MAR 4156 - International Marketing

Analysis of the BMW Company on a Global Scale

Group 11 Members: Andrea Alvarez

Kristen Jameson

Ethan Jenkins

Paul Schmidt

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1. Introduction

Bayerische Motoren Werke is a German automobile, motorcycle and engine

manufacturing company. It was founded in 1917 and was originally Rapp Motorenwerke

aircraft manufacturing firm. By the end of World War I, the firm was forced to discontinue

aircraft engine production by the Versailles Armistice Treaty. Consequently, the firm’s

focus switched to motorcycle production in 1923. BMW became an automobile

manufacturer four years later when it purchased Fahrzeugfabrik Eisenach, which, at the

time, built Austin Sevens. BMW’s engineers progressed from building small seven-based

cars to six-cylinder luxury vehicles. BMW began production of the BMW 328 Sports car

in 1936. Until World War II BMW’s main product focus would be aircraft engines,

automobiles, and motorcycles. Like many other German manufacturer’s, BMW’s

production was interrupted when the Second World War began. During the war, BMW was

classified as German armaments and war materials manufacturer; they concentrated on

aircraft engines and only produced motorcycles on the side, they ceased automobile

production altogether. At this time, other plants were also opened in addition to those in

Munich and Eisenach. BMW also began building cars in Bavaria with the BMW 501

luxury saloon. The sales from these saloons were not large enough to be profitable, so to

offset this, the company was also building and selling Isettas. Still the profits from selling

these Isettas, or microcars, were not enough to keep out of bankruptcy. Post World War II

was a difficult period for BMW as it adjusted its plant and work force to the manufacturing

of consumer oriented products. The post-war era was an especially difficult time for the

company; BMW’s finances were in such a state that management considered selling the

company to its rival, Daimler Benz. But, fortunately for BMW, Herman Quandt agreed to

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increase his investment in the company from 30% to 50%, securing its financial position

and laying the foundation for investment in a series of new successful models and

technologies. Quandt was instrumental in turning the company around and his investments

allowed the company to expand. These models were said to have established a new

segment in the car market and are credited with putting the company back on a path to

success. By 1966, the Munich plant had reached its production capacity. The company

purchased Hans Glas GmbH with its factories in Dingolfing and Landshut rather than

building an entire new factory. Eberhard von Kuenheim arrival from Daimler-Benz was an

integral step in BMW’s transformation to becoming a global company. He presided over

the company as it transformed from having a European focus to a global one. Under von

Kuenheim car production will quadruple, motorcycle production triple, and turnover

increase by 18-fold. In 1972, BMW’s board of management decides to open up the first

foreign location of the modern day BMW group, the Rosslyn plant near Pretoria, South

Africa. A year later, BMW establishes its own sales company in France; many other

countries will follow their lead in the subsequent years, globalizing the company further.

To heighten the company’s position as a global player, the first BMW production facility in

the USA is opened in 1989. The plant in Spartanburg, South Carolina, exported to locations

all over the world. In the late 1990’s, BMW acquired the naming rights for Rolls-Royce

Motor Cars. The label is still held entirely by Volkswagen until 2003 when BMW took

over full rights and responsibility. BMW continued to expand as they took over Husq varna

Motorcycles, a Swedish motorcycle company that has been around since the early 1900s. In

2007 BMW adopted its “Strategy Number ONE” with its four pillars of “Growth”,

“Shaping the future”, “Profitability” and “Access to technology and customers”. BMW is

now a world-renowned brand, selling almost 1.7 million autos per year in over 100

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countries with manufacturing facilities in Germany, U.S., China, Austria, U.K., South

Africa, and India. In June of this year BMW was listed as the number one most reputable

company in the world in Forbes.com.

2. Global Marketing Mix Strategies

a. Pricing Strategies

There are several factors that affect prices of the same goods across different

countries. There are issues such as purchasing power parity, taxes, and import tariffs.

Global companies take these and other factors into consideration when determining how

much they charge for a product in these different countries.

The automobile industry takes into account these factors and much more. BMW

specifically takes on a perceived value approach or value-based pricing, meaning that

purchases are tied to emotions. The company enjoys a premium price in comparison to

other competitors because customers associate wealth with BMW aside from the

performance of the vehicle. Because of quality “German Engineering” BMW automobiles

are perceived as status symbols, meaning a customer’s willingness to pay is higher. This

willingness to pay, even though BMW has never been the lowest price competitor in the

market, still varies across countries.

For the purpose of an example of the prices in different countries, the BMW 3 series

sedan in India ranges from $66,349 to $68147, in Germany from $39,666 to $42596, in

China from $54,453 to 68,428, and in the USA starting at $36,500.

i. PESTEL Analysis

The PESTEL analysis is a tool used by global businesses to determine how the

environmental factors of a country influence a company. It is useful when a company

begins operations within a new region or country examines factors beyond its control.

