Presented by Even number groups 2, 4, 6, 8, 10 and 12

Presented by Even number groups 2, 4, 6, 8, 10 and 12
BMW Automobiles Presented by Even number groups 2, 4, 6, 8, 10 and 12

Presentation Layout Automobile Industry Background of the case
Business Environment Analysis Macro Environment – PESTEL analysis Porter’s Five Forces Analysis Competitors and the automobile market Strategic capabilities of the company SWOT Analysis Strategic position of the company in 2004 Gap Analysis and Strategy Formulation Five Years Action Plan

Automobile Industry – in 2004
One of the most important industries in the world Provides jobs for millions of people Shape the culture and economy People to travel and transport goods faster and farther Mature business, mass production and a international business. Manufacturing, Assembling in different places. Started with 300 units in production in 1880s today more than 60 millions per annum. Demand has significantly increased in Europe, Japan and USA, for light vehicles purchases has increased to16.9 million US. Imported vehicles are higher than domestically produced in many countries.

Automobile Industry – in 2004
Trends of global trade and manufacturing flexibility Usage of computer system in manufacturing – CAD CAM, helps to improve the quality Enhanced features, GPS Maps, Bluetooth hands free, entertainment, digital display. Alternative energy sources for cars, such as natural gas, electricity, ethanol, vegetable oil, sunlight, and water (hydrogen fuel cells) Early stages strategies like production, product and selling has changed to marketing, ethical and sustainable orientation

BMW Company - Brief Summary
Bayerische Motoren Werke was established during the First World War Today Benchmark Automobile producer in the world One of the ten largest car manufacturer Originated in Germany and today one of Germany's largest and most successful companies Manufactures cars and motor bicycles Three different brands, BMW, Mini and Rolls-Royce Very specialized in the manufacture of engines Innovative, quality, advanced in technology and has premium market Uses a skilled German labor force and robots

BMW Company - Brief Summary
Production of cars has up by 4.5 per cent in 2003 to more than 1.1 million (BMW, MINI and Rolls-Royce) Total company growth is by 22.4 per cent Main competitors are Lexus, Mercedes Benz in the luxury segment

Environment Analysis BMW Company Competitors & the Automobile Market
Automobile Industry The Macro Environment

Macro Environment – PESTEL Analysis
BMW company Political Sociocultural Economical Technological Legal Environmental

PESTEL Analysis – Political Factors
EU Parliament accepted Automobile Manufacturer’s Association voluntarily offer to cut the amount of CO2 emitted from car exhausts over the next 10 years. Company Cars : 45% of UK market fleet car sector, favorable deals on leasing, distortion of registration figures. Taxes meant taking payment in lieu of company car and buying own smaller car. From 2002 taxed by number of miles and emissions Legal restraints on competition within the EU car industry are expected to drop substantially. Taxes and Duty – in UK MOT, price increased. Road tax is to be directly linked to amount of emissions. Subsidies : Spanish government protection for Renault, Peugeot and Fiat EU Environmental ministers accepted an offer made by the European Automobile Manufacturer’s Association to voluntarily cut the amount of CO2 emitted from car exhausts over the next 10 years. Company Cars - 45% of UK market fleet car sector, favourable deals on leasing, distortion of registration figures. Taxes meant taking payment in lieu of company car and buying own smaller car. Legislation - from 2002 taxed by number of miles and emissions Competition - legal restraints on competition within the EU car industry are expected to drop substantially over the next 5 years. Taxes and Duty - MOT, price increased. Road tax is to be directly linked to amount of emissions from next year.

PESTEL – Economic Factors
Strong growth in the USA and Asia GDP (Gross domestic product) of the USA grew on average by 4.4% Germany’s economic recovery, Germany’s gross domestic product grew by 1.6% Asia region strongest growth, Chinese GDP grew in 2004 by 9.5%, Japanese economy also grew more strongly

PESTEL – Sociocultural Factors
Demand for low-emission cars Fashions and taste - European trend towards convertibles and MPV’s(people carriers) Redundancies - Layoffs at Longbridge and Dagenham ( has been on a 4 day week). Ford job losses 2000 in Europe.

