BMW Value Chain Analysis

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Table of Content

Introduction Overview Company Description Value Chain Concept Discussion Information Systems Identified Description of Information Systems Value Contribution of Identified Information Systems Primary and Support Activities Affected by Information Systems

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Introduction

Overview This paper will analyze how the German car manufacturer BMW derives value from information systems as well as identify the value chain activities that are affected by the identified information systems. Following analysis will be limited to the information systems that provide the greatest value to BMW in form of gaining or maintaining a competitive advantage.

Company Description BMW, which stands for Bayerische Motoren Werke, is a luxury car manufacturer. The headquarters of the BMW group is in Munich, Germany, but the company is present all over the world (BMW Group, 2004). The company built high brand equity over the years through continuous branding efforts and high quality products (Interbrand, 2001). BMW is arguably the most admired carmaker in the world and BMW products inspire near- fanatical loyalty (Kiley, 2004).

Value Chain Concept Michael E. Porter developed the value chain concept in 1985. Porter’s value chain provides a systematic means of categorizing activities. At each stage of the value chain there exists an opportunity to contribute positively to the firm’s competitive strategy by performing some activity or process in a way that is better than the competitors, and so providing some uniqueness or advantage (Porter, 1985).

Value activities can be divided into two broad types, primary activities and support activities (Porter, 1985). There are five generic categories of primary activities involved in competing in any industry: (a) Inbound Logistics, (b) Operations, (c) Outbound logistics, (d) Marketing and Sales, and (e) Services (Porter, 1985). Support activities support the primary activities and can be divided in four generic categories: (a) Procurement, (b) Technology Development, (c) Human Resource Management and (d) Firm Infrastructure (Porter, 1985). Discussion Information Systems Identified

BMW uses many information systems. Due to the limited size of this paper, only some of

the information systems that provide the greatest value for BMW are identified. The information

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systems identified are (a) e-business solutions, (b) Application Service Provider (ASP solution), (c) sXtensible Markup Language (XML), and (d) SAP R/3 application.

Description of Information Systems E-business solutions. The BMW Group bundles its e-business activities in a new company named nexolab that was founded by the BMW IT subsidiary Softlab (Auto Intell, 2002). The e-business solutions range from strategy and process consulting to the development of new systems and implementation concepts (Auto Intell, 2002). These e-business solutions inc lude e-commerce, primarily in order to strengthen BMW´s sales channel. The e-business solutions cover the entire value chain – from the automotive suppliers and logistics service providers to the customer (Auto Intell, 2002). BMW also improved the infrastructure for its suppliers to enhance the production process. Using the most current Supply Chain Management (eSCM) technology components, BMW increased the availability of parts and its measurability within the production and delivery chain (Auto Intell, 2002).

ASP solution. ASP enables BMW to focus on their core competencies based on this

internal information system. The ASP solution provides built-in access to the latest technology, so that advances can be leveraged as they emerged, and when they are needed (Sun Microsystems Inc., 2001). ASP enables the transfer and integration of electronic-data interchange between BMW and its suppliers (Sun Microsystems Inc., 2001). One of the key functionalities delivered by ASP is supplier broadcast communication (BMW Group, 2004).

XML technology. XML allows BMW to share information components across the entire

enterprise. Working with XML, BMW is able to create a structure that allows the use and capture of the common and specific configuration information through each part of the BMW group (Watt, 2003). Configuration meta-data is used to uniquely identify the systems and components within a specific vehicle. Once defined, this information can be used to apply a piece of service information such as a service procedure to that component (Watt, 2003). Configuration meta- data is added to each procedure to control which procedure is displayed. This technology is used to help gathering better feedback form the dealer network (BMW Corp., 2004).

SAP R/3 application. The SAP R/3 is an upgraded version of SAP, which includes

additional business benefits (Cap Gemini Ernst & Young, 2002). SAP R/3 allows dealers to enter a web site and see the inventory of parts and cars available through the dealer network and the production plant. The web portal permits dealers also to go on- line and check prices, configure