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PESTEL analysis stands for Political, Economic, Social/Cultural, Technology,

Environmental and Legal factors.

Political factors are how much a government becomes involved in the economy.

Tax policy has a large impact on the automobile industry. For example, in 2002 the Indian

government formed an automotive policy in order to, “promote integrated, phased,

enduring and self-sustained growth of the Indian automotive industry.” This measure

increases the demand for an Indian auto component thus increases the price of foreign made

vehicles.

Economic factors include economic growth, exchange and inflation rates. This

affects the rate of growth for a company to and how fast they expand. The economic

recession in the US decreased spending on luxury goods. Also emerging economies in

developing countries like India and China are finding increased personal buying power.

The Indian economy has grown 8.5%. Increased level of household income leads to

increased purchases of automobiles.

Changing lifestyles in the US had lead to a decline in vehicle purchases. Younger

people especially, are more likely to spend money on smartphones, tablets, and laptops.

Due to this increased use of technology people can connect without being face to face and

therefore drive less. American customers also focus less on cars as status symbols and look

more to fuel efficiency as a top priority. They also choose to walk more in general and

flocking to mass transit as a means of transportation.

Technological factors in the auto industry like restriction on environmental

pollution have a great effect on companies like BMW where high performance vehicles

rather that fuel efficiency are their namesake. These restrictions especially in the EU clearly

affected the cost of capital for the German engineer.

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The increasing awareness of greenhouse gases and global warming has caused a

shift in taste to more eco-friendly cars like hybrids and electric cars. These environmental

factors are set up to altogether curb pollution in developing countries like China. “Of

course from the government’s point of view, we give up some growth, but to achieve better

health for all citizens, it is definitely worth it,” said Chen Haotian, the vice director of

Guangzhou’s top planning agency. Legal factors, like strict pollution policies in the US

markets, also dampen the automobile industry. This leads to an increase investment in

R&D seeking out new ways to increase fuel efficiency without losing quality or

compromising performance.

b. Distribution or Place Strategies

For nearly a decade now, BMW North America (Bavarian Motor Works) has

implemented the motto “The Ultimate Driving Machine” to describe their automobiles.

Their place in the upper echelon of luxury car companies has not always been cemented or

guaranteed. The history of the BMW Company as a force in international car sales is a long

and storied one. In 2008 and 2009 as the global economy began to come apart at the seams,

despite being a luxury car brand, BMW still managed to generate nearly half a billion in

profits for ‘08 and ‘09 combined. This type of success only comes when sales structures,

retail operations, and distributions plans are all working together flawlessly.

i. Channel Structures of BMW

The BMW motor group predominantly employs a channel structure for their automobile

sales in the global market. From the United States to London- the BMW motor group

utilizes authorized dealerships and sales groups to form a regional channel structure. This is

not to be confused with simple third party retail. These automotive groups and independent

dealerships still take their direction and are supervised directly by the BMW group. While

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dealerships have input on a wide range of avenues, the BMW Company has final say on

everything from inventory management to trim and packages offered. The regional channel

structure is the obvious choice for BMW (and most car companies) on the global market.

Direct sales to the public from the manufacturer would take up the majority of BMW’s

energies, time, and resources- so instead they focus their might on creating the best

automobile possible and delegating the sales to a different department. With this regional

channel sales structure, most of the automobiles bought from BMW globally are purchased

when customers physically walk into a dealership, interact with the sales agents, and

purchase a vehicle. However, on July 30th, 2012- BMW international announced they

intended to buck the global trend of regional channel sales structures and enter the direct

sales market. The BMW i3 and i8- two of their upcoming fully electric models will be sold

entirely online and backed up only by a roaming skeleton sales force. With a launch

tentatively scheduled for Q3 2013, this direct sales program will be the first of its kind for

BMW and will be considered a giant risk by most in the automotive community. This

strategy is actually a change in both retail operations and distribution strategy because

potential customers will be able to go into a showroom to physically see and test drive the

car, but the purchasing will be entirely online, and the delivery and customer support will

be provided at the customer’s home by the roaming BMW agent. This new strategy is

possibly significant because it expands their distribution reach dramatically. As it stands

now, if someone wanted to purchase a BMW- they would first need to locate a dealership

or showroom. For many customers in rural areas or countries where BMW may not have

dealerships, the purchasing process would likely require a plane ticket. With most people

unlikely to fly to a new city or country just to buy a car this new online purchasing plan and

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distribution strategy truly opens up the entire globe to potential BMW customers.

ii. PESTEL Analysis

Perhaps BMW international’s decision to shake up their regional sales channels and

distribution programs can be best flushed out through PESTEL analysis of the factors

influencing both their sales and manufacturing. While BMW has managed to remain

profitable through the recent global economic downturn, there is little doubt the recession

has caused many companies to rethink their sales structures. With most of their models

built and designed in Europe, the “Political” element of the PESTEL system plays but a

small role in their sales structure. Beyond the augmented European tax po licy, which

contributes significantly to BMW’s overhead, there are few political factors that truly affect

the company.

