The automobile industry has had a turbulent ride before few years because of economic conditions. Fierce competition and globalization possesses made manufacturers strive for their market shares. Buyers expectations, product development, differentiation strategy and large degrees of Research and Development have already been the major place of focus for the industry.
Bayerische Motoren Werke (BMW), which initially entered as an aircraft developing organization in 1917, had to get rid of its production after World War I in 1923 because of the Versailles Armistice Treaty. BMW then made a change to production of motorcycles in 1923. Finally, BMW started out the production of cars in 1928 now is one of the biggest automobile manufacturers around the world.
This case highlights the birth of BMW Group in britain (UK) together with the key concerns faced by the company, its marketing strategies, key competencies, market competition and brand positioning of BMW.
Key words: BMW, expansion in the UK, brand positioning, marketing strategies, company issues.
One of the ten major car manufacturers on the globe, Bayerische Motoren Werke (BMW) includes a long history of excellence. Founded in 1916, headquartered at Munich Germany, BMW started out its UK (UK) procedures in 1980 (www.bmweducation.co.uk). The BMW Group as well provides financial and it services such as for example customer relationship and supply chain management. Through durable company customs, detailed engineering, and pioneering improvements BMW Group has had the opportunity to determine itself as manufacturers of 1 of the very most elite automobiles on roads today.
UK may be the third largest market when it comes to sales and the second biggest in terms of production base (www.bmw.co.uk). "The BMW Group possesses invested over £800 million in its UK businesses since 2000." (www.bmw.co.uk).
UK may be the only country where all of the three of the BMW Group brands- BMW, MINI and Rolls-Royce are created (www.bmw.co.uk). BMW (UK) Ltd employs 8000 employees and 11,000 persons across a 158 solid seller network. BMW Group was the first of all major automobile maker to get documentation to the worldwide environmental management common ISO14001. The business markets its automobiles through company-possessed showrooms, subsidiaries, independent dealers and importers.
Since its basis, the BMW brand has stood to begin with, "sheer driving enjoyment." Sporting and dynamic efficiency of its cars coupled with peerless design and unique quality, has led to the unique appeal of BMW automobiles (www.bmwgroup.com). "The main strategies are to identify potential and encourage expansion, knowing what they symbolize, recognising where their strengths lie and producing the best utilization of every opportunity." (www.bmwgroup.com). The automobiles division evolves, manufactures, assembles and sells passenger autos and off-road vehicles under the makes of BMW, Rolls-Royce and Mini. The exceptional achievements of the company during the past years can be quite a sketch of their strategys precision.
"The mission declaration up to the entire year 2020 is clearly described: the BMW Group may be the worlds leading company of premium items and premium solutions for individual mobility." (www.bmweducation.co.uk)
Birth and progress of BMW in UK:
BMW (UK) Ltd expanded its functions in 1994 by firmly taking over the British Rover Group (www.bmweducation.co.uk). This included reputed makes like Rover, Area Rover and Mini automobiles.
BMW Group observed enough probable in the Rover Group and made a decision to enter the mass car industry in the UK. This plan was as well supported by the UK government as it would allow investment opportunities and assist in exploring new export market segments. This however, didn’t choose as BMW Group had planned. The company incurred huge losses after the takeover and sales declined. This led BMW Group to sell the Land Rover businesses to Ford. BMW (UK) Ltd and Rover split in-may 2000 (www.bmweducation.co.uk). However, BMW (UK) Ltd made a decision to continue with the Mini brand.
BMW Group obtained Rolls-Royce from Volkswagen in 1998 and attemptedto expand the blissful luxury segment. This proved as a direct competition to Mercedes Maybach and was effective in biting into its industry. The turnover of BMW (UK) Ltd was £ 3.3 billion in 2008.
The development of BMW (UK) Ltd Mini has never been able to surpass the demand worldwide. This led BMW (UK) Ltd to re-assess its manufacturing process along with technology. The new approach was derived in 2006 to handle this and is called ‘production triangle (www.mini-production-triangle.com). The final assembly of vehicles and overall body shell are carried out at the plant at Oxford. The Hams Hall plant is employed for outsourcing engines. Swindon plant handles the fabrications and main pressings. Therefore, the advantage received at one plant is certainly used in other to enhance the procedure. Heavy existence of KUKA robots along with a good integration of the ‘creation triangle the production of Mini has been very increased (Mortimer, 2008). Therefore, this production triangle of the three BMW (UK) Ltd vegetation can be highlighted as a significant core competency since it has resulted in a growth in the development and an increase in the sales of Mini everywhere.
