BMW automobiles Case Study 3

Case Study from Gerry Johnson, Kevan Scholes, Richard Whittington, (2011), Exploring Corporate Strategy, FT Prentice Hall, 8th edition

Introduction• A Prominent German automobile manufacturer• BMW Group - Diversified operations - automobiles, motor

cycles, Software Products, Financial services and Lifestyle• Owns strongest premium brands in the automobile industry

(BMW, MINI and Rolls-Royce)• Corporate Strategy -"Strategy Number ONE" - become the

world's leading provider of premium products and premium services for individual mobility

• Case is about the automobile industry in mid 2000 and BMW's road to sustain success in 2000s.

• Case mainly focused on High performance saloon automobiles from BMW.

PESTLE Factors• Political• Economic

– Power towards Asian from Europe (Brice countries)– Exchange rate fluctuation– Cheap labor cost from Asian countries (China)

• Social – Life style changes

• Legal – Tax registration affects on profitability

• Environment– From Consumerism to environment awareness, protection

Key Take out : The industry dynamics are changed from after 2nd world war era and today’s context. So PESTLE factors have affected to the customers expectations and

decision making process.

5 force analysis• Potential entrants- High

– There is a significant threat from new entrance.(through JV and alliances)

• Product substitute – High– Segment specific substitutes are high,

• Power of buyers – High – Many choice, Over supply in the market, customers are benefited

from competition, (Zero % lease, insurance

• Power of Suppliers – Moderate– Backward integration is possible for the manufacturers but suppliers

produce unique items to selected manufactures only

Rivalry

New Entry

Buyers

Substitute

Suppliers

Completive Rivalry – HighThreat of new entrance, Industry is in matured stage, low growth , quality is not a differentiation option and exist is difficult

A Strategic Group Map for the Automotive Industry (1990)Strategic Mapping

Product Line Diversification/Portfolio

Perc

eive

d V

alue

/Qua

lity

Low

Med

ium

Hig

h

Special Prod. Mass Prod./Limited Mass Prod./Full

Ford

Jaguar

RollsRoyce

Volvo

Toyota

Mercedes

Nissan

Honda

LexusAudi

BMW

Key takeout: Equal size of players in SBU level who closely compete each other. Each players success depends on degree of responsiveness to the customers’ value

creations & adopting to the new business environment

SBU

Success of BMW

Core Competencies

• Brand: associate with quality high performance, luxury & driving dynamics

• High qualified labor force

• Control on supply chain & relationship

• Flexibility of production facilities & size of the facilities.

Critical Success Factors

• Brand reputation• Customer loyalty• Global Positioning -

Effective communication to differentiate the brand/product in develop & developing markets

• Effective distribution• Sound management

of sales• Product portfolio

Sustainable Competitive Advantage

• Continuous value creation to the customer to meet changing value preposition

• Strategic change to adopt to the new business environment & competitiveness

Supportive Activity

Firm InfrastructureHuman Resource Management

Technology

Procument

Primary Activities

Inbound Logistics Operations Outbound

LogisticsMarketing

& Sales Service

Margin

Margin

BMW known as a premium brand and struggling in sustain competitive advantage

Strategy Clock -• Differentiation –With price premium – perceived

added value sufficient to bear price premium

• Differentiation platform changing responding to the environment & competitiveness– Quality is no more a differentiate

factor, – emotional bond, manage brand as a

status symbol by responding changing customer preference

4

Concerns of BMW strategies • Continuous Product development – Fast NPD process could loose the focus and low quality

products which can lead to brand image deterioration

• Product portfolio• Image Cannibalization among different series of models• Flattering of the features to cost reduction of different

model due to competitive pressure

• Future survival due to Small size of the company• Decision on alliance & take over• Failed on Land Rover• New alliance with Lexsus ?

Possible Recommendation • More focus on emerging countries without

deteriorating the brand image• Get the cost advantage through 1 series and

X3 series without cannibalizing expensive model

• High global presence to reduce currency risk• Strategic alliances of competitors

Q&A

Thank you