Managing organizational change for BMW in the emerging Chinese market

Table of Contents

Introduction
Purpose of Study
Research Question
Research Design
Limitation of Study

Literature Review
Overview
Literature Relevant
Summary

Methodology
Population
Methods for Data Collection

Data Analysis
Preview of Findings
Meta-Analysis

Analysis of the Findings
Relationship of Findings to Research Question

Conclusion and Recommendation
Research Question Discussion
Future Research Needs
Implications of Findings

References

Introduction

Change is often not welcomed, because it is more comfortable to do things the way we’ve always done them and change is often perceived as a threat. But change has always been a reality of life and is even more so today. The challenge for leaders is the transformation of their organization at this time of fast change. In this context, the research paper will analyze how the German car manufacturer BMW can apply organizational change and development theories to ensure highest quality and increase its market share in the emerging Chinese market.

China's explosive growth, which has turned its car market into the fastest-growing in the world, has attracted foreign automakers in hordes (Welch, 2004). Over the past decade, nearly every major car company has entered the Chinese market and so did BMW. The German car manufacturer invested in the local market and formally opened its first production facility in Shenyang. BMW entered a 50-50 joint venture with Brilliance China Automotive Holdings Ltd in 2003 and opened a €450-million plant, which will produce both BMW 3-series and 5-series models. BMW, which sells its three brands BMW, Mini and Rolls-Royce, is thus the only carmaker in the premium segment that produces locally in China (Welch, 2004).

Purpose of Study

The purpose of this study is to examine the current situation regarding the Chinese market and potential issues for BMW. Based on these findings, it is examined how BMW can apply organizational change and development theories in order to make the process of doing business within the Chinese culture and market more effectively. The purpose is to find out how BMW can ensure quality and enhance its market share in China and gain a competitive advantage in the automobile industry.

Research Question

How can BMW apply organizational change and development theories to ensure quality and increase its market share in the Chinese market?

Research Design

For the purpose of this research paper, various secondary sources from printed sources, online databases as well as from the library were used. To find information about organizational change in the automobile industry and BMW specifically, the researcher searched for headings containing such words as “BMW and organizational change theories”, “BMW in China”, “organizational change in the automobile industry”. Furthermore, the researcher searched for differences between literature of different nations regarding organizational change and development theories. Headings contained words as “Organizational change and development theories in Germany” or “Organizational change and development theories globally”.

Limitation of Study

This study is limited to external data. The researcher didn’t conduct information from internal sources of BMW. Furthermore, much of the research found has come from the USA, and is therefore influenced by American culture. The research is also limited to only one player in the automobile industry, which is BMW. Although BMW has to face issues of different nature by operating in China, this research paper will focus on economical issues, and most importantly the importance of quality assurance.

Literature Review

Overview

The first part describes in what degree and form the automobile industry is affected by change and development. It is analyzed if or how the automobile industry utilizes organizational change and development theories. The second part looks at the company BMW in particular, and how it can utilize change theories in order to increase market share in the Chinese market.

Literature Relevant

The automobile market is locally and mostly globally at the maturity stage of the life cycle, due to an increased number of competitors from domestic and foreign markets. The automobile market in general is characterized by a low potential for market growth, but high sales and profit potential (Murtagh, 2004). However, the Chinese automobile market is still highly attractive with low costs and a potential growth rate of approximately 20% annually (Panke, 2004).

The overall automobile market can be organized in geographic as well as product segments, but competitive forces are high in each segment of the overall market. The market structure of the luxury car manufacturer segment, which BMW belongs to is a differentiated oligopoly. The actions of each company in this oligopoly affects the other manufacturers in the market. Although BMW is the only luxury car manufacturer that produces locally in China, major competitors are fighting over the market share in China. Therefore, the key issue is how BMW can win more market share over its competitors.

BMW’s point-of-difference lays in the features, styles, services, and most importantly quality of its cars. BMW claims quality products that are engineered in Germany. Quality Assurance and Management as a form of change initiative is a fundamental concept and an important aspect of sustainable development of the automobile industry since the 1970´s, because buyers have major influence on the decisions of companies in an oligopolistic market structure. Porter (1980) states, “buyers compete with the industry by forcing down prices, bargaining for higher quality or more services, and playing competitors against each other—at the expense of industry profitability” (p. 24). This means that if one company can’t produce what customers seek, they will be more likely to purchase their car from a competitor, unless customers are loyal towards the brand. BMW has loyal customers, but they associate a BMW with high quality and performance. Quality manufacturing in China is therefore crucial for the success and market share of BMW in China.

As mentioned, Germany is well known for its quality engineering and BMW’s marketing activities emphasize this fact as a point of difference. The question now is how well Chinese employees are able and trained to manufacture the high quality cars of BMW in order to keep the claimed quality promise. German researchers suggest emphasizing on personnel development in order to increase employee technical competence, decision competence, and social competence in accordance with the targets and philosophy of a company (Odenwald & Matheny, 1996). The process of personnel development is based on company leadership and management that must competently handle continuous change and use human resources for a positive company image and future success. By controlling the product quality in the production process in China and therefore ensuring customer satisfaction, BMW can do better branding and improve margins and market share for itself.

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