Global Supply Chain:Case Study of BMW - Dissertation Example

Table of Contents Table of Contents Time Scale (Ghatt chart) 8 Background With the increasing levels of globalization that are mainly resulting from liberalization of markets, efficient flow of information and integration of economies, the level of competition in the local and global market has increased tremendously. This has mainly resulted from the entry of multinational companies which have accumulated huge amounts of money to enable them to segment the market, position their products and services strategically in the market and attract customer loyalty towards their products and services. This has made it hard for the small and medium enterprises to establish themselves in the market. Moreover, multinational companies have an experienced workforce which is able to deal with challenges that keep on arising in the market. This has been playing a significant role in improving the levels of customer relationship management. After the inception of BMW, the brand faced stiff competition from already established brands. The company had no well established system of ensuring that the product reaches the market. As a result, the top leadership had to strategize in order to enable the products to reach the target market. However, major companies had already segmented the market. As a result, it was hard for the customers to change their tastes and preferences (Miltenburg 2007). This paper will analyze how BMW overcame the barriers of entry that had been set by the competitors to become one of the best performing brands in the market. It will also research different aspects that can be used by small and medium enterprises in order for them to penetrate the global market. Literature Review In the past ne decade, BMW has been able to penetrate different markets across the world. This has been significant in reducing the risks and uncertainties associated with concentrating on a single market. In addition, the company has outsourced some of its operations to different parts of the world. This is to reduce the costs of operations by maximizing on cheap labor and raw materials. In addition, some countries have been able to invest heavily on the modern technology, an aspect that has made it possible for some car parts to be manufactured at very low costs. However, interlinking these production units with the main plant requires an efficient supply chain. As a result, the company’s global supply chain network has been critical in value creation, innovation, strengthening the company’s operations, thereby leading to the success of BMW Group. According to BMW Group, the firm has 12000 suppliers in 70 different countries. However, other multinational companies have found it hard to coordinate the activities of their suppliers. In the current competitive environment, the suppliers have become a critical component towards the success of any business (Vuskane 2010). The relationship between the company and its suppliers has become critical because this group dictates the presence of the product in the market. In some cases, the suppliers have held up some products in order to increase their prices. Furthermore, some suppliers have colluded with the competitors to create delays and remove the products in the market in order to give the competitors an upper hand in the market. This has made the customers to shift their loyalty towards other substitutes in the market. Automobile sector has become very competitive with companies such as Toyota, General Motors, Honda, etc having a large market share. Therefore, every customer is very important towards the success of the company. Nevertheless, the retention strategy by the company can only be achieved if there is a good coordination between the producer and the supplier. As a result, BMW has entered into a contract with its suppliers in order to ensure that they are legally bided. This is to prevent them from being manipulated by major competitors in the market in order to reduce the competitive advantage in the market. BMW success can be attributed to its ability to minimize and manage risks and utilizing opportunity while at the same time leveraging potential. The success of any business depends on how well it has been able to segment the local market. Dominating the local market provides the business with an opportunity to explore other markets across the world. Money collected in the local market is used to sustain subsidiaries that are struggling in competitive markets. For instance, BMW’s sales in German market were 47% of the total sales. This gives the company the confidence in the global market. However, even in the local market, the company has an effective supply chain. Nevertheless, it mainly relies on its internal suppliers who distribute the cars to the local population. This is to ensure that the units reach the customers on time (Weiler 2004). Furthermore, direct supply reduces the number of intermediaries who usually hikes the prices of the products in order to make immense profits. This move prevents the global brands from penetrating the local market using pricing strategies. Over the past two decades, a new global environment has evolved. Majority of the businesses have a global presence. This is through joint ventures, mergers, strategic alliances, or any other commitment strategy. This has enabled many companies to improve their financial base, an aspect that has enabled them to compete more effectively. In addition, through such strategies, the businesses have been able their supply chain. BMW has been able to capitalize on the foreign demand through developing strategic alliances with major logistic companies. In addition, the firm has been able to utilize the modern technology such as e-commerce in order to meet the demand. For instance, the firm has been able to enhance its B2B and B2C strategies which are meant to eliminate the need for intermediaries. This is through the use of the online platform to reach the customers directly. This has been significant in understanding the needs of the clients and making the products meet the specific needs of the loyal customers (Kouvelis 2011). This has been significant in retaining the customers. Furthermore, the company has been able to understand different factors that affect the consumption behaviors of the customers. Therefore, it has been making changes thereby, preventing the clients from shifting their focus towards the substitutes in the market. According to Kouvelis & Su (2007), strategic planning of the global facilities networks is complex and it mainly involves decisions on where to locate the factories, how to develop the suppliers for the plants, and other various interfaces along the global supply chain. While establishing a strong supply chain, it’s significant to focus on the