Luxury Automakers: BMW Strategy - Essay Example

 Luxury Automakers: BMW Strategy Introduction BMW is a Germany automotive manufacturer, which was establishedby Gustav Otto in 1916 and it is headquartered in Munich, Bavaria, and is among the international successful companies in a multi brand premium car producers. The company owns and manufactures varied automobile products including the mini cars, motorcycles, engines and vehicle parts. The company was instituted as a business unit following a reshuffling of the Rapp Motorenwerke aircraft production company in 1917 (Murray, Murray, Poole and Jones 2006, p. 595). The industry is part of Germany Big 3 luxury automakers together with Audi and Mercedes-Benz, which are among the best-selling luxury automakers across the globe (Murray, Murray, Poole and Jones 2006, p. 595). The company has moved along the milestones and in the year 2007, BMW adopted a strategy with four pillars including growth, profitability, shaping the future or cultural change and access to technology, as well as, customers (Vunskane 2010, p. 1). The company remains highly focused on the premium segments of the worldwide car markets; thus it is the leading supplier of premium products and services in the global market. BMW Strategic Framework The strategic HRM approaches employed in the company are categorized into varied approaches, however, the company can employ best-fit approach because this approach emphasizes on the need for HR strategies to be contingent and it is based on the best practice assumptions. Best fit approach can work well when employing competitive strategies especially Porter’s five competitive strategic approaches. This where BWM will have to choose HR practices that can fit together with competitive strategies and if possible, they can adopt HR policies when using best fit approach. Resource-Based View Approach This approaches focuses on intangible asset such as human resources, which allows the firm to compete favourably in the global competitive market. Barney and Hesterly (2010, p. 61) argue that VRIO framework can be employed in determining whether a resource capability is a source for along term competitive advantage when employing resource base view approach. Applying VRIO analysis in BMW organization can be difficult because of its complex nature but employing criteria that capability or resource can fulfill is vital. Barney proposes four criteria for competitive advantage such as value, rareness, imitability and organisation; thus enabling the company to increase their performance level (Barney 1991, p. 111).The shift of competitive advantage to product designs, marketing and brand building was the main strategies that the organisation employed in order to increase their profitability in the global competitive market. The designs and brands have been often for real differentiations and employing new methods such as lean management was introduced in the company. The use of innovative technology can make changes in the company; therefore, BMW has a strong focus on design and brand but it has ever since paid more attention to R & D. However, the establishment of the strongest brands including the Rolls-Royce and Mini brands in the global market has been an effective strategy for increasing their profitability and growth (Goyal, 2012). Therefore, the BMW is facing significant expectations concerning the quality of innovation reengineering for all brands; thus, to live up to their expectations, the company is bundling all R & D activities ina high performance business entity. The increased global competition within the automobile industry has forced BMW to respond to these challenges through employing price and product strategies. These includes also reducing costs and employing competitive pricing strategies, as well as product development lead times in order to enable them survive or sustain their business in the global competitive market. For instance, the BMW purchased Rover Group in 1994 but this was not until 1998 when the pressure on competition contributed to merger achievement by creating a single ‘Group Function’ structure within the organisation. The company had to meet other objectives; hence re-engineering programs in the organisation became an effective strategy for HR management. This included technology change process and this was concerned with change of production process, as well as, the way the firm operates their business. Competitive forces compelled the HR managers to introduce new equipment, tools and operating methods in order to compete favourably with their rivals. People or cultural change also became a concerning issue and the company emphasised highly on organisational effectiveness and value of organisational members. Coulson-Thomas (2013, p. 23) argues that HR manager generally initiate change through creating promotional avenues, hiring skilled employees, offering training programs, motivational and creating good relationships with employees. The diagram below reveals the relationship between, technical and interpersonal relations of a firm’s competitive strategy vital for creating high performance. Vunskane(2010) argues that for the company to be successful, it should employ effective strategies and analyze the wider internal and external environment carefully in order to anticipate changes and be proactive. Therefore, the concept of PESTEL and SWOT analysis are among the