The Success Of BMW Company - Assignment Example

The Success Of BMW Company Table of Contents Executive Summary 2 Question 1: To what extent has BMW met the critical success factors for the sector in the last five years? 2 Question 2: Using Bowman’s Strategic Clock or Porters Generic Strategies, identify the range of “generic” strategy choices that BMW appears to have made 4 Question 3: Identify the key resources and capabilities which BMW has used to support these strategic choices in the last 5 years, and evaluate whether these generate sustainable competitive advantage 5 Question 4: Using the criteria of “Suitability, Feasibility and Acceptability”, further evaluate BMW current strategies against the future competition they face 7 Conclusion and Recommendations 8 References 10 Bibliography 11 Executive Summary The project begins by identifying the critical factors which accounts for the success of BMW in the last five years. To do this it makes an assessment of the industry where the company operates, environmental factors, managerial position and the temporal factors. The next part of the project deals with identifying the strategic choices made by the company using Bowman’s Strategic Clock. It explains the reason why the company has chosen focussed differentiation as the most suitable alternative. The strategy to produce luxury cars of the best quality using the latest technology provides reasons why it has evolved as the most luxurious brands used by the high income groups in society. Then, the project assesses the key resources and capabilities which have been used by the company in the last five years. Lastly, the company’s present strategies have been evaluated in comparison to its future competition in terms of suitability, feasibility and acceptability. Question 1: To what extent has BMW met the critical success factors for the sector in the last five years? The critical success factors identify the key issues that organisations should focus on to attain success. It refers to the specific areas where satisfactory results would yield competitive success for the individual, department or department. The critical factors which account for the success of BMW include industry, competitive strategies, environmental factors, managerial position and temporal factors. The most important factor that has been the key behind the company’s progress towards success is its brand image. Its brand strength is so high that it allows product changes to take place smoothly and without any hurdles. It can easily introduce new products in the market without losing its share of the market. The company would also continue to attain success as long as the new products introduced under the original brand continues to meet customer requirements in terms of image, quality and value (Ward, Srikanthan & Neil, 1990, p.10). The automobile industry has been undergoing a process of transition since the last few years. The number of suppliers is supposed to come down from 5500 to 2800 by 2015. Among the independent manufacturers mention may be made of Fiat, Ford, Honda, and Porsche. The BMW has to compete with the above companies to be in the limelight. One important way in which the company have been working is that it is concentrating more on the post production activities, like sales, services and customer support. Contact with the customers and maintaining the brand image have been the critical factors which has contributed towards the success of the company (Wyman, n.d., p.3). Maintaining the international standards of production and using the latest technology has been a major factor for its success. The company has been encouraging brand differentiation. As the focus has moved towards the downstream end of businesses, the production and development programs have been increasingly shifted towards automotive suppliers of the company. The role of suppliers has increased substantially over the years (Wyman, n.d., p.3). Analysis shows that differences in the characteristics of brands determine which areas of production will be retained and which will be outsourced. BMW is a big brand which retains a greater share of production than the brands like Daihatsu, Rover and Kia (Wyman, n.d., p.3). Question 2: Using Bowman’s Strategic Clock or Porters Generic Strategies, identify the range of “generic” strategy choices that BMW appears to have made BMW is a company which has taken the most outstanding strategic moves which has benefitted the company substantially. It has even won the “Outstanding Corporate Innovator (OCI)' title for 2002 by the Product Development & Management Association (PDMA)” (ICMR, 2002). Among the Bowman’s Strategic Options, the most suitable of these for BMW is focussed differentiation which is option five. According to Bowman, the competitive advantage is related to the differentiation advantage or the cost advantage. BMW goes for focussed differentiation which is targeted towards a specific segment in the market and warranted at a premium price. The company produces cars at high price. The average BMW cars begin at $30,000 approximately (Course Shufe, n.d., p.5). The