BMW’s Business Strategy
For Indian Market
By
Swanand Pashankar
SIMS Ex-MBA 2009-12
Business Strategy
22-Feb-2011
BMW – Global leader in premium car sales
BMW Group, headquartered in Munich, Germany, is one of the most successful multi
brand premium automobile manufacturers in the world. The company manufactures,
distributes and sells passenger cars (including Sedans, Coupes, and Convertibles etc)
and motorcycles. BMW operates three business segments namely: Automobiles,
Motorcycles and Financial Services. BMW is the parent company of the Mini and Rolls-
Royce car brands, and, formerly, Rover (car)/Rover. The company's slogans in English
are "The Ultimate Driving Machine" and "Sheer Driving Pleasure". The company
produces, and markets, a varied range of higher end sporty cars and motorcycles. BMW
has also manufactured the first passenger car running on hydrogen ready for common
use, although the production figures are limited by the lack of a respective filling station
net.
In addition to cars and motorcycles, BMW operates an aircraft engine division under the
brand name of Rolls Royce. The company has worldwide subsidiaries and
manufacturing plants in Germany, Austria, the UK, the USA, Mexico, Brazil, South
Africa, Egypt, Thailand, Malaysia, Indonesia, the Philippines and Vietnam. BMW Group
is comprises of many segments within its vast portfolio but I would be only concentrating
on Automobiles. BMW group are focused on fabricating a variety of tangible products,
and also the group has many intangible financial services. The BMW Group’s
automotive which I am more interested in this easy is portion of their portfolio consists of
the three premium brands: BMW, MINI, and Rolls-Royce of which I would be more only
looking at BMW and would also demonstrate their marketing. BMW is supported by 11
different model series which are: BMW C1, BMW 1 series, BMW 3 series, BMW 5
series, BMW 6 series, and BMW 7 series, BMW X 3, BMW X 5, BMW X 6 and the BMW
Z4, BMW M5, BMW M6, and BMW Z4 M.
BMW India
Headquartered in Gurgaon (National Capital Region), BMW India is a 100% subsidiary
of the BMW Group. Till September 2010, BMW Group has invested 1.1 billion Indian
Rupees. BMW Group’s investment in India will be increased to 1.8 billion Indian Rupees
by the end of 2012. The wide range of BMW activities in India include the establishment
of a production plant in Chennai (Tamil Nadu) and development of a dealer organization
across major metropolitan centres of the country.
On 29 March 2007, BMW India officially opened its production plant in Chennai. The
BMW Plant Chennai produces the BMW 3 Series, BMW 5 Series sedans and the BMW
X1 in petrol and diesel variants.
The BMW Plant Chennai has the capacity to produce 8000 units per year on a single
shift basis. BMW India will employ around 400 people by end of 2010. Up to 1200 jobs
will be created in the dealer and service network by end of 2012.
BMW India has set a decisive course in India by setting up BMW dealerships of
international standards across all metropolitan centres of the country. BMW India has
set very high standards in service quality and customer care in India. The present
dealer network covers 95% of the sales potential of the premium car segment in India.
In 2011, BMW India will aggressively expand its dealer network by increasing the
number of outlets to 22 across major metropolitan centres and emerging markets in
India (from the present 20 outlets).
Currently, BMW India is present at 20 locations in the Indian market; BMW Studio (New
Delhi), Deutschen Motoren (New Delhi), Deutschen Motoren (West Delhi), Bird
Automotive (Gurgaon, NCR ), Bird Automotive (Ambience Mall, Gurgaon, NCR), Navnit
Motors (Mumbai), Infinity Cars (South Mumbai), Infinity Cars (Indore), Krishna
Automobiles (Chandigarh), Navnit Motors (Bangalore), Navnit Motors City Showroom
(Bangalore), KUN Exclusive (Hyderabad), KUN Exclusive (Chennai), Bavaria Motors
(Pune), OSL Prestige (Kolkata), OSL Prestige (Bhubaneswar), Parsoli Motors
(Ahmedabad), Platino Classic (Kochi), KUN Exclusive (Coimbatore), Sanghi Classic
(Jaipur).
Current models
BMW 3-Series (E90)
The 1 Series, launched in 2004, is BMW's smallest car, and is available in
coupe/convertible (E82/E88) and hatchback (E81/E87) forms. The 3 Series, a compact
executive car manufactured since model year 1975, is currently in its fifth generation
(E90); models include the sport sedan (E90), station wagon (E91), coupe (E92), and
convertible (E93). The 5 Series is a mid-size executive car, available in sedan (E60)
and station wagon (E61) forms. The 5 Series Gran Turismo (F07), beginning in 2010,
will create a segment between station wagons and crossover SUV.