effective strategic frameworks that a company can employ in order to analyze both the internal and external factors, which can be favorable or unfavorable to effective business performance (Fifield 2008, p. 78. The green agenda that aims to reduce pollution, waste, resource deficit and climate change became the significant agenda for achieving sustainability in the 21st century. Therefore, BMW became concerned about environmental factors that can impact effective business performance; hence the industry has to deal with these problems. Given that the road transportation accounts for 20% of CO2 emission and passenger cars accounts for 12%, the company became concerned about the future of the car industry (Vunskane 2010, p. 2). This was through manufacturing automobiles products especially cars, which consume less fuel and emits less gas to the environment. Additionally, the company had to respond to economical, technological, and also political or legal issues in order to sustain their business in the global competitive arena. The global economic crisis led to lower demand for automobile products in 2008, but the premium cars’ performance was not affected by mass markets (Claydon (2010, p. 103). However, the luxury cars including the Mercedes-Benz were hit hardest because of the increased fuel prices and the rise of Euro in relation to the dollar contributed to the reduced to 18% in 2008 (Ewing, 2012). Moreover, some political and legal issues impact most manufactures including labor force laws, pollution policies, as well as health and safety regulations. The tax levels are also imposed depending on the vehicle efficiency, congestion charges on vehicles, as well as emissions are among the legal aspects that impacts the company. Best Practice Approach This methodology is grounded on the fact that best HRM practices exist and adopting them will contribute to effective organizational performance (Armstrong 2006, p. 134).Human resource management strategy is effective in an organisation because it plays significant roles in transforming the organisational performance and contributes to organisational change. Adopting effective HRM strategy that aligns with the organisational mission is critical for the functioning and success of an organisation in the competitive business arena (Buytendijk (2009, p. 71). The field of HRM has evolved overtime and it has significantly changed because of increased global competition level in the contemporary business environment. Nankervis (2010, p. 56) argues that effective human resource management strategy are the key factors for creating radical change; thus increasing organizational performance level. Therefore, an appropriate human resource strategy for the BMW organisation is that strategy, which can drive the organization towards organizational change; thereby, increasing profitability. Main Features of an Effective HRM Strategy The main features of HRM strategy in an organisation include strategic planning, human resource development, organizational design and workforce planning. First, strategic planning is one of the main features of human resource strategy and this includes effective communication, boosting the reputation of the company, providing highest services in the organisation, hiring, training, implementing effective goals for organizational development and good customer relationship (Buttle 2009, p. 123). BMW managed by a team of managing directors and decision-making board; thus they administer the strategic direction of the corporation. The managing board provides daily management activities necessary for achieving the strategic goals of the company. Secondly, HR development is another feature of HRM strategy and this include development of employees’ skills through offering them training programs, motivation, assessing skills and capabilities, as well as employing effective leadership skills for managing the organisation effectively (Gobillot 2007, p. 37).BMW has made significant changes throughout history because leaders operate on the premise that people are significant to performance in the organisation. The philosophy of the company in relation to associates and leaders focuses on genuine collaboration among the workforce and management (De Waa 2012, p. 29). The employees in the company are viewed as the cornerstone of the organizational success; thus, motivation and training programs are offered in order to increase organizational performance. Hendry, Pettigrew and Sparrow (1988, p. 98) offer an effective strategic framework for human resource development that can enable the company to achieve its business goals effectively as illustrated in the diagram below in the appendix. BMW is one of the automobiles industries that have made significant attempts of creating organizational change in order to increase growth, as well as achieve a competitive advantage. Subba and Kumar (2010, p. 223) reveal that many organisations are nowadays going through massive and comprehensive change involving all aspects of organisation design, technology change and people change. Others are also implementing effective workforce planning by recruiting skilled people, team management, motivating employees and offering effectivetraining programs in order to enable them meet the objective of the organisation effectively (Coulson-Thomas 2012, p. 429; Dayaram and Fung 2012, p.89). BMW is one of the automotive industries