Why Organization Needs a Business Project - BMW Organization - Research Proposal Example

Work based project --- Why organization needs a business project? INTRODUCTION In Today’s business scenario, the work demands are such that information processing and decision making cannot be delayed. The technology has evolved to a point where computer softwares help to analyze and provide information in many different ways and makes the job of a decision maker quite easy. But all the technology and all the fast processors cannot make up for unplanned or badly planned ventures. Thus proper business planning assumes significance specially in times where competition is fierce and product and project life cycles are being reduced. This project thus concerns one of the fundamental principles in business, both for a new venture and an established business that is of Business planning. Management experts claim that business planning and goal setting is one of the surest method of achieving success in any business. A business that does not have a proper plan both for the short term and long term is like a ship without a rudder. Proper planning is needed in all aspects of business. Many experts such as Richard Stutely (2006) have stressed upon the importance of business plans and ways to make them as effective as possible. Others have discussed the reasons for the importance of business plans. Verklin and Kanner (2007) discuss the business planning in the media and Information field where a lot of confusion and individual attitudes often upset plans. There is lot of literature available on creating good business plans. ( For e.g. Covello and Hazelgren, 2006) The principal aim of the research is to find out the effect of planning and business plans on a well known company. We have chosen the well known BMW company for our research purposes. We will try to find out how the well written and good business planning was able to help BMW become a major force in the automobile industry. COMPANY BACKGROUND Founded in 1916 in Munich, the BMW organization is one of the ten largest car manufacturers in the world and a leading name in the luxury automobile sector. BMW (Bayerische Motoren Werke) Group is headquartered in Munich and is known for its excellence and its luxury sedans, SAVs, Convertibles, Roadsters and motorcycles. Its products are sold under three main brands -- BMW, MINI and Rolls-Royce Motor Cars and has 23 production facilities in 13 countries, 39 sales subsidiaries all over the world and 10 locations in the Research & Development network The BMW group strives to be the most successful premium manufacturer in the industry and its growth strategy involves looking for potential opportunities and working within their limits and identifying and building on their core competencies and is committed to a very high quality of its products and services. BMW Group's worldwide mission statement is: "To be the most successful premium manufacturer in the industry." The history of BMW can be looked at from two views – one before Quandt came into power and after he bailed out BMW from crisis. This is what we will look at from the planning perspective. Before Quandt the history of BMW is quite ordinary. At that time from the starting, the company mainly manufactured aircraft engines and powerful motor bikes. In fact, they were the leading suppliers of engines and bikes to Hitler’s Nazi forces before World War II. But during the war and after the war, the situation became quite pathetic as the company factories were hit badly and destroyed by the Allied forces. But it managed to recover after the war and this is what makes it very interesting. In 1959, BMW was close to bankruptcy and according to industry, Mercedes was quite keen to acquire it. But then came Herbert Quandt as the dominant shareholder of BMW and he changed the way company worked from that time. In 1962, BMW launched its 1500 model in the new market segment -- the quality production saloon. It was positioned somewhere between a mass production car with a design of the luxury sedans. It turned its ability to develop and use its highly specialized technical skills in a production line workforce to its competitive advantage and core competency. And thus building on this positioning, they built a brand called BMW which signified Luxury as well as class and quality. A well thought out strategy planning and execution of the strategy can be said to be the driving force behind this success. In the next few sections, we will try to look at the research methodologies available to us and select a most appropriate method fo0r our study purposes. We will also take a look at the literature available on this topic and try to relate our findings with the available studies. In the end, we will conclude by analyzing whatever information we could gather and use it a basis for our findings. METHODOLOGY It is the basic requirement of any research study to give detailed thought to the appropriate research methodology and technique which ensures a valid, reliable and accurate conclusion and result. There are many factors which need to be considered to choose the exact method which will produce best results such as the time constraints, data availability, and Skills of the researcher etc. The literature on research methodologies converge on two main methods of data collection and analysis --- Qualitative methods and Quantitative methods. The Qualitative research takes a holistic and completely personal and subjective approach to research. Here the data