The second PESTEL element definitely plays a significant role in influencing the

channel structures and distribution plans of BMW. The Economic factors affecting the

BMW motor group are numerous and complex. First, because BMW is considered a luxury

brand- available discretionary income in accounts of potential customers is a must. With the

global economy just now coming out of a recession, it is simple to see while a dip in sales

combined with a steadily rising overhead produced profit results that significantly deviated

from the BMW’s normal annual reports. It is these global economic factors, which perhaps

inspired the idea of BMW’s foray into direct sales (limiting overhead by selling directly to

consumers without dealerships as a middleman).

Social factors through PESTEL analysis appear to be a non-factor for BMW.

Their marketing team has done an excellent job in portraying the BMW brand as a luxury

for people in all walks of life. In contrast to the limited impact by social factors-

technological factors impacting BMW’s channel structure may be the very reason for them

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altering it. With the widespread proliferation of Internet access across the globe, companies

have begun to re-think many of their sales structures. BMW turning to the Internet as their

main purchasing medium would signal a marked shift in their sales and distribution

program. The environmental factors are also a significant player in the evolution of BMW

International. The increase in global attention to climate change has spurred the focus of

R&D in automobile companies toward electric and more efficient vehicles; BMW is no

exception. The announcement of the i3 and i8 models- both completely electric vehicles,

signals a shift in overall approach. The global environmental indicators have become too

strong for the masses to ignore and rising costs of petroleum have car manufactures

searching for a panacea to the painful problem of paying for petroleum.

c. Promotion Strategies

BMW spends billions of dollars per year advertising around the globe promoting their

products. Their focus is to embed BMW’s superiority into the minds of consumers. They

encourage the core values of their brand: technology, quality, performance, and exclusivity.

Since it’s founding, BMW’s success has relied on their consistent marketing policy, which

is the niche marketing strategy. There have been years of environmental, technological, and

economic changes since BMW’s humble beginnings, and they have been steadily

promoting the value of the cars they build adapting to all changes in society.

i. Advertising Strategies

The main markets for BMW have been Europe, Japan, the United States, South Africa,

and the Pacific region. Almost half of their total car sales come from Germany and the

United States. This is a problem because BMW’s market in Europe and the United States is

becoming more and more saturated every year.

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BMW has used the same advertising agency, WCRS, since 1979. Their promotions

include: TV spots, print advertisements, mega-posters, radio spots, and events. They have

stayed consistent in their advertising throughout the world promoting their vehicles to be a

cut above their competitors. To ensure their success they have developed the 4 C’s:

Customer Solution, Customer Cost, Convenience, and Communication. BMW believes its

important to serve the customers needs, meet the accepted price in each region, allow for

consumers to purchase their cars where ever they live, and provide 24 hour assistance to all

BMW customers.

Social media is the fastest growing outlet for advertising and promotion because it

allows companies to reach markets all over the world at alarming speeds. BMW recently

launched “viral films” on the Internet that promote their products’ excellence while at the

same time improving the company’s image.

BMW found profound success when they launched their advertising campaign in 1975

known as “The Ultimate Driving Machine”. At the center of this campaign is the idea that

BMW’s cars are high-performance vehicles reserved for successful professionals that want

a sense of superiority. Another successful strategy BMW used was product placement,

when they promoted their automobiles in four James Bond movies: Octopussy, GoldenEye,

Tomorrow Never Dies, and The World is Not Enough. These films were extremely

successful and gave BMW lots of worldwide publicity.

BMW has a reputation for pulling pranks to get publicity. Every April Fools day the

British Press publishes a scheme by BMW to trick readers. Recently, they ran

announcements stating they will brand their cars to their customer’s political party

affiliation.

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What makes BMW unique is they are a global company that consistently promotes their

products around the world using the same simple, universal theme: BMW is the “Ultimate

Driving Machine”.

ii. Public Relations Strategies

Public Relations allows companies to promote their products and improve their image

in the minds of consumers. In this global market, it is very important for BMW to keep its

superior image and likability. They have greatly increased the number of auto shows and

special events that focus on improving their image.

If you’re a large company, one big way to garner the public’s good will is to be

environmentally friendly. BMW is a member of the U.S. Environmental Protection

Agency. They work hard to develop engines that don’t pollute the environment. Currently,

they’re developing new fuels electric power, hybrid power, and hydrogen powered cars.