that have initialed such changes through re-engineering and responding to diverse changes in order to increase profitability Level.The Company redesigns tasks, change technology and change culture or people with an aim of enhancing organizational effectiveness. Conclusion In conclusion, human resource management strategy has become a significant issue in research field; thus, companies are now employing this strategy in order to carry out their business effectively. BMW employs varied strategies including product designs, marketing and brand building in order to increase their profitability in the global competitive market. The main features of HRM strategy in an organisation include strategic planning, human resource development, organizational design and workforce planning. QUESTION 2: Ways BMW Can Tackle its Challenges in Strategic People Management by Taking into Considerations Culture and Values, Particularly during Mergers and Acquisitions The part of BMW strategy relates to people management and this is through creating cultural change especially when employing mergers and acquisition. The core aspect of strategic people management is one way of structuring an elevated performance culture. The people management theorists have made significant efforts of indicating the way culture or people change in an organisation is an effective strategic approach towards increased performance level (Holt and Cameron 2010, p. 126). BMW organization is based on teamwork culture; thus, emphasizing on cultural change is an effective way of increasing high performance. Wriston (2007, p. 10) argues that a high performance team is where all team members work together towards attaining the common goals. This is through creating a sense of shared responsibility for the result that the organizational teams can achieve. The figure below indicates the way a high performance team culture can be achieved when the target becomes clearer and employees work towards a shared goal. In addition, cultural or people change is an effective approach for increasing organizational efficiency through changing employees’ skills, attitudes, perceptions and values of organizational members. Cultural or people change refers to the process of changing the values, norms, behaviors, beliefs and attitudes of employees (Mead and Andrews 2009, p. 102); this is significant because it can enable the company to achieve success when merging with other companies. Kaufman (2003, p.201) argues that an organization can align their cultural aspects with other company especially when employing merging and acquisition strategy through cultural change. This is because different organizations have their own cultural norms, values and belief; thus creating people or cultural changes in organizational reduce cultural barriers. Culture is one of the most aspects that can impact the organizational performance; thus taking into consideration cultural aspects is imperative. Therefore, overcoming resistance to cultural change is crucial because it can enable the organisation to break cultural barriers that may impact better organizational performance. Stahl and Mendenhall (2005, p 46) argue that corporate mergers are significant drivers of organizational growth; but they may fail to produce value for the shareholders of the acquiring firms. This many result due to corporate cultural issues; thus merging cultural values, norms and beliefs through creating people or cultural change is vital. BMW have had a good image of their brands and maintaining them would ultimately ensure that they cars remains valued in the motor industry. For instance, in the purchase of Rover in mid 1990’s, BMW intended to expand its market, but this posed a challenge of destroying their well-nurtured image; this is because presenting a new brand to the market at a less competitive price would consequently devalue their brands. The research survey indicates that corporate culture is the central to the merger and acquisition success and the cultural differences are significant casual factor in merger failures (Gleich, Kierans and Hasselbach 2010, p. 71). Blending multicultural aspects of different organisations into one company can create challenges; thus, HR managers can capitalize on the cultural differences between employees and try to diminish the psychological distances between them. Mergers and acquisitions can be valuable or less valuable because of cultural issues; therefore, mergers and acquisition strategy can be done with due diligence process, through identifying in case there is a better and strategic fit. This strategic fit aspect includes fitting the goals of each other and merging them to determine in case both goals can be achievable. The company employing this strategy can also take into considerations the way companies or partners involving in the merger and acquisition process can benefit from one another; this is vital because it can enable both companies merging to solve problems that may arise during the business process. Moreover, HR managers can reinforce values in order to derive organizational change (Wriston 2007, p.9). This is through employing value-based leadership approach, which is critical for reinforcing inherent value into an organizational vision and exhibiting characteristics such as strong or expressive communication forms. Effective communication is one of the effective leadership management roles