BMW (UK) Ltd spends plenty of money regarding R & D on its autos. This is why why BMW (UK) Ltd, as their primary competency has innovated engines like Hydrogen combustion engine, hydrogen H2R and straight six petrol engine.
Positioning and Branding of BMW:
"The positioning notion indicates how the management wants purchasers to perceive the companys manufacturer" (Cravens and Piercy, 2009). "A clear positioning strategy can insure that the elements of the marketing method are regular and supportive." (Cravens and Piercy, 2009). In this regard BMW provides positioned the manufacturer as the lone car that offers both luxury and efficiency. Its German legacy and reliance on patterns, plus a clever marketing strategy, BMW has had the opportunity to achieve (1) a point of difference on efficiency and a spot of parity on high end regarding luxury cars and (2) a spot of difference on extravagance and a spot of parity on efficiency regarding performance cars. The smart slogan, "The Ultimate Driving Machine," effectively captured the recently created umbrella category-luxury overall performance cars.
"The positioning strategy may be the blend of marketing program (mix) strategies employed to portray the positioning wanted by supervision to the targeted customers." (Cravens and Piercy, 2009).
BMW (UK) Ltd provides led its marketing programmes in various ways. The successful marketing of BMW through media and film industry increases its gain and creates an appeal because of its customers. "Colour press for example: Tatler, Vogue, lifestyle journals, motoring publications, broadsheet newspapers and tabloid newspaper weekend color supplements. BMW has highly influenced customers through press and film industry useful advice on how to write a scholarly paper" (Origin: BMW education programme). BMW automobiles have made their occurrence in Bond movies like Octopussy, Golden Attention, Tomorrow Under no circumstances Dies and The Environment ISN’T Enough (www.bmweducation.co.uk).
"Global publicity, communicated in partly subliminal means and partly by overt ones, is positive and important, because it reaches a wide section of the public quiet often on a world-wide scale" (www.bmweducation.co.uk).
BMW (UK) Ltd possesses managed to market the merchandise in a differentiated way. The concept of BMW Artwork Car was were only available in 1975 (www.bmweducation.co.uk). BMW Art Autos are displayed in museums and art galleries across the world, just like the Royal Academy of Arts in London (www.bmweducation.co.uk). In the last twenty years 15 BMW Art Automobiles were created by performers like Andy Warhol, Michael Jagamara Nelson and Matazo Kayama (www.bmweducation.co.uk).
BMW Group is usually a Tier One Spouse and the lone automobile producer to sponsor the London Olympics 2012. The company will give out 4000 vehicles to help transportation of athletes, press officials, complex officials and Athletics Federations members (www.independent.co.uk). During the games the company has promised to supply vehicles that may deliver ‘low carbon and ‘healthy living.
Reacting to environmentally friendly pressures BMW (UK) Ltd has promised to meet the Euro 6 emission norms and in addition outdo the maximum ordinary of 120gCO2/km established by LOCOG (The London Organising Committee of the Olympic Games and Paralympic Games). (www.london2012.com)
Facing the marketplace competition- A genuine challenge:
"Porters five forces of competition incorporate three sources of "horizontal" competition: competition from substitutes, competition from entrants, and competition from established rivals; and two resources of "vertical" competition: the energy of suppliers and electric power of buyers" (Grant 2010).
Entry into the automobile industry requires a substantial amount of purchase. High costs of setup, infrastructure, plant and machinery, distribution network and research and advancement make it tough for just about any innovative competitor to enter the marketplace. BMW (UK) Ltd previously enjoys large economies of scale and this can only be performed in the long term. The brand photograph of BMW is very high and so to surpass this, a huge amount of spending would be required.
BMW (UK) Ltd provides outsourced the assembly and production of some parts to create its procedures stronger. This likewise reduces the risk of a new entrant since it will be an additional expense for them. By outsourcing a business may gain strategic gain by focusing on its core competencies, while outsourcing additional necessary business capabilities to independent companions (Cravens and Piercy, 2009). BMW (UK) Ltd made a decision to outsource its engineering and development for the X3 small SUV to Magna Steyr in Austria. This increased their production productivity remarkably. BMW (UK) Ltd has also outsourced its procedures to low wage countries like Indonesia, Thailand and India.