should be representative of the full picture rather than a sample and the validity of the data is most important. The different methods of qualitative methods are action research, case study research and ethnography. The data collection techniques include methods such as Field study where the researchers observes the problem closely, interviews and questionnaires, document analysis etc. On the other hand, the Quantitative research is more experimental and looks for theories and laws that can be proved under laboratory conditions. But here the focus is more on the consistency and stability of the data such that the results can be replicated by any other researchers. The different quantitative methods used by researchers are survey methods, laboratory experiments, econometric methods and numerical methods. Since last few years, the researchers are increasingly combining the two methodologies in the same single research and this has given rise to the concept of Mixed methods research or the Triangulation Method. Many authors have discussed the triangulation such as Gable (1994), Kaplan and Duchon (1988), Lee (1991), Mingers (2001) and Ragin (1987) As per the advocates of this combined research methodology, it helps to provide a broader and deeper perspective to problems and in a sense also complement each other by providing a proof of the validity of the research results. The combined research methods thus are able to eliminate the inadequacies of individual methods and are able to provide automatic confirmation of the results as different techniques from both methodologies are use to arrive at the common result. Thus Triangulation method is able to relate and integrate the information received from two ways and provides the researcher with a more holistic and accurate picture of the given problem which would not be achieved when using a single type of method or data collection technique. (Perone and Tucker, 2003) When using a mixed methods approach or the triangulation approach, several research techniques can be applied which are either scientific or interpretative in nature. There is only some difference in how it is applied. Examples of these data collection techniques are: 1. Field study in which the researcher observes the happenings directly by being at the spot. (Klein & Myers 1999) 2. Questionnaire-based data collection. In this case a written response is taken from people on a certain set of questions which are mostly structured in nature. Lots of experts have discussed this method such as Straub (1989), Kraemer & Dutton (1991), Newsted et al. (1998) 3. Face-to-face Interviews in which the respondents are verbally interviewed and information sought using both structured and open ended questions. 4. Case study. This refers to a study of a particular project/setting/phenomena in its real time environment and gathering information from multiple sources and analyzing it critically. (Yin, 1984, 1994; Lee ,1989; Walsham, 1995b) 5. Secondary research. In this technique, already present data and documents are analyzed thoroughly. No new data is collected. For our purposes, we will be relying on secondary research method more as it is not possible for us to actually pinpoint from when the planning started in BMW company or for that matter, any company. We realized that every company has some sort of planning department or something similar. It is virtually impossible for a business to flourish without a business plan. Of course, there could be some poor planning areas or some well laid out plans. For our research purposes, we are going to assume that pre war period and some years after it – can be considered loosely as no planning period for BMW and years after Herbert Quandt took over BMW, as the period when business strategy began to be more planned SECONDARY RESEARCH Lots of authors have written about the importance of business plans in an organization. As per the U.S. Small Business Administration reports (1999), it has been seen that out of almost 1 million new businesses that are started each year, a similar number of businesses also shut down each year. See figure below for the failure rate of businesses over a 10-year period. As shown below, one-fourth of all businesses fail in the first 2 years, and about 50% fail or close down after 5 years, and 80 % shut their shop after 10 years. Figure 1 : Business failure rate (Source – US small business administration, 1996) This has been attributed simply to one cause and that is the lack of a good business planning. Similar study by Perry (2001) showed that non-failed firms do more planning than similar failed firms did prior to failure. He used a paired-sample t-test to investigate differences between the failed firms and matched non-failed firms. The literature in strategy planning shows that businesses need to plan for the future in order to be effective and successful (Ennis, 1998) but the review of some works show that this aspect is consistently neglected by most of the small and medium sized enterprises (e.g Orser, Hogarth-Scott & Riding 2000; Sandberg, Robinson & Pearce 2001; Beaver 2003). Thus authors such as Berry (1998) argue that the businesses specially the small firms will not be able to perform to their best abilities and achieve full potential without a good and well planned strategy. Thus lot of work has been done to study the reasons why organizations do not plan or problems that hinder planning. These studies are considered crucial as other researchers have shown that those firms that use