PESTEL – Environmental Analysis
Offering low-emission car is a method used by car makers to expand sales in the mature car market. GMs battery operated EV1 fell flat because it required frequent recharging. Now the major automakers are investing in fuel cells – devices that convert liquid hydrogen into electricity. Ford, GM, BMW and Honda all have announced plans to market competing versions. Aluminium cars weigh half as much as similar steel vehicles so fuel economy is improved by approximately 40%. CO2 reduced by 20% over vehicles lifetime.

PESTEL – Technological Factors
Alternative energy sources for cars, such as natural gas, electricity, ethanol, vegetable oil, sunlight, and water Safety - Safety sells, air bags for passengers. Plant efficiency - UK plants 20% less productive than best US plants because of work practices, indirect labour costs and infrastructure Gizmos - New Daewoo MPV has a Playstation option for passengers. Use gadgets to differentiate.

PESTEL – Legal Factors Home country legislation
Host country regulations International trade regulations Environment protection, labor rules

Porter’s Five Forces Analysis
Competitive Rivalry Potential Entrants Buyers Substitutes Suppliers

Competitive Rivalry There high number of competitors as well as variety of models competing in the market with similar technologies. Major competitors merzadiz and jaguar because hand made and prestige. Good relationship with clients and stakeholders Company uses different promotional materials BMW regularly undertakes research into its customers' profiles looking at demographic criteria, such as age and sex, lifestyle, their views on motoring and the way in which they use their cars.

Competitive Rivalry There high number of competitors as well as variety of models competing in the market with similar technologies. Major competitors merzadiz and jaguar because hand maid and prestige. Good relationship with clients and stakeholders Company uses different promotional materials BMW regularly undertakes research into its customers' profiles looking at demographic criteria, such as age and sex, lifestyle, their views on motoring and the way in which they use their cars.

How BMW segmented its market ?
BMW regularly undertakes research into its customers' profiles looking at demographic criteria, such as age and sex, lifestyle, their views on motoring and the way in which they use their cars. Information is used across all areas of the business, from the design and development of the cars themselves, to the way BMW advertises its brands. Female customers tend to prefer open driving, reflected in a preference for the BMW 3 Series Convertible and BMW Z4. The spaciousness and interior versatility of the BMW X Models, X3 and X5, attract modern families with children in their households (50%-60% having at least one child). 3 Series and 5 Series Touring models are characterised by an active lifestyle, with an exceptionally high interest in outdoor activities, such as water sports, cycling and skiing. Together with the Z4, the BMW 1 series shows the highest share of urban customers aged 39 years or younger (40%). This truly makes the BMW 1 series, not only in terms of its launch date, a young model in the BMW portfolio.

our female customers tend to prefer open driving, reflected in a preference for the BMW 3 Series Convertible and BMW Z4. The spaciousness and interior versatility of the BMW X Models, X3 and X5, attract modern families with children in their households (50%-60% having at least one child). 3 Series and 5 Series Touring models are characterised by an active lifestyle, with an exceptionally high interest in outdoor activities, such as water sports, cycling and skiing. Together with the Z4, the BMW 1 series shows the highest share of urban customers aged 39 years or younger (40%). This truly makes the BMW 1 series, not only in terms of its launch date, a young model in the BMW portfolio.