Outsourcing to a third party always involves hazards despite its positive aspects. Outsourcing may be attractive regarding reducing production costs and for that reason allows laying more give attention to marketing, product innovation and Research and Creation (R & D). However, the third party may occur as a risk since it can share data with rivals, rendering it difficult to replace them.
The partnership between BMW (UK) Ltd and Fiat (mutual utilization of elements of Mini and Alpha Romeo), is referred to as a competitive benefit. Since Fiat is usually in a contract, it cannot bind itself right into a partnership with any different automobile manufacturer. Very few automobile manufacturers have the ability to create such partnerships to their advantage. This framework is very tough to replicate as well. Collaboration with a partner with equal volume of understanding of the market and regarding operations could be rarely found. These kinds of frameworks are likewise very costly in nature and therefore, make it problematic for any competitor to get into.
"For some industries, the major determinant of the entire express of competition and general level of profitability is certainly competition among the businesses within the market" (Grant 2010). Majority of the manufacturers lay superb emphasis on developing their items and design and attracting new innovations.
The direct competition of
BMW in UK will be as follows:
1 series: Mercedes A class, Audi A3, Volkswagen Golf and Ford Focus.
3 Series: Audi A4, Jaguar X-Type, Mercedes C-Class, Lexus IS200
5 Series: Audi A6, Mercedes E-Class, Saab9-5, Jaguar S-Type, Volvo S80
6 Series: Jaguar XK, Mercedes SL, Porsche 911 and Lexus SC340.
7 Series: Audi A good8 and S8, Jaguar XJ series, Lexus LS400, Mercedes S-Class.
X3: Area Rover Freelander, Nissan X-Trail, Jeep Cherokee and Honda CR-V.
X5: Range Rover, Mercedes M-Course, Volvo XC90, Porsche Cayenne, VW Touareg.
Z4: Porsche Boxster, Mercedes SLK, Honda S2000, Nissan 350Z and Audi TT.
M Assortment: M3 Coupe- Mercedes C55 and Audi RS4, Mercedes E5 AMG, Audi RS6, Jaguar S-Type and Porsche Cayenne Turbo, M6- Ferrari F340 and Aston Martin DB9.
MINI: Renault Clio. Peugeot 206, Toyota Yaris, Vauxhall Corsa, VW Polo, Nissan Micra.
The Rolls-Royce Phantom: Mercedes Maybach 57, Bentley Flying Spur, Maserati Quattroporte and Mercedes S65 AMG Limousine.
(Source: BMW Education Programme)
Choo and Mokhtarian (2004) argue that high end segment customers where BMW has put itself have higher-level of disposable money hence they dont look for generic substitution of items that compete on disposable profits. But purchase of various other luxury products like pricey watch, jewels, shirts, hand bags, and house may functions as a trade-off for purchase of luxury cars.
Suppliers and manufactures work together to deliver excellence. This creates huge dependency between purchasers and retailers. Suppliers are a fundamental element of BMWs manufacturing process. A lot of them have been referred to as partners of their organization and influence their method to a great extent. Since, the quantity of suppliers is increasing global it increases their bargaining power as well. BMW includes a strong brand picture and an extensive base; this sets the suppliers on a high platform dealing with BMW. Accordingly, their bargaining vitality remains medium. The costs of raw materials are very volatile in dynamics, which again lowers the bargaining ability of suppliers.
The brand legacy is normally a hindrance which decreases the shifting of customers between various options available in that segment. BMW being truly a strong manufacturer reduces this mobility. Even so, potential buyers in this segment use a lot of time finding info on the products. This raises their negotiating powers.
According to BMW they place all their cars in the premium segment (www.bmwgroup.com). Therefore, it becomes necessary to be prominent in comparison with others. Differentiation strategy includes a huge role to enjoy in this regard. Branding is the prime area of concentrate for BMW. Once the branding is done the right way, the brand becomes noticeable and creates an appeal to the customers, as they like to see it.
Due to the recession in the past few years, the key focus of the corporation has been to arrange liquidity. BMW offers been able to attain the same by beginning their own in-house financing and lease financing to its buyers. The major risk faced by the company during lack of liquidity is certainly that of a takeover, and BMW has had the opportunity to avoid that. They also face major issues in terms of oil prices and raw material prices. These are highly volatile in aspect and therefore, less predictable. Nevertheless, this once again has been looked after by their in-house finance division through risk hedging activities.