business planning will definitely have higher sales growth, higher returns on assets, higher margins on profit and higher employee growth (Carland & Carland 2003; Gibson & Casser 2005). FINDINGS Thus based on the history of BMW and secondary search conducted into its past and some informal talks with older employees, we found that the major difference between the pre war era and the post war era of BMW has been in the Planning process. After the takeover by Quandt, the BMW company started to use strategy planning and leverage its highly technological skills in mass production cycle. They were finally able to match their distinctive capabilities with the present market opportunities and thus were able to effect a remarkable turnaround. But this did not happen overnight. A massive research into market opportunities and a thorough plan for the future marked the beginning of rise of BMW. The company made the right decision to move back into airplane engines as it was their niche capability which was combined with the automobile engineering to provide one of the best known brands today. Another reason of its spectacular success can be found in its plan to keep its labor and employees happy. Way back in 1959, BMW management made a pact with its employees which is still honored. It is one of the best company in the world having the best human resource policies. In 1972, BMW started paying out incentives or pay for performance and gave its workers a share in its profits. As per the plan, the company provides about one and a half months' extra pay at the end of the year if the company is able to meet its financial targets. As a result the workforce is highly motivated and flexible. This plan has helped the company give job security to its workforce. And even as other automobile companies such as General Motors Corp. and Ford Motor Co. have slashed tens of thousands of jobs, the BMW has hired 12,000 new workers since year 2000. (BMW’s dream factory, 2006) Besides the good planning, a well though out profit sharing plan with the workforce, the BMW as a company also encourages entrepreneurial style of management. Its management structure is flat, flexible, and fast. The company is known for its innovative styles and designs and has become the industry benchmark for high-performing cars in the premier segment. Its customized production, and brand management strategies have really paid off. And to top it all, it has been consistently performing over the last few decades. CONCLUSION Thus based on the above research and findings , we can conclude that a proper planning process can go a long way in securing a future of the company. This has been proved by the previous research and literature as well. In our case, the success of BMW cannot be purely based on its planning, but also on the policies of favorable work culture and entrepreneurial style of management. Thus we see that though organization planning is one of the most important aspect of business, it is not the only thing that can take the business to top. And obviously, most of the businesses have some sort of plans but the crucial aspect is to follow it and implement it correctly. In case of BMW , when the company started to follow a definite plan for its future, it was able to match the best in industry. Its revenues have increased consistently and it has managed to increase its market share as well. ( See appendix for the key statistics) APPENDIX Table 1 :Revenue statistics Year Amount 1996 £1,239,000 1997 £1,400,000 1998 £1,478,000 1999 £1,580,000 2000 £1,511,000 2001 £1,966,000 2002 £2,350,000 2003 £2,619,000 2004 £3,132,000 2005 €46,656 million Source : BMW website Table 2 : Total Cars and their market share in UK. Year Total cars BMW cars delivered UK Market share delivered worldwide in UK 1990 2,008,934 43,004 2.14 1991 1,592,326 38,707 2.43 1992 1,593,601 40,672 2.55 1993 1,778,426 40,921 2.30 1994 1,910,933 45,574 2.38 1995 1,945,366 55,034 2.83 1996 2,025,450 56,840 2.81 1997 2,170,700 63,700 2.93 1998 2,247,400 64,200 2.86 1999 2,197,615 70,932 3.23 2000 2,221,647 67,679 3.05 2001 2,458,768 81,720 3.32 2002 2,563,631 85,567 3.34 2003 2,577,527 93,822 3.64 2004 2,567,269 102,200 3.98 2005 1,327,992 111,666 4.02 Source : BMW website REFERENCES Beaver, G (2003), ‘Management and the Small Firm’, Strategic Change, 12, 63-68. Berry, M (1998), ‘Strategic Planning in Small High Tech Companies’, Long Range Planning, 31 (3), 455-466. BMW statistics. 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(1998) 'Survey Instruments in IS' MISQ Discovery, December 1998, at http://misq.org/discovery/surveys98/surveys.html, living version at http://www.acs.ucalgary.ca/~newsted/tutor.htm Orser, BJ, Hogarth-Scott, S & Riding, AL 2000, ‘Performance, Firm Size and Management Problem Solving’, Journal of Small Business Management, 38 (4), 42- 58. Perone, J and Tucker, L. (2003) An exploration of Triangulation of methodologies : Quantitative and Qualitative methodology fusion in an investigation of perceptions of transit safety. Center for Urban Transportation Research, University of South Florida. Perry, S. (2001) The Relationship between Written Business Plans and the Failure of Small Businesses in the U.S., Journal of Small Business Management 39 (3), 201–208. Ragin, C. C. (1997). Turning the tables: How case-oriented research challenges variable-oriented research. In G. Brochmann (Ed.), Comparative social research: Methodological issues in comparative social science (pp. 27-42). 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