Competitive Rivalry BMW Product/Series Major competitors .bmw 1 series
Mercedes A Class, Audi A3,Volkswagon Golf and Ford Focus. BMW 3 seris Audi A4, Jaguar X-Type, Mercedes C-Class, Lexus IS200. BMW 5 seris Audi A6, Mercedes E-Class, Saab 9-5, Jaguar S-Type, Volvo S80. BMW 6 seris Jaguar XK, Mercedes SL, Porsche 911 and Lexus SC340. BMW 7 seris Audi A8 and S8, Jaguar XJ series, Lexus LS400, Mercedes S-Class. X3 Land Rover Freelander, Nissan X-Trail, Jeep Cherokee and Honda CR-V. X5 Range Rover, Mercedes M-Class, Volvo XC90, Porsche Cayenne, VW Touareg. Z4 Porsche Boxster, Mercedes SLK, Honda S2000, Nissan 350Z and Audi TT. M range M3 Coupe - Mercedes C55 and Audi RS4. M5 - Mercedes E55 AMG, Audi RS6, Jaguar S-Type R and Porsche Cayenne Turbo, M6 - Ferrari F340 and Aston Martin DB9. Mini Renault Clio, Peugeot 206, Toyota Yaris, Vauxhall Corsa, VW Polo, Nissan Micra. Rolls-Royce Phantom Mercedes Maybach 57, Bentley Flying Spur, Maserati Quattroporte and Mercedes S65 AMG Limousine.

2. Potential Entrants Potential entrants are very high when consider the car manufacturing segment due to the extensive research and development, design, manufacturing and marketing processes to be carries out Ex / When look at the Research and Development process of BMW it includes Carrying out innovative technologies, covering all aspects of the car include: The use of new materials Light-weight structures Mechanizations Communication technologies Efficient Dynamics Best approved designs are developed to Series readiness in BMW's pilot plant, where all conceivable tests and trials including acoustic, climate and crash are carried out, are more or less similar to the other car manufacturers

2. Substitutes substitutes give high influence to the company since substitutes can make a company lose the clients it has. The company makes sure that the substitutes won’t give them much problem. They do this by proving that the service and products they offer are the best quality and are better than substitutes. They also prove that their service is better against others by comparing and contrasting it with substitutes so that clients can know the difference. The company also tries to offer products and services superior than substitutes so that they can attract more clients. By offering superior products

3. Bargaining power of the Buyers
Bargaining power of the Buyers is high High number of car manufacturers which serves the same customer segment of people who appreciate driving fun and sporty, yet elegantly designed cars

4. Bargaining Power of the Suppliers
Is moderate bargaining power due to the fact that majority of their key components are build in – house using standard row materials and large pool of suppliers on buying those row materials

Strategic Capability Analysis
STRATEGIC CAPABILITY OF BMW COMPANY BY 2004 Value Chain, Value Network, Activity Maps, Bench marking and SWOT Analysis can be used to diagnose strategic capabilities

HOW BMW HAS ACQUIRED KNOWLEDGE?
RESEARCH- ADVANCED TECHNOLOGY COMMUNICATIVE ACTIVITIES- brainstorming activities

Strategic capabilities of the company
MANAGING STRATEGIC CAPABILITIES Extending best practices by being close to the buyers which had allowed to segment the market effectively E.g. BMW automobiles has been positioned differently and price differently in the various national markets Adding and changing activities Stretching competencies E.g. They have build up a regional development program promoting innovation at regional level

Building on apparent weakness-
E.g. Customers went for design and brand. Ultimately BMW was more concerned of acquiring distinctive unique identity. Targeted training and development E.g. They have employed a highly qualified labour force E.g. Organizing training programmes

HR policies to develop competencies
E.g. Establishment of a mature modern apprenticeship scheme, to provide qualified personnel for electrical and mechanical maintenance at BMW’s Hams Hall engine plant and to reduce regional skills shortages Building dynamic capabilities The company has been able to design a BMW 5 Series Grand Turismo which is rich in sportiness, elegance, luxury and versatility.

SWOT Analysis - Opportunities and threats
Strength BMW is well-established and strong brand name within the automobile industry, which has been achieved mainly through quality production Using the reward of “world leaders in automobile” for the industries prestige It can be particularly used in market positioning, gaining new buyers as well as increasing profit margins. Having potential shares in Europe countries markets such in Australia, the market positioning status, the company can continuously gain profit as well as acquire the capital to support its project plans and business strategies. The models introduced by the company had been supported continuously by the customers. The BMW X5 is another famous model within the Sports Activity Vehicle line; the model had been enhanced with high-tech features, yet the model remains unchallenged mainly through BMW’s pricing tactic.

