Why is the Automotive Producer BMW AG so successful? A Casestudy

Table of Contents

1. Introduction
1.1 Aims and Objectives

2. Description of the Company BMW and its Segments
2.1 History
2.2 Current Situation including Sales and Strategy

3. Strengths of BMW
3.1 Products and Product Development of BMW
3.1.1 Performance and Handling
3.1.2 Design
3.1.3 Quality/ Safety
3.1.4 Portfolio/ 3 Series
3.2 Brand Characteristics of BMW
3.2.1 Image
3.2.2 Made in
3.2.3 Loyalty
3.3 Marketing and Management of BMW
3.3.1 Customer wants/ Customer Satisfaction
3.3.2 Model Policy/ Niches
3.3.3 Marketing
3.3.4 Management/ HR

4. Summary and Conclusion
4.1 Weight factors that affect BMW’s success

5. References

6. Appendix

1. Introduction

The Bavarian car group BMW is the greatest phenomenon of the new millennium the automotive industry has seen. BMW counts currently to one of the most successful car companies in Europe and worldwide.

Although of the overall sales slump especially in the German and the Western European Markets the Group has been able to improve market share and even increase deliveries to their customers in the vehicle, as well as in the motorcycle sector. Further the corporation has a growing workforce and reached a record high by improving their profit of 2004 by 14% to € 2.2 Milliards.^[1]

It is surprising that BMW can have such a positive development of its performance when the overall industry is in recession and direct competitors, such as producers in Germany and Europe have a hard time generating any kinds of profits.

1.1 Aims and Objectives

In this project I aim to identify the factors that are responsible for the current performance of the BMW AG.

I will try to describe the company and its segments, by looking at the BMW’s history and the current situation. Sales figures will be presented and analysed as well as the corporate strategy.

Then my objective is to identify BMW’s strengths using existing literature, primary research and common sense.

To conclude I hope to be able to weight the factors that affected BMW’s success.

2. Description of the Company BMW and its Segments

BMW is a German passenger cars and motorcycle producer, having its headquarter in Munich, Bavaria. It owns the brands BMW, Mini and Rolls Royce.

The company is traded on the public share market, with a majority of shares held by Herbert Quandt, a private investor of a traditional German industrial family.^[2]

The medium sized BMW Group is on 15th place in the world car production, but counts currently to the most successful and profitable firms in the industry (Appendix1). However looking at BMW’s history, the company also had to deal with difficult times.

2.1 History

Karl Friedrich Rapp originally founded the company as an aircraft engine manufacturer in 1913.

In 1916 the company was in financial difficulties and reconstructed under the pressures name BMW, which stands for Bayrische Motoren Werke.

In 1927 following a takeover by BMW, the small Dixi became the company’s first car. By 1933 the company was already offering more advanced inline 6 cylinder sports and salon cars.

During World War 2 the factory in Munich was largely destroyed and did not produce a vehicle until 1952.

By 1959 the company was in such financial difficulties that it nearly merged with its biggest competitor Mercedes. This could however be prevented by the support of the rich industrial Herbert Quandt, who made it his objective to refurbish the company. By using his personal contacts and bringing his own people in crucial positions, such as the Marketing Executive Paul G. Hahnemann, the company was able to become profitable again.^[3]

In the following years the company developed the model 3, 5 and 7 series, which are maintained in their portfolio in reworked forms.

In 1994 BMW bought the Rover Group from the British Aerospace. The merger was not very successful as BMW found it difficult to reposition the English automaker alongside with its own products. At the beginning of the new millennium BMW sold Range and Land Rover to Ford, and Rover to the Phoenix Consortium for the significant figure of £10. BMW kept the brand Mini and was later able to integrate it well in their portfolio.

Also in 1998 BMW managed to purchase the Rolls-Royce trademark, building a new factory in Goodwood, UK and launching its first vehicle the Phantom at the Detroit Auto show in 2003.^[4]

This short overview identifies the ups and downs of the company and shows that wise management decisions played an important role in gathering BMW’s success.

2.2 Current Situation including Sales and Strategy

At the moment the BMW group is directly employing 104,342 people, having production facilities in Germany, England, the US, South Africa, Mexico, Asia and Egypt (Appendix2).^[5]

Its sales have reached the company’s record of 1,104,916 passenger cars (BMW 928,151/ Mini 176,465/ Rolls Royce 300) and 92,962 motorcycles worldwide.^[6]

illustration not visible in this excerpt

The diagram shows BMW’s throughout positive trend in sales of passenger cars in Western Europe over the past ten years. It is impressive that no other European or American car group is able to present such positive figures in the negative developing market (Appendix3).

The company’s profit reached a personal high of € 2.2 Milliards in 2004.^[7]

Strategy

BMW’s strategy is “Detecting Potentials. Shaping Growth. Taking a clear stand. Understanding and using distinctive strengths - and taking action based on clear strategy.”^[8]

3. Strengths of BMW

BMW’s strengths are the internal features and actions of the company that create a competitive advantage for the Group.

They are factors that can and are influenced by the BMW and will have a major impact on the firm’s success.

3.1 Products and Product Development of BMW

BMW’s products are the main strengths and driver for their current success as they are what the consumers spend their money on. Products have probably the greatest impact on the consumers’ buying decision when purchasing a vehicle in the price class BMW finds itself in.

Therefore BMW take their product development very serious. BMW has various centres for research and product development worldwide, including an engineering centre in Munich, a design studio in California and a project team in Japan.^[9] BMW spends about 5% of their revenues on Research and Development, in the year 2003 this accounted about € 2.146 Milliards.^[10]

At BMW features like performance/ handling, safety, quality and design seem to play the most important role. This was supported in a study for the project “Factors affecting Sales in the Automotive Industry in Europe” and an interview of a BMW employee.

[...]

^[1] BMW (Auto Bild/ 18.03.2005/ Page 25)

^[2] Die Quandts (Rüdiger Jungbluth 2002/ Bastei Lübbe/ Chapter 24)

^[3] Die Quandts (Rüdiger Jungbluth 2002/ Bastei Lübbe/ Chapter 24)

^[4] www.wikebedia.org (all the history)

^[5] BMW Group Annual Report 2003

^[6] BMW Group Annual Report 2003

^[7] BMW (Auto Bild/ 18.03.2005/ Page 25)

^[8] www.bmwgroup.com

^[9] www.autointel.com

^[10] BMW Group Annual Report 2003