Recently BMW has increased its interest in public relations. For example, they are now

official automotive sponsors of the 2012 Olympics in London. The Olympic games are

honored and revered all over the world. Any company associated with the Olympic games

is certainly going to improve their image.

iii. Addressing Legal and Social Issues

BMW does not have to concern itself with the legal and social issues in the western

world. However, in India where there is a social cast system and the Middle East where

there are strict religious principles, BMW has made slight changes in their strategy.

Since 2010 BMW in India has been expanding rapidly by building manufacturing

plants, increasing promotion, and hiring more employees. They have changed their

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marketing strategies to promote family and fuel efficient cars that will counter the “Anti

flaunting mentality” Indians experience in their social system.

In the Middle East, BMW advertises by being sensitive to the religious rules in

regulations in strict Muslim countries. In Saudi Arabia, women aren’t allowed to drive. No

women are shown in BMW Ad’s unless they are sufficiently covered (no skin).

Overall, BMW’s strategy stays the same. They aggressively promote their machines to

be high class- automobiles built for and to be driven by elite professionals.

d. Product Strategies

i. Product Design

BMW’s products have emerged in the global automobile market as the prominent

leader in luxury. The company’s product offerings pertain exclusively to affluent

professionals seeking high-end quality coupled with performance. This combination gives

way to a product that demonstrates features yielding “extreme driving pleasure.” BMW

differentiates its product offerings by segmenting potential affluent customers; it does so by

creating a myriad of models catering to the unique tastes of different consumers in the

luxury market.

BMW’s product portfolio combines uniqueness and simplicity while reaching every

corner of their target market. The core of BMW’s automotive offerings is characterized by

the 1-7 Series. Each of the seven series offers different body styles, performance standards,

and driving experiences. BMW has created an elementary system of labeling each of its

models. An illustration of this system can be seen in the 328i Model; this simply means

that this particular vehicle is contained within the “3-Series” and its engine size is 2.8

Liters. Outside of its core offering (the 1-7 Series), BMW offers vehicles that appeal to

niche segments of this market, demanding a somewhat more specific product. The “X

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Model” offers a high performance SUV that appeals to affluent families with children

looking for a vehicle that caters to the family environment. The “Z Model” is a sport

roadster, which presents common BMW luxury while emphasizing speed and traction. The

“M Models” are modifications of existing BMW models, which contain performance (such

as engine and transmission) enhancements for the typical BMW customer with a taste for

the extraordinary. BMW also offers a series of motorcycles, from those made for all-terrain

to highway cruisers.

ii. Branding Strategies

BMW‘s international markets have increased steadily for the past several years. When

presenting their vast portfolio to foreign customers, BMW uses standardization and

extension. Their strategy of identifying their products (like the 328i series) is a universal

system that can be understood across cultural boundaries. This BMW has experienced

immense success with this labeling system and will stand by it moving into the future.

BMW’s places great value on the equity and image of their globa l brand; BMW’s

vehicles all act as extensions of this prestigious brand around the world. Their branding

strategy relates directly to the life-cycle of their products. The average BMW model

demonstrates a life cycle of seven years. BMW makes an attempt to keep its products in the

intro and growth stage of the product life-cycle by using a vigorous rebranding strategy.

Every three years BMW adds “meaningful features” to its existing models, which

constantly keeps the brand exciting and youthful. BMW will go to extensive lengths to

postpone the declination stage of its products, and if a product does begin to enter this

stage, BMW responds with the creation of a new model.

BMW’s brand has sent a quality signal to consumers around the world for many years.

This quality signal was born out of BMW’s unceasing effort to bolster the image and repute

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of its products as well as its brand. BMW’s products demonstrate superiority in intangible,

as well as, tangible attributes. The superior performance and engineering excellence of

every BMW yields an unspoken level of luxury that is synonymous with the BMW brand.

Aside from BMW’s products, they have also bolstered their brand through co-branding and

sub-branding. An example of BMW’s co-branding strategy can be seen in their partnership

with American Express to create a BMW credit card. BMW has also bolstered their status

as a socially responsible brand by creating the sub-brand “BMW i”; this sub-brand will

house several eco-vehicles such as the MGV (MegaCity Vehicle) which runs solely on

electricity. This series of strategic moves illustrates BMW’s concern with crafting and

maintaining a brand that has been the face of automotive excellence for many years.

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pitch/230991/>

Bmw brand study. In (2010). StealingShare Inc.. Retrieved from

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<http://www.ameinfo.com/89471.html>

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<http://www.greencarreports.com/news/1078075_bmw-i3-i8-will-be-first-bmws-to-

sell-online>

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