market. This approach involves locating the entire supply chains in various markets. This is to enhance the level of proximity to markets where the products are sold. Decentralization of the supply chain is very significant in enabling the business to reach its customers who are located in different parts of the world. However, the company should also focus on the process. This ensures that each facility specializes in specific steps of the supply process. In order for BMW to improve its sustainability in the supplier network, it has developed some risks management and related processes (Hill & Jones 2009). In addition, the company has expanded its local sourcing. For instance, the company’s production plant in Germany gets approximately 40% of the direct purchasing volume from suppliers located from Germany (Ireland, Hoskisson, & Hitt 2008). This is to increase the local market’s confidence towards the firm’s products. This is because many of the Germans want to purchase products that have been produced locally and from a firm that participates in the growth of the local economy. Research questions What can SMEs learn from global brands such as BMW? How has BMW achieved its internationalization strategy? What supply chain strategies has BMW been using and how has it impacted on its performance? What are challenges that SMES face in trying to expand its market base? Objectives General Objective To understand the lessons that SMEs can learn from global brands such as BMW Specific Objectives To find out how BMW achieved its internationalization strategy To establish whether global supply chain strategies by BMW has impacted on its performance To identify challenges that SMEs face in trying to expand its market base Justification of the study Initially, businesses were constrained inside their local boundaries. However, with the removal of tariffs, companies have been able to expand their operations to different parts of the world. Governments have removed their control over businesses and allowed the forces of demand and supply to dictate the prices of the commodities in the market (Peng 2009). However, this has created an imbalance in the market. This is because multinational companies have invested heavily in the modern technology in order to reduce the costs of operations. As a result, they are able to offer the customers products and services at very low costs. Many of these companies have already segmented the market and created a barrier of entry for other investors. This has made it hard for small and medium enterprises to penetrate the global market. Many of these companies have opted to close down because they have been unable to attract the customers’’ attention towards their products and services (Hill & Jones 2009). However, some companies such as BMW have been able to break this barrier and become one of the best performing companies in the market. This study will therefore, try to identify the strategies that were used by this company in relation to global supply chain and lessons that can be learnt by other struggling businesses in the market. In addition, it will offer guidelines on how to integrate the supply chain in the operations of the business. The market has become dynamic with different challenges arising each day. Initially, the supply chain was easy to comprehend (Cook 2011). However, global supply chains have become more complex especially with the increasing number of multinational companies in the market. Therefore, in order to reach the target market, the company needs to establish strong supply chain networks which cannot be manipulated easily by the competitors. This study will identify how BMW was able to achieve its objectives and challenges that SMEs are likely to face in their attempt to penetrate the global market. The importance of this study will be to give recommendations to these businesses on how they can overcome these challenges and break the existing barriers of entry. Methodology In order to come up with an in-depth conclusion and detailed and well supported recommendations both quantitative and qualitative methods will be used in the study. Primary information and data will be conducted through interviews. For instance, the manager of BMW will offer an insight on how the company has been able to achieve success and challenges that the firm went through. This interview will be conducted through the telephone. In addition, some other top officials in the firm will be interviewed. The study will also utilize secondary sources. For instance, it will rely heavily on books, journals, newspapers, company’s magazines, and other library sources. This will make it possible to have an array of information to help in coming up with in-depth conclusion. Time Scale (Ghatt chart) Activity Week 1 Week 2 Week 3 Week 4 Week 5 Week 6 Designing the research problem and objectives Designing research methodology Literature review Data collection and analysis Report writing and submission Resources Majority of the secondary information are accessible at a fee. This will have a major impact on the success of the project. In addition, the company does not release their confidential data more easily because it might be used by the competitors against them. Furthermore, some employees might not be willing to provide information for the fear of being victimized. Evaluation This study will offer me with an opportunity to understand different issues related to business management. However, getting information from the top-level management will be a challenge although majority of them are willing to have a telephone interviews. However, there is a risk that the information provided is not accurate as the informants are likely to manipulate the information in order not to expose their pitfalls. References Cook, T. A. 2011. Compliance in today's global supply chain. Boca Raton, FL: CRC Press. Harrison, J. S., & St, J. C. 2004. Foundations in strategic management. Mason, OH: Thomson/South-Western. Hill, C. W., & Jones, G. R. 2009. Essentials of strategic management. Mason, OH: South-Western/Cengage Learning. Ireland, R. D., Hoskisson, R. E., & Hitt, M. A. 2008. Understanding business strategy: Concepts and cases. Mason, OH: South-Western Cengage Learning. Kouvelis, P. 2011. The handbook of integrated risk management in global supply chains. Hoboken, NJ: Wiley. Kouvelis, P., & Su, P. 2007. The structure of global supply chains. Boston: Now. Miltenburg, J. 2007. Manufacturing strategy: How to formulate and implement a winning plan. Portland, Or: Productivity Press. Peng, M. W. 2009. Global strategy. Mason, OH: South-Western/Cengage Learning. Vuskane, L. 2010. BMW Business Strategy - An Overview. München: GRIN Verlag GmbH. Weiler, M. 2004. A case analysis: Exploring customer attitudes on BMW. Norderstedt, Germany: GRIN Verlag. Read More