company aims the niche market comprising of the very high income group individuals. China forms a potential market for BMW cars. The company attaches special importance to the China which forms a potential market for leading premium cars. The luxurious standard of the brand reflects from the company’s annual report for the year 2003. It includes the most important information of its joint venture with China. It reads as “Production of BMW cars in Shenyang in the northeast of China began in September 2003 - This is an important milestone in the BMW Group's expansion strategy” (Weiling, 2004). The company’s target to capture the luxurious car market was a big success and an important strategic move at the same time. It sold 18445 numbers of cars in China which was an increase of 176% from the previous year. The number of customer deliveries increased by 75% in the Chinese market which includes Taiwan and Hong Kong. The BMW Brilliance Automotive began expanding production at a rapid rate encouraged by the booming sales of the company. The company’s luxurious outlook also reflects through its plan to produce Audi Sedans in Changchun which is a highly rated car among the top brands in China. It is also one of the most popular cars used by the Government officials in China. Chinese officials belonging to the ministerial level can use 1.8 litres sedans. BMW requires downgrading its sedans to meet the requirements. However, it refused to do so. This is because if it does so, then it would have to compromise on other qualities of the car. Rather it decided to position itself as the “premium business sedan provider” (Weiling, 2004). It makes its intensions very clear. Its intension is to be the producer of the most luxurious cars in China (Weiling, 2004). Question 3: Identify the key resources and capabilities which BMW has used to support these strategic choices in the last 5 years, and evaluate whether these generate sustainable competitive advantage Objectively enhancing the strengths and weaknesses of the company’s resources and capabilities in comparison to its competitors is a difficult task. It requires assessing one’s own capabilities very judicially. Organisations often fall victim to their own past glories, future hopes and their wishful thoughts. At times successes in business sows the seeds for its destruction. Appraising the resources and capabilities requires extensive understanding and insight. BMW’s ability to integrate the world class engineering along with design excellence and effective marketing makes it the world’s most recognised and reputed brands in the world (Wiley, 2007, p.22). BMW is one such car which other companies would find difficult to duplicate. Thus the risk of imitating is extremely low in the case of BMW. This has been achieved through the sophistication of components which are required for the construction of the car. It uses the latest technological accessories for construction. These technologies make the car unique and the one of the most popular one. The technology that has made the car unique is the active cruise control which applies acceleration and braking through sensors surrounding the vehicle. This makes duplicating and imitating of any BMW model almost impossible for any automaker (Lee, et al., 2008, p.22). The organisation’s attention towards minute details makes it one of the best organisations worldwide. Attending to the minute details is something the company takes to heart. BMW has been able to do this by developing an educational program in which skilled technicians across the world are provided scholarships through the “STEP (Service Technician Education Program)” (Lee, et al., 2008, p.16). This ensures that the company’s technicians are enough skilful to handle the customer needs and requirements. Another tool used by the company is the “Designworks Sustainability Management System” (Lee, et al., 2008, p.16). This program intends to promote success in the company and to generate revenue considering the social and environmental aspects of the business. This system allows the management to keep tight control over its employees. By maintaining the brand quality with which the social networks and environment is treated, the company has developed an organisational infrastructure which would sustain for a long time (Lee, et al., 2008, p.16). Question 4: Using the criteria of “Suitability, Feasibility and Acceptability”, further evaluate BMW current strategies against the future competition they face BMW has been offering luxury cars in America since 2008. Presently it is offering two other types of cars both using six-cylinder engines. However in Europe, the company offers more options for engines and body styles. Presently it sells coupe, convertible and hatchback using four cylinder diesel engines, four-cylinder petrol engines and straight six-cylinder petrol engines. It should keep offering the six cylinder models and the four cylinder diesel models in US. It should not bring back the hatchback model which is presently offered in Europe. This is because the hatchback models that were produced by Mercedes