Operations Strategy and Business Strategy of BMW - Case Study Example

Operations Strategy/Business Strategy In the competitive global market, there lie many significant factors that eventually affect the decisions or the strategies which are being made particularly in the automotive industry. In lieu of this, the choices or the likings of the consumers determine the current techniques, consistencies and performance measures of an organisation among others. The automotive industry is significantly growing to a large extent among other industries. There lies a great scope towards the accomplishment of huge success along with revenue for this particular industry. The study highlights the operations or business strategy of BMW which is one of the leaders of automotive industry along with various different factors that include its market environment and the nature of the competitors, evaluation of ‘order qualifiers’ and ‘order winners’ of the industry, process design, product quality, cost, supply chain management, innovation, technology and various human resource issues among others. Table of Contents Abstract 2 Introduction 4 Market Environment of BMW 5 PEST Analysis of BMW 5 SWOT Analysis of BMW 7 Business or Operations Strategy of BMW 8 Evaluation of Order Qualifiers 10 Evaluation of Order Winners 11 Evaluation of BMW’s Order Winners with Their Business Model and Strategy 12 Different Features of BMW 13 Conclusion 16 References 17 Bibliography 19 Introduction “Bayerische Motoren Werke AG” (BMW AG) is one of the most prominent brands in the world of automobiles. The popular blue and white rounded symbol of BMW makes an obvious proof that the owner is driving a prestigious car or motor bike. This particular symbol recognises the brand as offering the most excellent design, well processed equipments, manufacturing and quality that are provided to the customers worldwide (Franzen, n.d.). BMW holds a significant position as a maker of bicycles, motorcycles and airliner equipments. In addition, BMW profitably launched its line of motorcycles with which it has won numerous races and eventually gained brand appreciation of high manufacturing brilliance and a sporting heritage (Franzen, n.d.). It has been identified that BMW enjoyed almost a steady and regular expansion and advancement since it was established. Gradually, BMW manufactured and sold significant numbers of cars in contrast with that of its competitors (Franzen, n.d.). In this connection, by the year 2000, BMW earned profit more than twice than that of its competitors such as Ford and Volkswagen among others for per car it sold. In the year 2005, when most of the carmakers were struggling to maintain their sales, BMW car sales were raised by 37% (Franzen, n.d.). Market Environment of BMW BMW usually targets towards wealthy and prosperous men and women between the ages of twenty five and forty. In this connection, the direct competitors of BMW include luxury car manufacturers especially from Japan, the US and other European countries among others. Globally, the biggest US based competitors of BMW are Buick, Lincoln, Cadillac and Ford (Maguire, 2007). The Japanese competitors primarily include Toyota, Lexus and Honda. In addition, BMW also competes locally that is in Germany and globally with other European companies such as Jaguar, Audi and Mercedes Benz (Maguire, 2007). It is obvious to the fact that luxury car brands are drastically emerging in the recent years within the global automobile industry. In this connection, especially Toyota is one of the major existing competitors of BMW. It has got the maximum market share particularly in the automobile businesses. Moreover, Ford and Audi are the other existing primary competitors for BMW (KPMG, 2007). PEST Analysis of BMW A PEST analysis generally denotes ‘political’, ‘economic’, ‘social’ and ‘technological’ factors. These very particular areas are listed, analyzed and has been related to the BMW Group. Few of the political factors have led to several obstacles for BMW. The factors that include emission of various gases and political instability are some of the political issues that are faced particularly by BMW. It has been recognized that in future, the operations of BMW in rising markets will increase compared to its competitors, hence there lies every possible chance towards the increase in the dependency on political stability to occur (Ploen & Olesen, 2010). In relation to economic factors, due to BMW’s continuous globalisation, the issue of currency risk has been a critical concern for the company compared to its competitors. Besides this, BMW’s cost of manufacturing seems to be in a very significant issue which is determined through the cost of raw materials, which are used for the production of cars and motorcycles (Ploen & Olesen, 2010). This particular factor indicates that BMW has difficulties while predicting the future prices and ultimately earn less than their expected income from the products or may even incur loss compared to its competitors (Ploen & Olesen, 2010). In connection with social factors, the ecological aspects play a major role towards providing new opportunities particularly in BMW’s rising markets. The consumers especially in the US and Europe usually demand for “green” products that implies meeting emission values and environmental directives (Ploen & Olesen, 2010). In response, BMW increased focus upon its hybrid cars, dual fuel engines and its fuel efficient cars among others to fulfil the demand of its consumers to a certain extent. Thus, in future, BMW is expected to remain very much concerned towards various social aspects by providing innovative solutions especially towards different environmental issues (Ploen & Olesen, 2010). In relation to technological factors, it has been recognised that technology is regarded as the