BMW 7-Series (F01)
BMW's full-size flagship executive sedan is the 7 Series. Typically, BMW introduces
many of their innovations first in the 7 Series, such as the somewhat controversial iDrive
system. The 7 Series Hydrogen, featuring one of the world's first hydrogen fueled
internal combustion engines, is fueled by liquid hydrogen and emits only clean water
vapor. The latest generation (F01) debuted in 2009. Based on the 5 Series' platform, the
6 Series is BMW's grand touring luxury sport coupe/convertible (E63/E64). A 2-seater
roadster and coupe which succeeded the Z3, the Z4 (E85) has been sold since 2002.
BMW X3 SUV (E83)
The X3 (E83), BMW's first crossover SUV (called SAV or "Sports Activity Vehicle" by
BMW) debuted in 2003 and is based on the E46/16 3 Series platform. Marketed in
Europe as an off-roader, it benefits from BMW's xDrive all-wheel drive system. The all-
wheel drive X5 (E70) is a mid-size luxury SUV (SAV) sold by BMW since 2000. A 4-seat
crossover SUV released by BMW in December 2007, the X6 is marketed as a "Sports
Activity Coupe" (SAC) by BMW. The upcoming X1 extends the BMW Sports Activity
Series model lineup.
1 Series (E81) (2004–present) Hatchback, coupe and convertible
3 Series (E90) (2005–present) Sedan, coupe, convertible and wagon
5 Series (F10) (2010–present) Sedan and Wagon
5 Series Gran Turismo (2009–present) Progressive Activity Sedan
6 Series (E63) (2003–present) Coupe and convertible
7 Series (F01) (2008–present) Sedan
X1 (2009–present) Compact Crossover SUV/Sports Activity Vehicle (SAV)
X3 (F25) (2010–present) Compact Crossover SUV/Sports Activity Vehicle (SAV)
X5 (E70) (2006–present) Compact Crossover SUV/Sports Activity Vehicle (SAV)
X6 (2008–present) Sports Activity Coupe
Z4 (E89) (2009–present) Sports Roadster
BMW Strategies
The success of BMW in Europe and United States lies in their changing management
strategies from time to time. They are keen towards their management policies.
Whenever they find any change in the economy, technique, production etc, they also
change their strategies and base them according to the new changes. Some times their
strategies are based on the future i.e. environmental impact, developing third generation
technology for their machines.
The major reason for this strategy change is to avoid possible trade restrictions and
exchange rate fluctuations. With this uniqueness in their strategies, they succeeded in
their sales and target the maximum sales. In the early 1980s, at the time of global
boom, BMW laid out their policy for the production of luxury cars only. They decided to
put more efforts on luxury and comfort which separates them from their competitors.
They produce 5 lines of cars: 1, 3, 5, 6 and 7 series.
The Government of India’s new policy on automobiles announced in Jun 1993 attracted
a large number of automobile companies here. According to this policy heavy subsidy
would be provided to the automobile manufacturers. There were three existing Indian
companies, Hindustan Automobiles, Premiere Automobiles and Telco and one Indo-
Japanese venture - Maruti. Maruti was by far the biggest player with 70% of the market
share.
This was an important step in company’s expansion in Asia. With this strategy, BMW
could also hold into Chinese market. BMW’s long term goal is to make Asia its
stronghold and the entry into the Indian market with locally made models was an
important step towards this end. In 2007, the luxury car market was estimated at around
10,000 cars per year and was expected to double in next 4-5 years.
This favorable duty structure has put BMW at relative advantage and the company can
expect to entice the Indian buyers who will be able to buy the premium car at a much
lower price. Another reason why BMW chose to take the plunge in India rather than
China is due to its foreign investment policy. China would provide much more hostile
environment for BMW to start a new setup. The production and sales subsidiary is
owned 100% by BMW group. In addition to operating the assembly plant and importing
BMW cars, the task of the subsidiary has been to develop the dealership network,
decide pricing and product strategy as well as marketing and after sales.
War with Mercedes in India
The fight between these two German giants in the Indian context is an interesting one.
Mercedes is a silent, soft spoken car that immediately conjures up images of old money.
BMW, on the other hand, is flashy and makes you sit up and take notice. Right now, it
looks like young India likes to rev things up.
BMW zoomed past Mercedes for the first time in India in January 2009 with sales of 270
cars compared to the Merc’s paltry 79. And it has steadily moved ahead, holding on to
the top spot selling a total of 2,008 cars until July compared to Mercedes’ 1,606.
While the lack of a product in a major growing segment slowed down Mercedes, BMW
swerved into this opportunity. The company recognised this handicap in Mercedes’
product portfolio quite early in 2008 and has since turbo-charged the sales of its 5 and 6
Series models; a strategy that has worked wonders for BMW.
Mercedes’ sales also suffered because of the lack luster performance of its new M class
sports utility vehicle (SUV) which was launched in March this year. The new M class
SUV was supposed to snatch back market share but it has failed to generate big
volumes. In comparison, BMW’s SUV offerings, the X3 and the X5, have clocked good
numbers.