and Audi were not accepted well in America (Lee, et al., 2008, p.17). Thus producing the hatchback model would be either acceptable not feasible for the company. New product lines would help to generate more market share for the company. Audi is the strongest contender in the field producing four cylinder luxury cars. The remaining competitors like Mercedes, Lexus, and Infiniti do not produce four cylinder luxury cars in America. Offering the four cylinder luxury cars would help the company to capture a greater proportion of the market share (Lee, et al., 2008, p.18). It must be noted that gas prices have been rising rapidly in the market. In 2008, oil prices per barrel surpassed $125 (Lee, et al., 2008, p.18). These days’ consumers are more willing to buy the four cylinder cars than the six cylinder ones. The sales of four cylinder cars in the Unites States have been increasing since 2002. There are ample customers who would be willing to purchase BMW cars only if the four cylinder models were available. Thus producing the four cylinder model cars in the US market would not help to meet the customer requirements but would also yield greater profits in future. One possible disadvantage that is likely to be faced by the company is losing its brand image. Power, performance and luxury comprises of the core competencies of the company. BMW promises the above three competencies to its customers. BM would lose its power competency on developing the four cylinder model (Lee, et al., 2008, p.19). Conclusion and Recommendations It is seen that BMW has been adapting itself to the rapid changes in the automobile industry. The company continues to produce cars considering the customer requirements in terms of quality, value and image. One of the most critical factors which accounts for the company’s success is its use of technology of international standards. Lately, the responsibility of production and development is being increasingly shifted towards the suppliers. According to the Bowman’s Strategic clock the strategy most widely used by the company is option five, which is focussed differentiation strategy. According to this strategy the company targets the niche market inclusive of the higher income group people. Its cars are priced high as a consequence of the latest use of technology. China is the most profitable place of operation where it targets to sell to the government officials. One of the important resources used by the company is the highly skilled people of the world. It also arranges for a scholarship to attract the best talents in the world. It uses such high class technology which makes it impossible to duplicate or imitate the product by automakers. As regards the suitability, feasibility and acceptability of the product, it is recommended that the company produce and sell the four cylinder models which would expand and enlarge its present customer base. However, bringing back the hatchback model is not recommended because it is not largely accepted in the US market. Previous attempts by competitors like Mercedes and Audi to sell the model had not succeeded. However, it was felt that selling the four cylinder model would spoil the brand image of the company to some extent as it would have to compromise with one of its core competencies, i.e. power, where performance and luxury are considered to be the other two core competencies of the company. References Course Shufe. No Date. BMW Marketing Innovation. [Doc]. Available at: http://course.shufe.edu.cn/course/marketing/shuangyu/jxal/bmw.doc. [Accessed on December 11, 2010]. ICMR. 2002. BMW's Innovation Strategies. On the Winning Edge. [Online]. Available at: http://www.icmrindia.org/casestudies/catalogue/Business%20Strategy1/BMW%20Innovation%20Strategies.htm. [Accessed on December 11, 2010]. Lee, et al. 2008. BMW. Intrepid International. [Doc]. Available at: http://www.plu.edu/~kimjh/doc/bmw.doc. [Accessed on December 13, 2010]. Ward, K., Srikanthan, S. & Neil, R. October 1990. Marketing Investment Analysis: The Critical success Factors for financially evaluating and effectively controlling marketing investment Decisions. [Pdf]. Available at: https://dspace.lib.cranfield.ac.uk/bitstream/1826/558/2/SWP0791.pdf. [Accessed on December 11, 2010]. Weiling, L. 2004. BMW eyes luxury car market. [Online]. Available at: http://www.chinadaily.com.cn/english/doc/2004-03/27/content_318514.htm. [Accessed on December 11, 2010]. Wiley. 2007. Analyzing Resources and Capabilities. [Pdf]. Available at: http://www.blackwellpublishing.com/grant/files/CSAC05.pdf. [Accessed on December 11, 2010]. Wyman, O. No Date. Study by Mercer and the Fraunhofer Society: The new form of collaboration in the automobile industry. [Pdf]. Available at: http://www.oliverwyman.com/ow/pdf_files/9_en_PR_Future_automotive_industry_structure_-_FAST_study.pdf. [Accessed on December 11, 2010]. Bibliography Cravens. 2009. Strategic Marketing 8E. Tata McGraw-Hill. Kiley, D. 2004. Driven: inside BMW, the most admired car company in the world. John Wiley and Sons. Pride, W. M. & Ferrell, O. C. 2007. Foundations of Marketing. Cengage Learning. Read More