BMW has an access to major distribution channels which allows it to market its products in the most effective way as well as distribute its designs to several foreign markets. Years of successful business operation strengthens its capability to overcome past and even new challenges with tried and tested strategies. This capability also allowed the company to introduce its new products and implement strategies at the right time and place. Excellent working force with highly trained in technologies for production and they have the capabilities to turn resources into advantages Diverse ranges of Products - BMW, MINI and Rolls-Royce and having an excellent brand awareness

Weaknesses The development of new product models of the company produces indefinite outcomes. BMW continuously strive to produce new models that would meet the needs and satisfaction of the customers; Some time that will not elicit significant return of investment. The price of the product is another weak factor obtained a significant market share in the industry, the luxury market is relatively smaller as compared to the general masses Even if the BMW cars have been equipped with the latest technology, the final product will be very expensive for the customers to buy. Moreover, manufactured vehicles are shipped from its main factories in Germany, the shipping rate further adds to the cost of the cars.

BMW is operating within a highly competitive industry. In addition, the industry is made up of equally strong brand names such as Mercedes Benz and Jaguar. Various marketing risks are also considered as threats for the company. Though BMW can apply any marketing strategy, its effect on the market can vary. Unexpected crisis in the economy can greatly affect the profitability of the introduced models; this could also affect the marketing efforts of the company. New & existing competition in the world market and instant copy of the introducing technologies by the competitors. Buyer sophistication and knowledge was an important to promote the sale

Volatility in Price of Fuel and Consequences of the oil crisis and Economic recession New legislations by the EU and the world trade organization Downward trend in the automobile profitability at 2003 end period Market shift to globalization and makes extremely high competition for customers and resources Currency exchange cost Customer expectation Diversification and branding establishment Environmental issues: Pollutions

SWOT Analysis -Opportunities and threats
The company can make use of other marketing means, which could promote greater customer satisfaction and loyalty. The ability of the company to produce quality products can be an effective marketing tagline that could support future market growth. Based from its strengths, the company has the resources and channels that could help in developing and conducting various marketing efforts. New Products can be produced by the innovation management system which is adopted by the industry Market shift to globalization and it has huge potential to promote the sales not only in the Europe but even in the far east also. Can go for low cost labour in countries like China with the technologies

The company is very vulnerable to bad publicity; negative company image can greatly affect the loyalty not only of the affected market but also its customers worldwide. Mostly classic models are produced and focusing for that segment of customers Even advanced in technology they are low in innovations. Substitute products or technologies in world market from mainly Benz Leadership threats as was happened in the Rover failure

Innovation & Alliances of the new companies
Customers demand change to more comfortable and relevantly cheap cars therefore they can promote the mini with low cost Diversification range can be increased can be used in catch up the new market Low-cost strategy & Differentiated automobiles are the possibilities therefore company need managed to differentiate their products with low cost.

Strategic Position of the Company
The vision statement “Uniqueness through diversity, Leadership, taking Risk & courteous” The mission statement "To become most successful premium manufacturer in the car industry"

The core values Uniqueness through diversity Teamwork Involvement in community BMW Group's involvement in society and social programmes, such as: Increased road safety Promoting intercultural understanding Educational projects for children and young people Community relations Fighting HIV/AIDS - Mutual respect Excellence through quality & innovation Courteous Responsive Efficient

Main Goal Attaining financial success is the main goal of the BMW Group which, at the same time, also provides a sound basis to allow it to accept responsibility in environmental and social issues. BMW Group was the first car manufacturer in the world to create a Vehicle Recycling Network. BMW invested around €20 million (Germany only) in 2004 into product related environmental protection. Reduce fuel consumption and CO2 emissions (eg:Mini)

Objectives Becoming the most successful supplier of premium automobiles in every relevant market. To increase sales throughout the entire Asian region to 150,000 cars by the year 2008.