When it involves competition BMW has not been able to match the volume in ways of expense. There are high quantity producers who certainly are a direct competition to BMW. The strategy is to use the excess sources of one area to all of those other business areas. Makers of bigger volumes will lead in a cost leadership strategy. They will enjoy larger economies of scale and for that reason, cost advantage. BMW even so, runs on the differentiation strategy. They don’t produce volume cars but maintain the image of their premium cars. This allows them to get by charging reduced price on the cars. Even so, BMW has decrease their costs in other areas.
It wouldnt be wrong to say that branding continues to be the key factor for BMW as a significant success factor.
The VRIO (Value, Rarity, Imitation, and Corporation) framework assists in analysing the internal sources of an organisation. The framework is structured around some questions, which have to get answered with yes to ensure that the source to qualify as a potential sustainable competitive advantage.
In case of a VRIO framework, one source is usually compared on the four factors and this helps in understanding the difference between competitive parity and sustainable competitive edge.
EXPLOITED BY ORGANIZATION
Portfolio of Brands
Fiat as suppliers
The main reference of BMW (UK) Ltd is its company portfolio. Its very exceptional that a manufacturer has a portfolio where they are able to charge a premium across almost all their brands. BMW has been successful in doing so. That is an enormous threat to the competitors and a challenge given that they cannot imitate this.
Innovation is definitely BMWs concentration. No compromise on creativity helps them to grow constantly. BMW has been able to stitch their branding and invention very creatively. Their fantastic R & D has had the opportunity to achieve solutions that assist their brand grow in the market. Since, BMW is capable of doing so, it makes them stronger in the foreseeable future perspective as well.
It is both precious and rare to rank at the very top, when university students are asked about their preference for future employment (BMW AR, 2009).
Question 1: Carry out and analyse the situation analysis of BMW.
SWOT analysis will be applied to conduct the situation research of BMW (UK) Ltd. Employing SWOT the strengths, weakness, prospects and threats of the company will be identified. "Strengths and weakness relate to the internal resources and functions of the business, as perceived by the customers" (Piercy, 2002); and "Opportunities and threats will be externally oriented issues that can potentially influence the efficiency of a business" (Baines et al, 2009: 188).
BMW (UK) Ltd because of its German legacy is regarded as trustworthy and top quality of engineering. It has remarkably helped BMW to build its brand image. The successful marketing of BMW through media and film industry adds to its gain and creates an charm how to write a reaction paper because of its customers. Colour press for instance: Tatler, Vogue, lifestyle journals, motoring publications, broadsheet newspapers and tabloid newspaper weekend colour supplements. BMW has highly influenced customers through media and film industry (Resource: BMW education programme).
The latest CO2 emission norms and legislations concerning End Life of Vehicles (ELV) have already been a major danger to BMW (UK) Ltd. However, the company has prevailed in turning this into power. Innovation of ‘hybrid vehicles and ‘smarter motors has given BMW an edge. Raising demand for ‘greener cars as well allows them to explore new market segments. BMW (UK) Ltd has got reacted on ELV directive and is now manufacturing cars, which are in least 85% recyclable and at least up to 95% recoverable (Group Administration report 2008, p.32).
Prices of the recycleables used have been unpredictable for BMW (UK) Ltd because of its volatile dynamics. BMW (UK) Ltd possesses taken care of this with their in-house finance division.
BMW (UK) Ltd due to its large exports of Mini faces key currency risks. This again has been looked after by their expert in-house finance section through financial hedging.
BMW (UK) Ltd faces a major weakness when it comes to the company Mini. Since its just produced in the UK, BMW (UK) Ltd can be forced to incur substantial costs on shipping abroad. As a strategic decision this may also be stated in other countries.
BMW (UK) Ltd due to its valuable company perception enjoys the chance of charging an extra premium on its automobiles.
China being the major market for cars is seen as an opportunity for BMW (UK) Ltd. They are able to get into an arrangement with the Chinese and develop Mini within their country.
BMW (UK) Ltd offers had the opportunity to diversify its businesses by providing leasing financing to its customers. This allows its customers to help make the cars easily available to them.
The company should look into emerging markets for expansion since, US and European countries take into account its major sales and also have been affected because of economic recession.
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BMW Group Deliveries of automobiles by place and market