind the naming of the first ones. The German Imperial Flying Corps arranged the engines for its aircraft according to output classes using a system based on Roman numerals, and the majority of engine manufacturers adopted this military coding for their product designations. The company used this naming system for both its water-cooled and air-cooled aero engines up to 1932 – from the ‘BMW IIIa’ to the ‘BMW XV’.

However, this military-inspired nomenclature sat rather awkwardly with the power units developed by the BMW engineers for cars and motorcycles. Instead, these engines were given the name ‘Bayern-Motor’ as a sales designation, usually followed by the output figure. A new designation system for these units was agreed within the company based around their technical fundamentals, such as the number of cylinders, their model series and project number.

This produced designations like ‘M4A1’ and ‘M2B15’, which looked decidedly secretive at first glance. Broken down however, it was immediately clear to the initiated which product they referred to. The ‘M’ stood for ‘Motor’ (engine), the following figure for the number of cylinders, the letter for the model series and the final number for the project number in question. For example, the ‘M4A1’ was an ‘A’ series (large-capacity in-line) four-cylinder engine with the project number 1.

BMW acted to simplify the system in the mid-1920s. The references to the number of cylinders and model series were abandoned. Now the only entry in front of the project number was to denote an engine (‘M’ = Motor), transmission (‘G’ = Getriebe), a frame for motorcycles (‘R’ = Rahmen) or a chassis for cars (‘F’ = Fahrgestell).


And this was how the first ever BMW motorcycle got its name. The frame for the new bike was given the project number ‘R 32’ when it was entered into the project list. The engine was christened ‘M2B33’, later shortened to ‘M33’. The transmission used in the motorcycle bore the designation ‘G 34’. The internal project number for the frame construction saw the motorcycle unveiled with the official sales designation ‘BMW R 32’. Initially, all the brand’s motorcycles were issued with their name according to this system, a product of the design organization. In the public use, the ‘R’ stands for ‘Rad’, a short name for Motorrad (motorcycle) at this time. Interestingly, many mistake ‘Rad’ for the other sense of the word – ‘wheel’!

The mid-1920s saw an enforced change to this designation principle. Up to that point, each motorcycle had its own frame construction. Now the designers started using the same frame for several models, although these could be distinguished by the engine variant fitted. This development meant that the sales designation for the models could no longer be based on the project numbers for the frames. The ‘R’ was retained, but was now followed by a two-digit number that differed from the design designation.

Motorcycles were to be given new sales designations. A system giving the single-cylinder machines single-digit sales designations while the two-cylinder units two-digit designations was hastily introduced.

With the acquisition of the Eisenach vehicle factory in 1928, the decision was made to separate the numbering systems for aero engine, motorcycle and car development. The National Socialist authorities oversaw an intensification of rearmament in Germany from 1933. In order to simplify the expansion of the Luftwaffe, the Reich Air Ministry apportioned fixed numbering systems to its various engine manufacturers. BMW was given the range between 100 and 199.


'BMW got back into its stride after the end of the Second World War with further developments of its pre-war models.'


BMW took the new instructions as the signal to introduce a new internal naming system. As the numbers 100 to 199 had already been assigned to aero engines, motorcycles were given the range from 200 to 299 and cars the 300-to-399 band. The existing motorcycle models were integrated into the new system according to their conventional designation. For example, in development documents the ‘R 32’ became the ‘232’. The sales designations traditionally used for motorcycles were retained, although modifications were made to the existing system. From the mid-1930s the nomenclature for the models reflected, as a rule, the engine displacement. For example, the 500cc boxer unit was named the BMW ‘R 5’ and its successor the BMW ‘R 51’.

BMW got back into its stride after the end of the Second World War with further developments of its pre-war models. The first post-war motorcycle was an only slightly modified version of the pre-war single-cylinder BMW R 23. As well as breathing new life into 1930s engineering, BMW also rekindled the familiar old designation system. The first post-war model presented in 1948 bore the name BMW ‘R 24’.


When it came to motorcycles powered by boxer engines, BMW retained the familiar designation ‘R’ (followed by a number denoting the engine displacement) over the course of the decades that followed. Offshoots of the basic model were identified by added-on abbreviations. For example, ‘G/S’ standing for Gelände/Strasse (offroad/on-road); ‘GS’ for Geländesport (off-road sport); and ‘RT’ for Reisetourer (tourer).

The decision of BMW to produce motorcycles with in-line engines saw the bikes in these model series receive a totally separate designation. The development designation ‘K’ was adopted as a series badge. As with the boxer models, the ‘K’ was followed by a number derived from the displacement of the in-line engine. BMW followed the same pattern with the single-cylinder machine that went on sale in 1993. This model series was given the designation ‘F’, referring to the ‘Funduro’ concept. More recently, the new generation of lightweight single-cylinder machines presented in 2006 took on the letter ‘G’.