Current strategies Bowman’s Strategy Clock focus on price based strategies to achieve more profits. also wants to have prices that are unique from the competitors . (More like focused differentiation) Internal growth through market and product development. – Launch a new model every three months through to 2005, providing a range of premium auto mobiles that ranged from the Mini to the Rolls Royce. BMW automobiles positioned differently and price differently in the various national markets. BMW also exercised a firm control on the supply chain and dealings and relationships with suppliers, who mostly had maintained a long association with the company. Market expansion to Asian countries

Gap Analysis & Strategy Formulation

Vision Mission Be the most preferred brand for individual mobility
BMW strives for best practice in car manufacturing industry, by consistently providing innovative individual solutions, by excelling, and by being prompt, efficient, Dynamics, Lower emissions, more driving pleasure and diligent in whatever do

Goals The primary goal of the BMW Automobile is to assure continued profitable growth. Its BMW, MINI and Rolls-Royce brands will be further expanded. From 2005 to 2009 to expand the production network, extend the sales network, and for research and development, With a largely constant number of employees.

Objectives the long-term.
To generate profits and independence to take on responsibility for the long-term. Comprehensive investments in the expansion of the production network, in research and development as well as in the worldwide sales network and manufacturing to assure the company’s performance ability for the future To interest in protecting the environment and natural resources. (To be as environmentally friendly and conserving of resources as possible) Comprehensive responsibility to its clients and their safety.

while consuming ever fewer resources in the production process
Objectives Cont….. strives to increase production on a continuous basis while consuming ever fewer resources in the production process continuously increase the performance commitment and capability of employees Developments of the surrounding social environment.

Strategy formulation By Identifying potentials and knowing what the Company represent, need to recognizing where the company’s strengths lie and need to make the best use of every opportunity.

Competitive Edge Through Competitive Strategy
Cost leadership = aggressively seeks efficient facilities, pursues cost reductions, and uses tight cost controls to produce products more efficiently than competitors Differentiation = attempt to distinguish products or services from that of competitors Focus = concentrates on a specific regional market or buyer group

Fred W. Abel Model for States Analysis

What To Whom How Cars Sports loving youth Families with children
Environmental friendly drivers How Developing cleaner cars through technological advancements Reduction in prices through process developments and global factor advancements Improve interaction with customers and efficient customer chain management Differentiation & Focus differentiation

Using Strategic Clock to Analyze Strategies

Action Plan - Technology
Strategy 2005 2006 2007 2008 2009 Developing cleaner cars reducing per mile cost R&D and designing of a hybrid car Reduce the amount of emission by 50% on current Prototyping and Trials of hybrid car on targeted segments Commercially produce a hybrid car R&D and designing of a hydrogen driven car Prototyping and Trials of hydrogen driven car on targeted segments Commercially produce Hydrogen driven car R&D and designing of a electric car

Action Plan - Operations
Strategy 2005 2006 2007 2008 2009 Reduction in prices through process developments and global factor advancements Outsource non – essential parts from lower price quality suppliers Open an assembly plant in India Develop the Indian assembly plant to manufacture limited car types Open an assembly plant in China (Through Joint-venture) Extend the assembly plant in India to a manufacturing plant Extend the assembly plant in China to a manufacturing plant

Action Plan - Marketing
Strategy 2005 2006 2007 2008 2009 Focus differentiation Promoting BMW to new market segments with minimum product differentiation Develop new models to meet changing customer taste Attract new market segments in overseas via marketing campaigns Launch and hybrid versions Focus on Asian market (More spaces cars) Launch and hydrogen versions

Action Plan – Marketing Cont.
Strategy 2005 2006 2007 2008 2009 Improve interaction with customers and efficient customer chain management Revamp the web site to abstract more customer feedback Develop and implement a Supply chain management system Develop Customer relationship Management system by integrating it to R&D Standardizing the after sales services globally Revamp and complete Enterprise support system to support process Implement and enable automated ordering and delivering through complete process integration

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Presented by Even number groups 2, 4, 6, 8, 10 and 12

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