top priority to a certain extent especially in the automotive industry. In today’s competitive automotive industry, BMW managed to get an extra advantage in the production of engines with implementing latest and innovative technology among others compared to its competitors (Ploen & Olesen, 2010). SWOT Analysis of BMW The strengths of BMW can be discussed with the facts that include its significant position in the super luxury car segment particularly within the automobile industry, high expenditures towards its research and development processes and sustaining superior quality products among others (Aroq Ltd., 2004). BMW’s high expenditures towards its German base may have an effect upon the productivity and success of the company in the long run as more and more competitors shift their product development activities to lower cost countries. This significant issue denotes the weakness concerns of BMW to a certain extent (Aroq Ltd., 2004). With the significant expansion of European Union countries along with converting into the world’s biggest trading operations, there lies a huge opportunity for BMW in order to influence its strong European position particularly in premium and luxury car segment to gain more market share across new and expanding markets. Moreover, BMW’s high concentrated attention towards Chinese luxury car market also raises immense opportunities in future (Aroq Ltd., 2004). In this connection, BMW’s launch of a new product is very much important which eventually raises an opportunity to produce the products entirely in a new market with its strategy of quality and performance. If the new offering regarding launching new products in an entirely new market does well, then there lies a great opportunity for BMW to expand its market to a large extent (Brandes & et. al., 2005). Along with various opportunities, there also lies certain threats for BMW that include continuing decline of the Dollar against the Euro that ultimately threatens towards the profitability and rising prices of raw materials such as steel. This factor related to BMW eventually hampers the earnings to a certain extent (Aroq Ltd., 2004). There also lie significant threats towards entering into the markets with new products. In this competitive financial market worldwide, BMW should be careful of not losing their market share by releasing a particular product that its customers do not prefer. The factor of losing market share particularly in this significant issue ultimately threatens BMW in terms of its profitability and success among others to a certain extent (Brandes & et. al., 2005). Business or Operations Strategy of BMW BMW entered into a significant phase towards the execution of its several business strategies. The execution of the new strategies of BMW eventually has ensured its business success and the company focuses mainly upon the profitability factor as a part of their business strategies. It is strongly believed that by implementing the various strategies, BMW can attain their expected results as well as huge success while enforcing their business operations in future (BMW Group, 2008). In this connection, in order to achieve expected results and success, one of the business or operation strategies of BMW lies in improving or enhancing the various costs that include material, production and development costs among others. Along with improving these mentioned costs, the company also includes reduction in terms of its personnel costs as a business or operations strategy (BMW Group, 2008). The other significant strategy of BMW lies in further profitability improvements through cooperation. The BMW Group decided to continue to influence its cooperative ventures in order to enhance its profitability. In this connection, BMW continued to maintain a strong link along with comprehensive discussions with other manufacturers to explore the chances of using shared components and appliances among others in order to attain high profitability, cost reductions and success (BMW Group, 2008). Besides, cost reduction strategies along with profitability factor, BMW also made certain business or operations strategies towards making emission reduction technological procedures and offering new, attractive luxury cars as well as motorcycles to the consumers. Moreover, the business or operations strategies of BMW also include updated modern technology and innovation leadership among others with a view towards securing the future as well as attaining expected results in future (BMW Group, 2008). The other noteworthy business or operations strategy of BMW lies upon the “BMW Group” plans in order to lessen reliance especially upon foreign exchange rates. Moreover, BMW also channelised business or operations strategy towards increasing purchasing especially in US Dollars which in turn eventually raises the profitability and success of the company in future to a certain extent (BMW Group, 2008). The other important operations strategy of BMW lies in establishing or introducing various modern and new models or principles relating to their business fields. The company firmly believes that they will continue to grow by introducing various new and modern models in order to move forward particularly in the automobile industry (BMW Group, 2008). The other mention worthy business or operations strategy of BMW includes the cost issue that is to offer reasonable price which can meet their expected results in profitability, offering superior and fast delivery of the products and maintaining flexibility within its broad variety of products and services among others (Brandes & et. al., 2005). Evaluation of Order Qualifiers Fundamentally, ‘order qualifiers’ are the criteria that a particular company must comply with its least standards while executing its business operations. The conception of order qualifiers