Bmw Company Analysis - Essay Example

BMW COMPANY ANALYSIS Introduction BMW was founded in Munich, Germany in 1916 originally as the ‘Bayerische Flugzeug Werke AG’ (BFW) before the creation of the ‘Bayerishe Motoren Werke’ (BMW) in 1917. BMW initially concentrated on the development and production of aircraft engines during World War I and thereon it focused more on the development of ‘premium’ automobiles and motorcycles motor vehicles where it has built up its reputation for reliability and excellence today. [4] [5] The BMW group currently has three brands in the offering after the acquisition of Mini from Rover group in 1994 and the responsibility of exhibiting Rolls Royce in 2003. The BMW brand is known for giving a ‘sheer driving pleasure’ with the sporty and innovative design and quality. Rolls Royce Motor Cars brand is one the well-known brands in the world which provides the luxury motor car par excellence. Mini brand is the most unique feature of the BMW group since it is ideally suited for a young, unconventional and ready for change society. [4] [5] [7] [8] The BMW Group currently has 17 production facilities in six countries, Austria, US, GB, China, South Africa, Germany and Brazil with its headquarters in the landmarking ‘four-cylinder’ tower coordinating the worldwide activities covering 150 countries from Munich. In total BMW Group manufactures models at 23 production and assembly plants and has 39 sales subsidiaries in 13 countries on four continents. [4] [5] Current Strategy BMW states four strategic points on its website. 1) Identifying potential and encouraging growth 2) Knowing what we represent 3) Recognising where our strengths lie and making the best use of every opportunity 4) Following a clear strategy BWM is always looking for new targets and challenges and this philosophy has inspired every employee working at the BMW Group. It influences the company’s structure and the decisions making process. BMW’s ethical working processes and methodologies are based on care and service for the society and the environment. After the acquisition of Rolls Royce and MINI, BMW has expanded its product line as well as its diverse customer base. With the three brands, BMW, MINI and Rolls-Royce Motor Cars, BMW Group promotes its products for the premium sector of the international automobile market and to achieve its aims, the company uses various marketing tools to sell them all over the world. Hi-tech research and development facilities to bring constant innovative designs and lower costs while providing very highest in quality for all its products and services, BMW win the hearts of many of its potential customers each day. [4] [5] But not all are absolutely satisfied with the way things are done in BMW. After the Rover fiasco, the management has been changing hands and sustainability is being considered as an issue. Some investment bankers like Citigroup, Lehman Brothers, and Deutsche Bank have been surprised by the un-ambitious targets set by the new CEO, Norbert Reithofer while others say that in the challenging environment, these targets are satisfactory. [10] [11] Analysis Lets take an in depth view of BMW’s factors making up the strategy to work out. Innovation BMW is known for its innovation, bringing in new technology and features in the market that revolutionizes the industry. Sticking with this strategy, BMW is now trying to solidify this image into the customer’s mind so that they associate ‘innovation’ with BMW. The company is trying to pass a more direct message to its customers, which involves more values of technology, ecology and design in all the future machines. A recent advertisement goes with a slogan ‘BMW – Defining Innovation’ is one of the few advertisements following this strategy. [1] Furthermore BMW like always has been spending huge amount of money on research and development to offer something new for its customers. With an expenditure rising up by 20 percent to 723 million euros in recent years spent only on research and development, BMW has been able to develop a more fuel-efficient engine for its newer models. This is just one example of the lead BMW has taken in expanding the innovative boundaries. Anti-wind resistant designs, extreme power of the engine and interior décor of the cars are some of the other examples. [2] Operations When we talk about BMW operations, its growth and expansion targets are the first that come to mind. Expanding into new global markets is the ‘in-thing’ for BMW for quite some time now. Operating in 150 countries and having 23 production and assembly plants and has 39 sales subsidiaries in 13 countries on four continents, BMW has been able to reach out to many potential customer bases with the latest one being established in India. BMW’s is also giving an opportunity to its dealers to take BMW’s make worldwide by acquiring the rights to sell BMW brands. This consistent expansion is right inline with its global risk diversifying strategy. [4] Marketing BMW has come of with new and exciting marketing campaigns to invite the customers to take a closer look and feel the cars upfront. It takes part in ‘auto-shows’ like the Frankfurt Auto Show, Tokyo Auto Show and the most exciting the Dubai Auto Show. BMW also has a Formula 1 team which provides the company further international acclaim and