Another reason for the shift in leadership is that BMW brings something new to the
table. BMW brings in a fresher look and brand experience and has more appeal
amongst the younger set while Mercedes is associated more with the old customer
segment.
Distinctive Features of BMW’s Strategy for India
1. Aggressive product strategy:
BMW’s success in such a short span of 2 years in India can be ascribed to the
attention of details and aggressive product strategy. Before BMW, Mercedes
officials were content to coast along on the back of their 15 year old monopoly of
luxury segment in India.
Peter Kronschnabl, the president of BMW India was quick to figure out that
Mercedes lacked products in a major growing segment. BMW swerved into this
opportunity. The company recognized this handicap in Mercedes’ product
portfolio quite early in 2008 and has since turbo-charged the sales of its 5 and 6
Series models; a strategy that has worked wonders for BMW.
2. Wider product offerings:
No other company than BMW offers such a wide spectrum in its product offering
in India. Simply by looking at the image below, we will understand the reason of
BMW’s success in short time in India.
[Source: BMW India’s official website]
In sedan segment, BMW offers four series, namely 3, 5, 6 and 7; while in SUV
segment, series X is on offering. X1, X5 and X6 are already making the
pavements for BMW in SUV segment. Series Z4 and M are adding x-factor to the
BMW’s portfolio thereby attracting newer and younger customers in India in the
luxury segment.
3. Young and fresh image:
BMW brings in a fresher look and brand experience and has more appeal
amongst the younger set while Mercedes is associated more with the old
customer segment. Mercedes is a silent, soft spoken car that immediately
conjures up images of old money. BMW, on the other hand, is flashy and makes
you sit up and take notice. Right now, it looks like young India likes to rev things
up.
4. Strong dealership network:
Prior to BMW’s entry in country, dealerships were mainly used as parking spaces
and all marketing events would take place at hotels or cars would be sent to the
prospective customers’ house.
BMW changed this scene by starting to establish a strong network of dealers in
Tier I cities of India. Now, BMW has also focused on Tier II cities and is
expecting to sell 30-40 cars in each of these cities every year.
Innovations:
Here are some innovative ideas BMW has brought to the tables for its customers.
1. BMW Online
BMW has launched an online shop where the customers can buy apparels,
accessories and gifts. Accessories specific to makes and models are also
available. It gives an enriched experience to the customers
2. Clean Energy
In the long term, hydrogen will replace petrol: that is the BMW CleanEnergy idea.
However, hydrogen fuelling facilities are currently not widely available. This is
why BMW CleanEnergy vehicles have both hydrogen and petrol tank. If one of
the tanks is empty, the bivalent BMW engine unit switches over automatically to
the other fuel system.
Together with a number of partners, BMW opened the first fully automatic and
public hydrogen filling station at Munich airport in 1999. In autumn of 2004, the
world's largest hydrogen filling station went into service in Berlin through the
Clean Energy Partnership. Important experience is gathered at this station
regarding the production, delivery, storage and filling during everyday operations.
3. BMW Driver Training:
Introduced in 1977, the BMW Driver Training course was the first of its kind: a
special course, initiated by an automotive manufacturer, to improve the skills,
reactions and awareness of drivers. Today, the BMW Driver Training course
comprises a broad range of specialized programs and workshops, tailor-made to
your individual driving needs.
4. BMW Financial Services
Financial service is a key factor for success in today's mobile world. The ideal
partner for private and corporate customers, BMW Financial Services offer an
extensive product portfolio which supplies expert information regarding financing
and leasing, insurance, asset management, dealer financing and company car
pools.
BMW Financial Services India is seeking a license to operate as a Non-Banking
Finance Company (NBFC) in India to offer solutions for Retail automobile
financing for BMW customers and multi make customers, Financing for Fleet
Owners and Commercial Financing for BMW Dealerships and multi make
dealerships. BMW Financial Services India will continue to offer Insurance
solutions to its customers through its cooperation partner.
Conclusion
BMW entered Indian market in last decade with the intent to form Asia as its stronghold.
The long term strategic plan of BMW was to be the premium luxury car producer in
India. With the attention to details in designing aggressive product strategy, wider
market offerings, the company was successful in achieving this goal in a surprisingly
short time; beating its arch-rival BMW in less than 2 years.
The company got successful in positioning itself as a young and dynamic brand in the
views of Indian customers. The stronger dealership network in tier I and tier II cities laid
the foundation for reaching out to the customers. The success BMW is enjoying
currently in India can be largely ascribed to the clear vision, detailed planning and
immaculate execution of those plans.
References
1. http://www.bmw.in/in/en/
2. http://www.thehindubusinessline.in/
3. http://economictimes.indiatimes.com/news/news-by-industry/auto/automobiles
4. http://ibnlive.in.com/news/
