Project
on
BMW
Global Strategy and Marketing Opportunities
SUBMITTED TO: PRO. MUKESH PORWAL
SUBMITTED BY: TRIPURARI RASTOGI PGDM 2010-12
Company History & profile:Bayerische Motoren Werke AG (BMW), (literally English: Bavarian Motor Works) is a German automobile, motorcycle and engine manufactsuring company founded in 1916. It also owns and produces the Mini brand, and is the parent company of Rolls-Royce Motor Cars. BMW produces motorcycles under BMW Motorrad and Husqvarna brands. BMW is known for its performance and luxury vehicles, and is a global leader in premium car sales . BMW entered existence as a business entity following a restructuring of the Rapp Motorenwerke aircraft engine manufacturing firm in 1917. After the end of World War I in 1918, BMW was forced to cease aircraft engine production by the terms of the Versailles Armistice Treaty. The company consequently shifted to motorcycle production in 1923 once the restrictions of the treaty started to be lifted, followed by automobiles in 192829.
Type Industry
Founded Founder(s) Headquarters Area served Key people
Products
The circular blue and white BMW logo or roundel is Revenue (2009) portrayed by BMW as the movement of an aircraft propeller, Operating income 289 million (2009) to signify the white blades cutting through the blue sky an Profit 204 million (2009) interpretation that BMW adopted for convenience in 1929, Employees 96,230 (2009) twelve years after the roundel was created.[ The emblem Subsidiaries Rolls-Royce Motor evolved from the circular Rapp Motorenwerke company Cars logo, from which the BMW company grew, combined with BMW Motorrad the blue and white colors of the flag of Bavaria, reversed to Husqvarna produce the BMW roundel. However, the origin of the logo Website Bmw.com being based on the movement of a propeller is in dispute, according to an article recently posted by the New York Times, quoting "At the BMW Museum in Munich, Anne Schmidt-Possiwal, explained that the blue-and-white company logo did not represent a spinning propeller, but was meant to show the colors of the Free State of Bavaria." By the year 1959, the automotive division of BMW was in financial difficulties and a shareholders meeting was held to decide whether to go into liquidation or find a way of carrying on. It was decided to carry on and to try to cash in on the current economy car boom enjoyed so successfully by some of Germany's ex-aircraft manufacturers such as Messerschmitt and Heinkel. The rights to manufacture the Italian Iso Isetta were bought; the tiny cars themselves were to be powered by a modified form of BMW's own motorcycle engine. This was moderately successful and helped the company get back on its feet. The controlling majority shareholder of the BMW Aktiengesellschaft since 1959 is the Quandt family, which owns about 46% of the stock. The rest is in public float.
Aktiengesellschaft Automotive industry 1916 Franz Josef Popp Munich, Germany Worldwide Norbert Reithofer (CEO), Joachim Milberg (Chairman of the supervisory board) Automobiles, motorcycles, bicycles 50.68 billion
Models
Assembled/Manufactured Locally BMW 3 Series (320i, 330i, 320d Highline and 320d Corporate Edition) BMW 5 Series (523i, 520d, 525d and 530d) BMW X1 (sDrive 18i, sDrive 20d, sDrive 20d Exclusive) Imported BMW 5 Series (535i CBU) BMW Gran Turismo (Limited Edition) BMW 6 Series (650i Coup and 650i Convertibl BMW 7 Series (740Li, 750Li, 760Li and 730Ld) BMW X5 (X5 xDrive50i and X5 xDrive30d) BMW X6 (X6 xDrive50i and X6 xDrive30d) BMW X6 M BMW M3 (Coup and Convertible) BMW M6 (Coup and Convertible) BMW Z4 (sDrive35i Roadster)
BMW Identifying Market Opportunities
A critical factor in BMWs success is its ability to gather new ideas, pick the best ones and implement them swiftly through an integrated innovation process. The BMW innovation process has three stages. The first stage is innovation research and this is accomplished through technology exploration and their virtual innovation agency. The second stage is management which translates these new ideas to opportunities and the third stage is innovation transfer, where the opportunities are translated to concepts. The focus here is on the first two stages where ideas are generated and translated into market opportunities.