that can enable the manager to reinforce cultural value in an organization successfully. Mathur (2008, p. 129) argues that effective communication in a multicultural environment is vital and it can enable a firm to break cultural barriers; hence contributing to organizational success. Nankervis, Stanton and Oley (2012, p. 7) explore the significant of employing effective leadership management styles in a multicultural environment with an aim of achieving organizational effectiveness. The authors argue that successful leaders are those ones who employ effective leadership styles and possess significant characteristics such being able to make decision wisely, courageous, work as a team, communicate and listen careful when working in a multicultural business environment. This is vital because it can enable the company to achieve effective business performance; thus achieving a competitive advantage in the automotive industry. Rogers, Ojha and White (2011, p. 3767) employ an industrial approach to analyze organizational culture, which they assume to be a technology that affects cost. The authors distinguished strong organizational cultures from broadly acknowledged organization behaviors and found out that a firm with strong organizational culture has lower marginal cost than their counterparts. Therefore, in a competitive automotive industry, a firm with minimum average cost can survive in the global competitive market. In this case, human resource development can help employees to change their work attitudes, behaviors and values in order to improve performance. For instance, currently BMW’s leadership face diverse challenges ranging from market downturns to overcapacity due to increased competition from other automobile manufacturers (Murray, Murray, Poole and Jones 2006, p. 395).Therefore, changing the organizational behaviors and employing effective leadership styles can enable the company to overcome leadership challenges. Improving communication through offering training programs to employees and organization seminars, as well as, workshops is one way of tackling cultural barriers. Effective communication can enable the company to address cultural issues affecting the organizational; thereby, providing solutions through sharing information with employees effectively. Training is an effective aspect in any organisation because it can enable the company to address the issue of multicultural aspects and ways of overcoming cultural issues. Therefore, HR managers can organize seminars and workshops for training their employees on cultural issues; thus enabling them to meet the demanding needs of the company successfully. The talent management is an effective philosophy that can enable employees to improve their performance level in the organisation (Purcell (2009, p. 34).Talent management can be done through providing effective training programs and this can enable employees to work together towards achieving organizational objectives, as well as, enable them to meet their personal goals (Purcell and Chartered Institute of Personnel and Development 2003, p. 94).Talent management is effective because it is through this culture that everyone will step forward and take on greater responsibility within the organisation. Talent management is beneficial because it does not only benefit the staffs but also customers, hence increasing performance level, and everyone also has the choice and opportunity for achieving full potential; hence statement management is desirable. The diagram below indicates the way talent management can contribute to superior performance in an organization. Talent Management Delivers Engaged Labor Force Deliver Superior Performance Developing effective strategies for empowering people in the BMW automotive industry is a vital. Human resource managers can energize their team and maximize bottom line outcomes through developing valuable interrelated strategies when employing mergers and acquisitions. Motivation and talent development requires more than superior leadership styles and skills vital for creating organizational change (Wellington 2011, p. 121). Therefore, successful leaders should be employ effective people-focused and motivational strategies effective for unleashing the potential of the followers. This can enable the company to not only achieve high performance level but also sustain their business in the global competitive market. Lastly, maintaining transparency, knowledge management and information sharing, as well as, decentralization of decision-making will create organizational change in a multicultural working environment .Vouldis and Kokkinaki (2011, p. 41) argue that decentralization in an organization is imperative because it provides employees powers to make independent decisions. Human resource managers can employ decentralization rather than centralization because the former provides employees in the lower hierarchy to make significant decisions. This is vital because engaging employees in decision-making in a multicultural environment can contribute to better problem solving; hence increasing organizational performance level. Conclusion In conclusion, BMW can tackle its challenges in strategic people management by taking into considerations culture and values, particularly during mergers and acquisitions. BMW is among the automotive industries that have made significant efforts of employing effective