A Case Study on BMW Group
BMW is an internationally renowned manufacturer of prestigious cars; the company is recognized around the world. The BMW Group manufactures automobiles and motorcycles, with a strong emphasis on outstanding quality for its three premium brands: BMW, Rolls-Royce and MINI. The company was established in Germany in 1916. It has a presence in over 160 countries, with 21 manufacturing plants on four continents and global headquarters in Munich, Germany. It employs over 100,000 people worldwide, 9,000 of them in the UK.
BMW Group focuses on total excellence. The company focuses on three cornerstone of vehicle maintenance expertise which are quality, efficiency and innovation. The BMW engineers enter the production developing innovative, convenient and drive-focused service features that ensure best performance. The company is committed to providing first class service that delivers best-in class care for vehicle and uncompromising driving experience.
With BMW, MINI and Rolls-Royce Motor Cars, the BMW Group is the world’s only car maker to pursue a purely premium strategy for all market sectors covered by its brands, from exclusive smaller cars to top-of-the-range luxury limousines.
Generic Strategy
BMW strive to identify potential and encourage growth. Their strategy lies on recognizing the company’s strengths and best use of the opportunities that comes along. Directed by a clear strategy, goals are attained by the company. The basic philosophy of the company is to inspire every individual at the BMW Group whilch helps the decision making process of the group and enhances the company’s structure. As a result, best quality products are developed.
The generic strategy in which the BMW Group uses is a differentiation strategy. With its differentiation strategy, BMW has served a wide range of customers throughout the world since their cars are differentiated in the eyes of their customers. The company’s customers are willing to pay a higher price for BMW cars. It has been noted that differentiation implies a difference in the perception by clients of the product. Differentiation is when one company is able to offer something different, but that difference sets it apart from its competition by the value the target customer places on it, not simply because there is a difference (1987).
A differentiation competitive advantage prescribes that a firm achieve and maintain a means of making its product unique from its competitors’ products (1983;1989). The advantage of differentiation is based on the additional value the product possesses, for which the customer will pay a premium. While additional value may be created through a variety of means, such as quality, service, brand image, or distribution (1984), superior quality is the means of differentiation which is most often used (1983). Thus, successful differentiation permits a firm to command premium prices (1990) for this additional value. A differentiated product engenders customer loyalty, reducing customer sensitivity to price and protecting the business from other competitive forces which could reduce price-cost margins (1983).
PEST Analysis
Politics
Globalization has been a current trend to every industry which also includes the automobile industry in which is due to the construction of import international facilities and establishment.
It has been noted that when products are traded regulations and policies are present. Products of the automobile industry are governed by the regulatory bodies such as the National Highway Traffic Safety Administration.
With these regulations and policies, company’s operations may be impaired. Some countries also control the entrance of foreign companies which would also affect the process of operation of these companies. Large tax implementation is one of the controls that government usually pursues. With such government control many companies are impaired and usually can not operate on those countries.
Economic
In the Scotiabank Group estimates, globally there are about 49 million new cars were sold in 2006 ( 2007). During the period of 2004 to 2006, a change in consumer preferences in cars to a more fuel-efficient vehicles rises due to the high gasoline prices. Gasoline prices of approximately .00 per gallon started taking a huge bite out of family budgets in 2004, and many middle-class consumers wish they had vehicles that were much less expensive to operate and by 2005-2006, gasoline prices has increase to .00 range ( 2007).
According to (2007), fuel-efficient vehicles, such as BMW’s MINI Cooper, have enjoyed soaring demand. Consumers and emissions regulators started to take a renewed interest in advanced-technology, clean diesel engines offers exceptional performance and fuel economy while offering the quiet, vibration-free running associated with gasoline engines ( 2007).
Socioeconomic
With the increasing globalization of business, society has also been more concern with the degradation of the environment and a continuous concern for the benefit of the employees. The society has call for attention to industries for social responsibility. This includes human right protection of corporate employees, consideration for the health and safety of consumers, and contribution to local communities.
And with the increasing global environmental issues that arise with the globalization, people are now increasingly aware of the effects of the continuous industrialization.
In the social aspects, automobile industry is also affected with the lifestyles and the social preferences of the consumers. Automobile industry is affected with the type of colors in which their customers preference. Colors may vary according to demographics or personal preference. Customers also may demand tight turning radiuses or high speeds or curb-climbing suspension.
Technological development
It has been noted that auto industry has experience a rapid technological changes over the years. This fast changes has lead to a more sophisticated, with a significant electrical and electronic content cars present in the present time. To provide comfort and safety, while still being friendly to the environment, these new vehicles use the latest developments of many different technologies. Further developments are expected in the areas of brake assistance, adaptive speed control and global navigation and satellite tracking systems. More elaborate/exotic fuel consumption reduction technologies such as gasoline direct injection, camless valve actuation, and full hybrid-electric systems may take many years to influence the fuel economy of the entire market.