Idea Generation
Satellites BMW has different satellites around the world that are strategically placed to ensure that BMW is quick to identify new technologies and market trends. BMWs aim is to understand market opportunities by participating in them rather than by simply reviewing market research. For example, the Palo Alto Center is strategically placed in one of the most high tech regions in the world and engineers working there have access to the geniuses who are developing advanced hardware and software developments, and work with these contacts to create new automobile component products.
Competition
Each year, 10 BMW employees are selected to travelto Palo Alto to unearth the next breakthrough in automotive innovation. Cross-functional teams of three, have 90 days to identify, explore, and develop new projects.
Virtual Innovation Agency
BMW gathers ideas from external sources through Virtual Innovation Agency (VIA), which is an Internet portal created for developing new relationships with potential external innovators who may be individuals, small companies, or large companies from other business centers and research centers. Those who have ideas that could can enter them on the website. If BMW is interested in implementing the idea appropriate personnel contacts are provided. The innovator is then reimbursed for his idea.
Opportunity Generation
Structure BMW uses six, innovation areas for opportunity identification. This set of areas is a center for defining market opportunities and managing ideas and each area is focused on a particular customer-driven need. The fields are as follows: experience dynamics, convenience and service, safety and security, concept cars and experimental vehicles, aesthetics and value and environmental acceptability. Each innovation area is coupled with an element of the companys business strategy that is established by an innovation strategy board consisting of BMW board members, corporate strategists, and innovation managers. For each field, there is an Innovation Field Manager(IFM) and an Innovation Field Council (IFC) and it is the councils role to interpret the directives of the innovation strategy board into needs and opportunities for new products and components. The overarching aim of these areas is to provide focus and decision traction to prioritize ideas and opportunity areas.
Feedback Loop
The innovation team in Munich manages the innovation portfolio. This portfolio tracks ideas from generation through completed projects and then monitors the projects results once they are implemented. This helps BMW to track performance of its process.
What makes BMW excel ?
BMW excels for the following major reasons. They have access to a huge pool of ideas both within the company and external to the company and they make sure that the culture and processes that they provide, foster continued idea generation. Their process ensures that ideas that align with their strategy and with particular customer needs are categorized and filtered. Also, the feeback loop tracks performance of the process and allows BMW to make continuous tweaks to the process.
International strategy
German automaker BMW plans to make smaller, lighter more fuel-efficient vehicles for the global market, but indications are they still expect a 10 percent growth in premium vehicles in the U.S. in the next two years. Let's hope they're right! Situation BMW AG thinking small in bid to claim bigger chunk of growing global luxury vehicle market To tap into global opportunities, BMW's future vehicles must be smaller, lighter, fuel-efficient, and represent better value Premium no longer defined by size of vehicle or number of cylinders, said Jim O'Donnell, president of BMW of North America BMW prepared to make necessary investment in plants and products strives to keep competitive w/ Mercedes-Benz and Lexus BMW extending reach to emerging markets, but has no intention of giving up ground in Europe or North America O'Donnell expects sales of premium vehicles to grow 10% in US over next 2 years
Significant Points 90% of people were new to brand last year, as world creating new class of affluent customers, O'Donnell said By 2015, China, India, and 8 other Asian markets will have 70M affluent households w/ $600B in discretionary spending Europe will remain BMWs largest market, followed by China, and US Classic vehicles like 7-Series will continue to have future in BMW's lineup But portfolio must evolve into smaller vehicles to meet changing global needs, O'Donnell said Future vehicles could be slotted below 1-Series, and BMW may add X1 crossover next year
STP OF BMW
SEGMENTATION