logically leads towards the arrangement of a suitable manufacturing strategy of any industry. In addition, order qualifiers are the factors that are regarded by the market as an ‘entry ticket’ for a particular industry (Ambe, 2010). The market qualifier factors of automobile company such as BMW comprises of quality, price, lead time and service level among others. In relation to order qualifiers, these are the minimum measures or conditions among others especially for BMW to become as an order qualifier and ultimately get entry into the marketplace in order to execute smooth flow of business operations. The principles of order qualifiers also act as an approach especially towards supply chain procedure of any particular industry such as BMW in order to address their specific characteristics (Ambe, 2010). Thus, understanding the particular characteristics of BMW’s product type, marketplace requirements and various management challenges among others, will definitely help BMW towards designing the relevant as well as appropriate supply chain strategy that ultimately makes sure of finest performances and attain greater worldwide advantage among others. In lieu of this, the order qualifier for BMW usually comprises of the quality of the product, price of the product and service among others (Ambe, 2010). Evaluation of Order Winners An ‘order winner’ usually makes the available produced goods and services to become successful within a particular industry. There are many factors that include price and service level among others which usually constitute order winner qualities. The market ‘order winner’ of automobile company such as BMW are market availability and price of the products (Ambe, 2010). The various aspects or facets of order winner comprises of price that include manufacturing, value added, selling price, running cost and service cost among others. The quality of performances, reliability, technical durability, production and delivery speed, and service ability among others also can be regarded as order winner factors for BMW (Ambe, 2010). Apart from the aspects or facets of price and quality, the issue of flexibility that include material quality, output quality, new product, modified product and deliverability and the issue of dependability that include schedule adherence, delivery performances, price performances and ability to keep promises also evaluates order winners of a particular company such as BMW (Ambe, 2010). Moreover, the order winner of a particular industry such as BMW also constitute the aspect of speed that include delivery speed of the products, delivery frequencies of the product, production speed and new product advancement speed among others (Ambe, 2010). Thus, it can be stated that both features of order qualifiers as well as order winners play crucial roles in a particular industry. The various factors of ‘order qualifiers’ and ‘order winners’ that have been mentioned above eventually affects upon the process of supply chain and have a strong influence upon the business or operations strategies that are adopted or designed by any particular company such as BMW (Ambe, 2010). Evaluation of BMW’s Order Winners with Their Business Model and Strategy The business model and various operations or business strategies of BMW eventually placed the company to become ‘order winners’ as compared to other companies particularly in the automobile industry. One of the significant business initiatives of BMW lies in receiving environmental award for its deliberate investments especially in clean energy (Nunes & Bennett, n.d.). In this connection, BMW possesses the capabilities regarding its delivery speed and frequency in response towards the demand of the consumers and eventually attains a significant position particularly in the automotive industry compared to its competitors (Nunes & Bennett, n.d.). It is obvious to the fact that BMW is a German luxury car producer and its reputation particularly in the automotive sector is viewed especially by its quality in procedures and products as well as its innovative capabilities (Nunes & Bennett, n.d.). It has been identified that one of BMW plants that is situated at Spartanburg (USA), was eventually regarded by its innovation especially in the paint shop by using “water-borne” systems. The use of “water-borne” systems ultimately reduces the amount of solvents that are being used in the procedures that ultimately minimises the emissions of harmful substances while painting the cars (Nunes & Bennett, n.d.). This particular fact provided enormous benefits towards BMW’s environmental improvement aspects and eventually the conception of order winners are met through this significant evidence of BMW’s business model (Nunes & Bennett, n.d.). In relation to BMW’s business or operations strategy, order winners are met through improving or enhancing various types of costs that include manufacturing costs, development costs, service costs and material costs among others (Nunes & Bennett, n.d.). Apart from this particular factor, the other additional factors that include reduction in personnel costs, expenditures in emission reduction technology procedures, reducing dependence upon foreign exchange rates and increasing purchasing especially in US Dollars also count for BMW in order to place itself as order winners particularly in the automobile industry as compared to its competitors (Nunes & Bennett, n.d.). Different Features of BMW The process design of BMW eventually lies in an installation process which was created by a team consisting of staff especially from the BMW design department in Munich. The process design especially of BMW is usually composed of picture sequences, layered procedures of car design and pencil sketches among others. It has been identified that the process design of BMW eventually lies