advertises the company as an extreme racing vehicle developer. BMW has recognized its strength in the luxury and sport vehicles sector, therefore it markets its product to customers that appreciate fun in driving sporty, yet elegantly designed cars. For US, BMW markets itself with the slogan ‘The Ultimate Driving Machine’ while globally it goes with ‘Sheer Driving Pleasure’. Both these slogans portray the fun, activity inciting side of the cars. [4] [9] With a 3.5% share of the car market in Europe and 1.5% of the car market in the United-States in 2004, BMW is progressing towards achieving the ultimate driving machine class in the very near future. [3] Human Resources Human resource management is an extremely deterring task for the management team especially when there are 70,000 employees around the world to control. Yet BMW takes this challenge head on, just like it has been doing from the start. [4] Its current Board of Management consists of seven members plus Dr. Norbert Reithofer as Chairman of the Board of Management who is in-charge of operations. BMW hasn’t been able to keep the same head of operations for a long time, however with current CEO’s policies, BMW is hoping to retain the head of operations for a long time to come. [5] Finance BMW has been the largest maker of luxury cars for the past two years by unit sales, producing 88,036 vehicles with an increase of 3.7 percent over 2006. The figure rose to 13.8 billion euros, beating a 12.9 billion-euro estimate boosted by the increased production of the US built ‘X5’ and British ‘Mini’ [2]. But BMW is criticised for earning just 6 percent operating margin on a car which provides revenue of $50,000 per car on an average, when most car manufacturers who make half that revenue per car as BMW does are able to make comparable profits. However some critics are positively commenting on this slight margin as a path to sustenance of the current customers and increased customer base in the future by offering slightly lower prices in the future. [10] Key Problems Specialized Competitors exist in the industry. Luxury vehicles Mercedes and Audi and Lexus compete directly with some of the classes of BMW. It is tougher for BMW to compete than other premium car makers because it lacks the competition’s economies of scale. Audi uses components and engines from its huge Volkswagen owner just like Lexus uses many crucial from Toyota’s while Mercedes trucks and smaller cars can provide hidden content for more luxurious models. [10] The most destructive problem for BMW has been the Dollars weakness against the euro for quite some time now. Since BMW makes two-thirds of its cars in Germany and gets about 25 percent of sales from the U.S., its biggest market, a low Dollar is makes BMW suffer losses where they can make potential profits. [2] Changing Management ever since 1998 almost on an yearly basis shows the inconsistency in the managerial decisions. This particular piece of information is harmful for the confidence of the shareholders especially at a time when Dollar has hit an all time low against the Euro. [3] Conclusion BMW is and always will be looking for new and innovative vehicles to develop in accordance with the needs and wants of the customers while keeping the environment and safety precautious as number one on the priority list. The all-hybrid vehicle is just one example of such a strategy that is in store for the customers. The other important step that BMW would be taking is to increase value for the customers while achieving higher profitability and growth targets with the programme to tap 6 billion Euros in efficiency potential by 2012. Furthermore the shareholders would benefit from company success to a greater extent and their confidence will be regained. New targets set by the CEO in September, 2007 to regaining the sales target of 8% to 10% in the Automobile segment will quieten down the non-ambitious target critics. Also, to solve its declining Dollar problem, BMW will use natural hedging and increase its purchases primarily in US dollars. [6] Works Cited 1. Bento, Sofia. “New BMW Strategy”, Blog Spot, Retrieved on November 10, 2007 from www.bsofb.blogspot.com/2007/09/new-bmw-strategy_20.html 2. “Bloomberg”, Retrieved on November 10, 2007 from www.bloomberg.com 3. “BMW,” Transnationale, Retrieved on November 10, 2007 from www.transnationale.org/companies/bmw.php 4. “BMW Education”, Retrieved on November 10, 2007 from www.bmweducation.co.uk 5. “BMW Group”, Retrieved on November 10, 2007 from www.bmwgroup.com 6. “BMW Group reveals future strategy - CS, X1, Rolls Royce Coupe, and Mini SUV confirmed,” Motor Authority, Retrieved on November 10, 2007 from www.motorauthority.com/cars/bmw/bmw-group-reveals-its-future-strategy 7. “Mini Education”, Retrieved on November 10, 2007 from www.mini.co.uk/mini_education 8. “Rolls Royce Motor Cars,” Retrieved on November 10, 2007 from www.rolls-roycemotorcars.com 9. “Wikipedia” Retrieved on November 10, 2007 from www.en.wikipedia.org/wiki/BMW 10. Winton, Neil. “BMW expected to meet targets, despite U.S. problems,” Retrieved on November 10, 2007 from www.detnews.com/apps/pbcs.dll/article?AID=/20071009/AUTO02/710090301/1362/OPINION0339 11. “World Car Fans”, Retrieved on November 10, 2007 from www.worldcarfans.com/6041118.001/bmw-future-product-strategy Read More