Bayerische Motoren Werke Aktiengesells chaft (BMW group) manufactures automobiles and motorcycles worldwide. The activities of the BMW Group are divided into three segments that include the Automobiles, the Motorcycles, and the Financial Services segments. The Automobiles segment The Automobiles segment engages in the development, manufacture, assembly, and sale of cars and off-road vehicles, under the brands BMW, MINI and RollsRoyce, as well as spare parts and accessories. BMW and MINI brand products are sold in Germany through branches of BMW AG and by independent, authorized dealers. Rolls-Royce brand vehicles are sold in the USA through a subsidiary company and elsewhere by independent, authorized dealers. The Motorcycles segment The BMW Motorcycles segment engages in the development, manufacture, assembly and sale of BMW brand motorcycles, as well as spare parts and accessories. The Financial Services segment The Financial Services segment focuses primarily on leasing automobiles, providing loan finance for retail customers and dealers, accepting customer deposits and insurance activities. The BMW Group operates in the world markets with 22 production and assembly plants, 34 sales subsidiaries and a research and development network. Significant Events Deutsche Telekom AG entered into a partnership with BMW Group, as part of which the two companies would organize joint research and development projects in areas, such as data security and vehicle maintenance. BMW Group is collaborating with Mercedes-Benz Cars. Both firms are collaborating to develop, produce and purchase car components. Mercedes-Benz Cars and BMW are exploring cooperation, on a project-by-project basis, in developing and producing components, including engines. BMW Group introduced new variants of its 5 Series sedan in July 2008. The new variants, BMW 520d, 530d and 530d Highline powered by diesel engines, would be additions to its existing petro variants BMW 525i and BMW 530i. BMW Group has extended its collaboration with Daimler AG. The collaboration is targeted at purchasing certain vehicle components. Both companies had earlier collaborated to develop hybrid drive train technology. Vattenfall Europe AG and BMW Group, in November 2008, announced that they would launch a field test in Berlin, Germany that would see 50 Mini E cars on the streets and public access to recharging points. The project is supported to by the German Federal Ministry for the Environment, Nature Conservation and Nuclear Safety. GENIVI Alliance founding members BMW Group, Delphi Corp., General Motors Corporation, Intel Corporation, Magneti Marelli SpA, PSA Peugeot Citroen, Visteon Corp., and Wind River Systems, Inc. are collaborating to create a shared GENIVI platform - a common software architecture that is scalable across product lines and generations. The GENIVI platform would accelerate the pace at which automakers can deliver new solutions, bringing them closer to the lifecycle of consumer devices, and accelerating new business models, such as connected services.
POSITIONING
Positioning is what the customer believes about your product's value, features, and benefits; it is a comparison to the other available alternatives offered by the competition. These beliefs tend to based on customer experiences and evidence, rather than awareness created by advertising or promotion. Marketers manage product positioning by focusing their marketing activities on a positioning strategy. Pricing, promotion, channels of distribution, and advertising all are geared to maximize the chosen positioning strategy. Generally, there are six basic strategies for product positioning: 1. By attribute or benefit- This is the most frequently used positioning strategy. For a light beer, it might be that it tastes great or that it is less filling. For toothpaste, it might be the mint taste or tartar control. 2. By use or application- The users of Apple computers can design and use graphics more easily than with Windows or UNIX. Apple positions its computers based on how the computer will be used. 3. By user- Facebook is a social networking site used exclusively by college students. Facebook is too cool for My Space and serves a smaller, more sophisticated cohort. Only college students may participate with their campus e-mail IDs. 4. By product or service class- Margarine competes as an alternative to butter. Margarine is positioned as a lower cost and healthier alternative to butter, while butter provides better taste and wholesome ingredients. 5. By competitor- BMW and Mercedes often compare themselves to each other segmenting the market to just the crme de la crme of the automobile market. Ford and Chevy need not apply. 6. By price or quality- Tiffany and Costco both sell diamonds. Tiffany wants us to believe that their diamonds are of the highest quality, while Costco tells us that diamonds are diamonds and that only a chump will pay Tiffany prices. Positioning is what the customer believes and not what the provider wants them to believe. Positioning can change due the counter measures taken at the competition. Managing your product positioning requires that you know your customer and that you understand your competition; generally, this is the job of market research not just what the entrepreneur thinks is true.
Positioning is undoubtedly one of the simplest and most useful tools to marketers. After segmenting a market and then targeting a consumer, you would proceed to position a product within that market. Remember this important point. Positioning is all about 'perception'. As perception differs from person to person, so do the results of the positioning map e.g what you perceive as quality, value for money, etc, is different to my perception. However, there will be similarities.
Products or services are 'mapped' together on a 'positioning map'. This allows them to be compared and contrasted in relation to each other. This is the main strength of this tool. Marketers decide upon a competitive position which enables them to distinguish their own products from the offerings of their competition (hence the term positioning strategy). Take a look at the basic positioning map template below.