BMW explored a totally different direction in its attempt to launch a new type of mobility concept. Its ‘enclosed motorcycle’ was christened BMW ‘C1’, the ‘C’ standing for ‘City’ – the main area of use for this two-wheeler. Meanwhile, the new off-road bike unveiled in 2005 saw BMW break for the first time with the naming systems used for boxer-engined motorcycles since 1923. It was dubbed the HP (High Performance) 2 (cylinders) Enduro. This range has since been expanded with the ‘Megamoto’ and HP2 Sport.

So what about the numerous model codes that we have also become acquainted with over the years, such as R, RS, S, CS, C, CL, GS, RT, RS, GT and LT?

The first time that ‘R’ was communicated was with the R 100 R of 1991. It means ‘Roadster’ of course. ‘S’ stands for Sport. It first appeared with the R 50 S and R 69 S and then again in 1973 with the R 90 S. More recently, the R 1100 S, R 1200 S and K 1200 S have proudly worn the ‘S’ designation.

There was a BMW car model series in the Sixties called ‘Coupé Sport’, or ‘CS’. In motorcycles, this designation was used in 1980 for the first time after the facelift of the R 100 S, but this time standing for ‘Classic Sport’. It also appeared with the launch of the rotax-powered F 650 CS in 2001, but in this case, meaning ‘City Scarver.

The RS designation appeared for the first time at a 17-round series for production racers. On the 1939 R 51 RS, it stood for ‘Rennsport’ (race sport) with the ‘SS’ designation standing for Supersport. From 1976 the ‘RS’ description became known as ‘Reisesport’ (travel sport), and has since been joined by ‘RT’ (Reise-Tourer – travel tourer); ‘LT’ (Luxus-Tourer – luxury tourer); ‘C’ (Cruiser); ‘CL’ (Cruiser und Luxus – luxury cruiser); and ‘GT’ (Grand Tourisme).

The ‘GS’ designation we know so well actually made its debut in 1980 as ‘G/S’ to mean ‘Gelände/Strasse’ (off-road/on-road). There was also the ‘ST’, which was first used in 1982 for the street version of the GS. It stands for ‘Strasse/strada’ (street) and can be seen on the latest R 1200 ST model.

 

Key Factors contributing to the success of the business

Key Factors contributing to the success of the business.

  

BMW, Germany’s flagship automotive manufacturing company, has gone a long way. About 60 years ago, its primary market (aeroengines) and capital equipment were both inruins. Even during the German recovery periodin the 50s, BMW did not prosper despite economic improvements everywhere. By 1959,BMW was so bankrupt, that a rescue by Mercedes served as its only way of staying afloat(Kay 1993).Today, BMW is one of the most respected companies and recognizable brands in the world. The BMW Group, according to its latest financial report, continues its leadingposition in premium segments of the international automobile markets. Despitepersistently difficult conditions, a total of 341,932 BMW, MINI and Rolls-Royce brandcars were delivered to customers in the period from July to September 2005, 15.4% morethan in the third quarter 2004, according to BMW.com.In the age of globalization, when distinctions between national markets are fading, this isno mean feat. BMW joins other major automotive manufacturers such as General Motors,Ford, Toyota, Honda, Volkswagen, and Daimler Chrysler in operating in a globalcompetitive marketplace.How was BMW able to successfully respond to the challenges of globalization? What arethe critical success factors required by BMW to compete successfully in their chosensegments? What are the competitive advantages that set BMW apart from itscompetitors? These and more are some of the issues that this paper will tackle.Key macro environmental impacting the automotive marketIncreasing global trade hasenabled the growth in world commercial distribution systems, which has also expandedglobal competition amongst the automobile manufacturers, according to the BusinessEconomics ResearchAdvisor (2004). A phenomenon that mostly accelerated in the later half of 1990s,globalization of the automotive industry mostly transpired due to the construction of important overseas facilities and establishment of mergers between giantmultinational automakers (Business Economics Research Advisor 2004). Industry specialists agree that the expansion in foreign commerce in the automobile industry mostly profited the German and Japanese markets and led to increased growth andproduction.In the automotive industry, globalization can have tremendous cost benefits. Automotivemanufacturers have traditionally taken a multinational strategy in forming a globalstrategy, wherein they have traditionally operated separate organizations in North America, Europe, Asia, and South America that for the most part have actedindependently with little if any synergies across organizations (Chandler n.d.). Thisstrategy has resulted in substantial inefficiencies in product development costs and to

 

lesser extent production costs. Traditionally, the separate geographic organizations within each auto manufacturer has developed and launched overlapping models. Thisoverlapping represents substantial cost savings as these companies spend several yearsand billions of dollars designing and engineering a new car model (Chandler n.d.).To cope with globalization, automobile companies were forced to develop the followingframework and integrate them in the global management strategy: product development;supply systems including factory locations; systems to purchase from the suppliers of parts, components, intermediary material and raw material; production systems atfactories, and automobile sales and distribution systems although they may be differentregion by region (Shimogawa n.d.).