Five Forces Model
Threat of New Entrants
Threat for new entrants are not so strong since establishing a manufacturing company for automobiles quite needed big amount of capital. Emergence of competitors requires the capital, required technologies, and management skills. However, there are still possibilities of new entrants in the industry.
Power of Suppliers
Bargaining power of suppliers is weak since the automobile supply business is quite fragmented and there are many competing firms. Many suppliers rely on one or two automakers to buy a majority of their products. If an automaker decided to switch suppliers it could be devastating to the previous supplier’s business. As a result, suppliers are extremely susceptible to the demands and requirements of the automobile manufacturer, and hold very little power.
Power of Buyers
The bargaining power of consumers is weak even customers are more demanding and more sophisticated. Customers may be enchanted with the presence of foreign cars and price sensitive, their bargaining power is till weak since they do not purchase cars in huge quantities.
Availability of Substitutes
Operating own vehicle compromise a higher cost. With these people may seek for alternative transportation options and may prefer to take the public transportation such as the bus, train, or airplane to destination. The price of gasoline has a large effect on consumers’ decisions to buy vehicles. Considering the time, money, personal preferences and convenience, the threat for substitutes is strong. One car maker poses a big threat as a substitute.
Competitive Rivalry
Highly competitive industries generally earn low returns because the cost of competition is high. The auto industry is considered to be an oligopoly, which helps to minimize the effects of price-based competition. The automakers understand that price-based competition does not necessarily lead to increases in the size of the market place, and historically they have tried to avoid price-based competition. But more recently the competition has intensified–rebates, preferred financing, and long-term warranties have helped to lure in customers, but they also put pressure on the profit margins for vehicle sales. Competitive rivalry is strong especially with globalization.
Resource Audit
The function audit centers on “observing if the procedures applied are the adequate ones and if they function correctly. That is, checking to see if the relationship between objectives and procedures is a satisfactory one and if this has been achieved in the most cost effective manner” [1998].
HR audit is to study and analyze each one of the specific areas of HRM. The analysis should center on the planned measures, the method of implementation, and the results obtained. In order to carry this out, the areas that are to be studied must first be identified. Afterwards, a list of the indicators that will serve to analyze each of them must be made.
The qualifications, motivation and creativity of its employees are decisive for the BMW Group’s success. The almost 106,000 employees worldwide work in an environment that is defined by trust, esteem, mutual understanding, performance and reward. The corporate culture that has evolved over the years is the reason for the employees’ great dedication and their strong identification with the BMW Group. This is supported by the good cooperation between company management and works council. Uniform human resources and social policy guidelines apply for all employees worldwide. The objective of the Company’s value-oriented and values-based human resources policy is to constantly promote and develop its employees. Personal development opportunities along with flexible work time arrangements make the BMW Group a successful, attractive employer who is able to cope with social challenges, such as demographic change.
Companies assume responsibility for their economic success as well as for the environment and society. For only companies that take account of the interests of people and the needs of the environment, i. e. that operate sustainably, can achieve long-term economic success. For the BMW Group, sustainability management means using resources efficiently and sparingly, recognizing and minimizing risks, acting in a socially responsible way and thus enhancing the Company’s reputation. In doing so, both the management and employees constantly strive to improve on their achievements. Since sustainable actions provide the basis for viable development, the BMW Group takes this responsibility.
Company knows how to deploy its strengths with an efficiency that is unmatched in the automotive industry. From research and development to sales and marketing, BMW Group is committed to the very highest in quality for all its products and services. The company’s phenomenal success is proof of this strategy’s correctness.
Value Chain
In order to monitor the supply chain in BMW, the comapny uses many information systems. Some of the information systems that provide the greatest value for BMW are e-business solutions, Application Service Provider (ASP solution), and sXtensible Markup Language (XML).
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 (2002). The e-business solutions range from strategy and process consulting to the development of new systems and implementation concepts (2002). These e-business solutions include 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 (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 (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 ( 2001). ASP enables the transfer and integration of electronic-data interchange between BMW and its suppliers (2001). One of the key functionalities delivered by ASP is supplier broadcast communication (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 ( 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 ( 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 (2004).
Conclusion
With the above analysis, BMW have the exact strategies in their business. The company possess a lead in the market. However, as business as it is there are still threats of competition and changing consumer demand. The company should considered sustainable competitive advantage to be able to stay in the business.
Credit:ivythesis.typepad.com
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