The term 'positioning' refers to the consumer's perception of a product or service in relation to its competitors. You need to ask yourself, what is the position of the product in the mind of the consumer? Trout and Ries suggest a six-step question framework for successful positioning: 1. What position do you currently own? 2. What position do you want to own? 3. Whom you have to defeat to own the position you want. 4. Do you have the resources to do it? 5. Can you persist until you get there? 6. Are your tactics supporting the positioning objective you set?
Look at the example below using the auto market. Product: Ferrari, BMW, Kia, Range Rover, Saab, Hyundai.
Positioning Map for Cars. The six products are plotted upon the positioning map. It can be concluded that products tend to bunch in the high price/low economy (fast) sector and also in the low price/high economy sector. There is an opportunity in the low price/ low economy (fast) sector. Maybe Hyundai or Kia could consider introducing a low cost sport saloon. However, remember that it is all down to the perception of the individual.
FUTURE PROSPECTIVE - 2015 BMW Vision Supercar
When BMW unveiled the wild-looking Vision EfficientDynamics concept at the 2009 Frankfurt Motor Show, one had to wonder: Is this a pie-in-the-sky show car, or could it be tomorrows supercar? According to an inside source at BMW, its the latter. And while a BMW eco supercar isnt a reality tomorrow (or even next year), a car very similar to the Frankfurt concept could be on the road by 2015. Why? Because the entire concept car is based on technology that BMW has already developed, or is currently developing, said our source. For instance, the Visions rear electric motor is from the 7 Series ActiveHybrid, while the front electric motor system is feasible, and the Visions 1.5-liter 3-cylinder turbodiesel is apparently already in development. The technologies furthest from current reality are the lithium-polymer batteries and the Visions heat-energy-regenerating system, both of which are about five years out. Michelin is said to be hard at work developing new low-rolling-resistance tires that also provide good handling. Everything else on the concept could be produced, if only in small quantities. It follows that the Vision makes sense only as a supercarundoubtedly an expensive one. Also, dont count on Lamborghini-like performance. Rather, the goal with the Vision is nearM3 acceleration, but with super high mileage and low emissions. A BMW official told us the Vision Efficient Dynamics concept was extremely well received and many potential customers have already asked us to build it. We hear BMW will soon show a fully running demonstration prototype, as opposed to the electric-only show car we featured in our March 2010
Entry Strategies
Entry strategy for international markets is a complete plan, which sets the objectives, goals, capital, and planning that helps company in international business operations over a future period long enough to achieve their goals in world markets.
Foreign market has always been one of the significant fields of opportunity and switching costs. In seeking to serve and penetrate foreign market, firms may choose various entry modes.
Some of the typical modes of foreign market entry are as following:
Exporting (direct and indirect)
Licensing
Joint Ventures
Wholly owned subsidiaries
Equity and non-equity modes
The entry strategy of companies typically follows one or two alternative patterns. Waterfall strategy was the preferred choice made by the BMW. Under the waterfall scenario, the product or services was gradually move into overseas markets, while in the sprinkler mode product is introduce in several countries market simultaneously with in a limited period.
It goes well with the cultural distance and learning patterns. After success in the home market, the product gradually moved out to culturally close markets. The other advantage is that the expansion can take place in an orderly manner, and the same managers can be used for different countries, which helps to capitalize on the skills developed and it is relatively less demanding in terms of resource requirements.
Pricing strategy of BMW
BMW deals in luxury car that why they follw the skiming pricing strategy . 1. BMW has priced the 1 Series very close to the 3 Series forcing consumers to hold off pre-orders until they can see and drive the car. Many may end up buying a 3-Series model instead of a 1-Series car. 2. The pricing strategy has angered many initial BMW 1-Series customers and consumers which consider the car overpriced. Pricing has driven many away from buying. 3. The 3-Series may actually be a down sell for BMW dealers as consumers find better value and lower lease payments on a comparable 3-Series car. BMW 3 Series sales may actually get a bump from the 1 Series launch. 4. The clear consumer favorite is the BMW 135i which may make it harder for dealers to sell the 128i models with internal competition from the 3 Series models and outside competing models. 5. Competition from Audi A3 and A4 as well as the Infiniti G37 will give price sensitive shoppers a compelling purchasing alternative to what is perceived as an overpriced 1 Series initial pricing model. 2.