strategic framework for achieving successful business performance. Thus, the company can overcome challenges through reinforcing cultural values, communicating effectively, training, talent management and culture change. They can also develop empowering strategies for employees and improve communication; thus solving cultural barriers, as well as, develop effective strategies for empowering employees in a multicultural environment. Bibliography Armstrong, M. (2006).A Handbook Of Human Resource Management Practice. London: Kogan Page. Barney, J. B.,&Hesterly, W. S. (2010). Strategic Management and Competitive Advantage: Concepts and Cases.Upper Saddle River, N.J: Prentice Hall. Barney, J (1991). Firm Resources and Sustained Competitive Advantage, Journal of Management, Vol. 17, No.1 pp. 99-120. Buytendijk, F. (2009).PerformanceLeadership : The Next Practices to Motivate Your People, Align Stakeholders, and Lead Your Industry. New York: McGraw-Hill. Buttle, F. (2009).Customer Relationship Management : Concepts and Technologies. Amsterdam: Elsevier/Butterworth-Heinemann. Beardwell, J.,&Claydon, T. (2010).Human resource management: A contemporary approach. Harlow: Pearson. Coulson-Thomas, C. (2012). Talent management and building high performance organisations. Industrial & Commercial Training, 44(7), 429-436. doi:10.1108/00197851211268027 Coulson-Thomas, C. (2013). "New leadership" and creating the high performance organisation: part 1. Industrial & Commercial Training, 45(1), 23-31. doi:10.1108/00197851311296674 De Waal, A. A. (2012). Characteristics of High Performance Organisations.Business Management & Strategy (BMS), 3(1), 28-45. doi:10.5296/bms.v3i1.869 Dayaram, K.,& Fung, L. (2012). Team Performance: Where Learning Makes the Greatest Impact.Research& Practice In Human Resource Management, 20(1), 81-96. Ewing J. (November 22, 2012). “As BMW Is Put to the Test, Its Plans Are Years Ahead”,The New York Times. Retrieved on May 31, 2013 from http://www.nytimes.com/2012/11/23/business/global/bmw-chief-faces-big-test-of-his-strategy.html?pagewanted=all&_r=1& Fifield, P. (2008). Marketing Strategy Masterclass : The 100 Questions You Need to Answer to Create Your Own Winning Marketing Strategy: Including the New 'scorpio' Model of Market Strategy. Amsterdam: Elsevier Butterworth-Heinemann. Gobillot, E. (2007). The connected leader: Creating agile organisations for people, performance and profit. London: Kogan Page. Gleich, R., Kierans, G.,&Hasselbach, T. (2010).Value in due diligence: Contemporary strategies for merger and acquisition success. Farnham, Surrey [U.K.: Gower. Goyal (March 5, 2012). “How BMW, Mercedes & Audi stack up and what their strategies are”, The Economic Times. Retrieved on May 31, 2013 from http://articles.economictimes.indiatimes.com/2012-03-25/news/31234306_1_bmw-premium-selection-mercedes-audi-stack-luxury-car Hendry, C., Pettigrew, A. M.,& Sparrow, P. (1988). Changing Patterns Of Human Resource Management. Holt, D. B., & Cameron, D. (2010). Cultural strategy: Using innovative ideologies to build breakthrough brands. Oxford: Oxford University Press. Kaufman, R. A. et.al (2003).Strategic planning for success: Aligning people, performance, and payoffs. San Francisco: Jossey-Bass/Pfeiffer. Mead, R.,& Andrews, T. G. (2009). International Management : Culture and Beyond. Chichester, England: John Wiley & Sons. Mathur, U. C. (2008).International marketing management: Text and cases. New Delhi, IN: Sage. Murray, P., Murray, P., Poole, D.,& Jones, G. (2006). Contemporary issues in management and OrganizationalBehavior. South Melbourne, Vic: Thomson Learning. Nankervis, A. R. (2010). Human resource management: Strategy and practice. South Melbourne, Vic: Cengage Learning. Nankervis, A. R., Stanton, P., & Oley, P. (2012). Exploring the Rhetoric and Reality of Performance Management Systems and Organisational Effectiveness -- Evidence from Australia. Research & Practice In Human Resource Management, 20(1), 1-24. Purcell, J. (2009). People management and performance. Abingdon, Oxon: Routledge. Purcell, J., & Chartered Institute of Personnel and Development. (2003). Understanding the people and performance link: Unlocking the black box. London: Chartered Institute of Personnel and Development. Rogers, P. P., Ojha, D.,& White, R. E. (2011). Conceptualising complementarities in manufacturing flexibility: a comprehensive view. International Journal Of Production Research, 49(12), 3767-3793. doi:10.1080/00207543.2010.499116 Subba, R. P.,& Kumar, V. T. (2010). Management: Theory and practice : text & cases. Mumbai [India: Himalaya Pub.House. Stahl, G. K.,& Mendenhall, M. E. (2005). Mergers and acquisitions: Managing culture and human resources. Stanford, Calif: Stanford Business Books. Vunskane, L. (2010). BMW Business Strategy - An Overview. Germany, GRIN Verlag. Vouldis, A.,&Kokkinaki, A. (2011). A Critical Review of Business Performance Models and Frameworks and Their Application to Sales Organisations.Proceedings Of The European Conference On Intellectual Capital, 475-485. Wellington, P. (2011). Effective people management.London: Kogan Page. Wriston, M. J. (January 01, 2007). Creating a High-Performance Culture. Organization Development Journal, 25, 1, 8-16. Appendix Strategic Framework as developed by Sparrow and Pettigrew for the Automobile Manufacturer Source:Hendry, Pettigrew and Sparrow (1988) HRD- is the Human Resource Development Read More