upon its artistic development procedure (BMW Group, 2008). The comprehensive and multi level equality management system of BMW ensures quality in all its work processes as well as components and materials and ultimately products. As a whole, BMW ensures flexible along with effective management system as well as the products that ultimately serves or offers to its customers worldwide (BMW Group, 2008). BMW has initialised a broad variety of methods that will ultimately help them to attain major progress in terms of cost. The target of BMW in terms of cost include reduction in personnel costs and various other costs, capital expenditure and capital employed per vehicle in development, production, sales and administration among others (BMW Group, 2008). In relation to BMW’s supply chain processes, it has been identified that the suppliers of BMW in its supply chain procedure, agree towards the use of energy and raw materials efficiently, diminishing the emissions and noises to a certain extent and maintain an efficient ecological arrangement system (BMW Group, 2008). It is obvious to the fact that BMW Group is one of the most flourishing finest quality producers particularly in the automotive industry. The most significant reason for BMW in order to attain this success eventually lies in its conscious leadership and innovation in the construction of cars. The different innovation factors of BMW eventually help to develop their commodities and services and ultimately secure the long-term success of the company (BMW Group, 2008). BMW’s innovative networking system greatly enhances the company’s reputation as well as success in worldwide competition of automotive businesses. The BMW Group’s high quality networking system that includes innovative production networks eventually leads the company to attain its expected outcomes in future (BMW Group, 2008). The employees of BMW from different technical areas have been working together towards a common shared goal incorporating the latest technologies into automobiles as rapidly as possible. The latest technologies include “human machine interface”, “mechatronics” and “B2X” among others (BMW Group, 2008). In relation to human resource issues, there lie many external factors that influence the activities of BMW such as latest technical aspects, market regulations and various operational transformations among others. In lieu of this, the human resource professionals of BMW have a significant function towards all these issues or trends that are mentioned above. The human resource management of BMW eventually paved the way towards the progression of the company as well as helped to attain their expected results while executing their business operations (BMW Group, 2008). Conclusion It has been identified that as the country’s economy is developed, the market positions of any company such as BMW also seems to change. BMW is proposed to reflect individual needs in terms of various practical advantages towards the customers especially in wealthy countries such as the UK, Australia and the USA. After acquiring a general overview of market environment, target audiences and competitors’ preferences of BMW, it has been recognised that this company is consistently maintaining its quality along with price to its customers. The company also possesses certain quality features that ultimately made it to place itself as ‘order qualifiers’ and finally ‘order winners’. The company made certain business or operations strategy in order to improve and increase its profitability factor and it is assumed that with proper implementation of the strategies, the company can significantly attain its expected results in future to a certain extent. References Ambe, I. M., 2010. Agile Supply Chain: Strategy for Competitive Advantage. Journal of Global Strategic Management, Vol. 7, pp.5-17. Aroq, Ltd., 2004. BMW AG: 2005 Company Profile Edition 1. SWOT Analysis. [Online] Available at: http://www.just-auto.com/store/samples/aroq_bmw_profile_2005ed1.pdf [Accessed January 21, 2012]. BMW Group, 2008. Corporate News. Investor Relations. [Online] Available at: http://www.bmwgroup.com/bmwgroup_prod/e/nav/index.html?http://www.bmwgroup.com/bmwgroup_prod/e/0_0_www_bmwgroup_com/home/home.html [Accessed January 21, 2012]. Brandes, J & et. al., 2005. The Ultimate Driving Machine: A BMW Minivan. Threats and Opportunities Analysis. [Online] Available at: http://ww.xceo.net/about_us/files/The_SMoms_Capstone-BMW.pdf [Accessed January 21, 2012]. Franzen, G., No Date. BMW Case. BMW: The Most Admired Car Brand in the World. [Online] Available at: http://85.17.192.207/coolbrands/dmdocuments/ecbmw.pdf [Accessed January 21, 2012]. KPMG, 2007. Luxury Brands in China. Market Performance. [Online] Available at: http://www.kpmg.com.cn/en/virtual_library/Consumer_markets/CM_Luxury_brand.pdf [Accessed January 21, 2012]. Maguire, M., 2007. BMW Brand Audit. GRIN Verlag. Nunes, B & Bennett, D., No Date. Green Innovation Management in the Automotive Industry. BMW Receives Environmental Award for its Investments in Clean Energy. [Online] Available at: http://www.managing-innovation.com/case_studies/Green%20Innovation%20Management.pdf [Accessed January 21, 2012]. Ploen, R. R. & Olesen, M. K., 2010. Valuation of BMW. PEST. [Online] Available at: http://pure.au.dk/portal-asb-student/files/10730/Valuation_of_BMW.pdf [Accessed January 24, 2012]. Bibliography Sturgeon, T. J & et. al., 2009. Globalization of the Automotive Industry: Main Features and Trends. Int. J. Technological Learning, Innovation and Development, Vol. 2, Iss. 1/2, pp. 7-24. Veloso, F & Kumar, R., 2002. The Automotive Supply Chain: Global Trends and Asian Perspectives. Major Drivers of the Automotive Industry. [Online] Available at: http://www.adb.org/Documents/ERD/Working_Papers/wp003.pdf [Accessed January 21, 2012]. Read More