VISION

BMW MISSION STATEMENT

The BMW Group is the worlds leading provider of premium products and premium services for individual mobility.

COMPETITIVE STRATEGY THROUGH MARKETING DEVELOPMENT1. Improving engineering From mid 1990s automobile producers strove to improve engineering as a route to competitive advantage and to catch up with competitors.

2. Improving quality From mid 1990s automobile producers strove to improve quality as a route to competitive advantage and to catch up with competitors.

By mid 2000s, the car market was teeming with good quality cars. For example, the quality of US automobiles had improved 24 % from the late 1990s.

3. Price CompetitionIn the first few years of 21st century, players in the automobile industries as a whole stepped up price competition.4. ReliabilityBMW automobiles are powerful, reliable and luxurious.5. DesignThe customer choice factors had become design as demonstrated by the fact that companies that had given attention to look of their automobiles had made small gains, rather than losing market share. This realization made design the first weapon in the fight for market share, as the feature that grabbed customers attention.

Naturally, boardrooms took up design as a major plank of their strategy and sparked a hunt for top level designers.

The promised rewards were rich enough to lure best talents, who were then provided with lavish high-tech design laboratories and art studios.

6. BrandingThe customer choice factors had become brand as demonstrated by the fact that companies that had built powerful brands had made small gains, rather than losing market share.

It had become clear that a brand identity was one of the most effective ways to be more competitive in an industry where more and more products came to the market.

Effective branding establishes emotional connections between customers on one side and products, salesmen, and others on the other. A prime example of successful branding was Toyota.

BMW conveyed the image of the Ultimate driving machine. Every model raised a set of general perceptions and emotional connections generated by the mother brand, as well as some specifically related to the model in question.

The launch of BMW 1500 established the BMW automobile brand as one with a reputation for engineering excellence and managed to build a perception of valuable differences in the minds of their buyers.

7. Brand Building and ManagementThe company tightly controlled its distribution network to the benefit of brand management, communications and after sales services.

8. Advertising

9. National competitivenessIn the 21st century national resources influenced national competitiveness. One of Germans distinctive national resources was a highly qualified labour force that could be used by German manufacturers as a source of competitive advantage.10. Global perspectiveBMW is an international Company that operates in more than one country. By the latter part of 20th Century, the automobile industry was global, mature and heavily consolidated. The main markets for BMW automobiles have been in Western Europe, the USA, Japan, South Africa, UK, China and the Pacific region, with the markets of Germany and US accounting for almost half the total car sales. Its international perspective gave the company a competitive advantage.

11. Market SegmentationBMW segmented its markets effectively; BMW automobiles have been positioned differently and priced differently in the various national markets, this gave the company a competitive advantage.

12. Firm control on the supply chain and dealings and relationships with suppliers

BMW also exercised a firm control on the supply chain and dealings and relationships with suppliers who mostly had maintained a long association with the company a combination that gave the company a competitive edge.

ANALYSIS

1. SWOT ANALYSIS

STRENGTHS

BMW is a prominent European maker of prestigious automobiles, whose automobiles are powerful, reliable and luxurious.

Diversification Its operations also include motorcycles, software products and financial services

Launch of a large number of models Launch of a large number of models across the price and class ranges, and a robust policy of market development.

A significant employer and an economic force after the 2nd World War BMW employed over 104,000 workers in 2003.

International Perspective of the firm. BMW is an international Company that operates in more than one country and in different continents effectively. The later 20th Century the automobile industry was global, mature and heavily consolidated. Automobile production was first prominent in the US, then Europe and later Asia especially Japan.

InnovationBy mid 2000s the car market was teeming with good quality cars, many brands and models. BMW built powerful brands and designs which conveyed the image of Ultimate driving machineThe turning point came in 1961 when it launched the BMW 1500 with a reputation for Engineering Excellence

Highly qualified labour forceOne of Germanys distinctive national resources was a highly qualified labour force that was used by German manufacturers as a source of competitive advantage.

Excellent BrandingValuable differences in the mind of their buyers

Effective Distribution NetworksBMW tightly controlled its distribution network to the benefit of brand management, communication and aftersales service.

Effective Market SegmentationBMW segmented the market effectively, the different segments include, entry segment, mass market segment, premium segment, and luxury segment. The automobiles have been positioned and priced differently in the various national markets.

Firm controls on supply chains and Good relationship with suppliersBMW also exercised a firm control on the supply chain dealings and developed good relationships with suppliers who mostly had maintained a long association with the company.

Growth BMW registered growth of revenue in 2002 of up to 4.2 %Moving production into growth markets achieved the double effect of containing the costs and partially hedging against currency risk.

Market Development

Progressive AgreementsBMW achieved some remarkably progressive agreements with the workers union and were operating some of the most flexible and productive plants in the automotive industry.

Effective Management across CulturesBMW operated in more than one country and in different continents effectively.

WEAKNESSES

Uncertain of its destinyThe company concentrated on automobile production but without a focus, No Vision

Brand Building and Management put pressure on companys resources with less certain results.

Failure of managing acquisition of Rover in 1990s which came to a sorry end 5 years later when they had to sell the British Company for the sum of 10 US DOLLARS.

The incompetence of the CEO, Mr. B. Pischetsieder who failed to maximize the shareholders value thus failed to meet the expectation of the shareholders.

OPPORTUNITIES

BMW INTERNATIONAL PERSPECTIVEBMW international perspective is able to give it competitive edge in market development especially in regions which have potentials and have not been reached yet. The main markets for BMW automobiles have been Western Europe, USA, Japan, the Pacific region with markets of US and Germany accounting for half car sales.

In 2002 Helmut Panke, a nuclear physist new CEO started a strategy of internal growth through market product development. In 2003 BMW planning to launch a new model every 3 months through 2005.

The expansion of production facilities in US.

THREATS

In 1959 BMW faced bankruptcy.

The global economy experienced a sharp downturn in 2001 which lasted three (3) years.

The fall of equity prices- equity prices had fallen until late 2003.

Geopolitical tension and concern about oil supplies led to the uncertainty about the economic and political environment.

In the climate of geopolitical tension sales in most automobile markets around the world declined with the exception of UK.

The decline in the automobile markets in US was particularly severe.

Car companies sold cars at lower prices; the consequent depression of profitability was likely to affect negatively their credit rating, thus increasing the cost of borrowing.

Depressed demand and over supply the larger European car companies had suffered from depressed demand and oversupply.

Falling profitability Volkswagens profit fell by 49% in the 2nd quarter of 2003.

BMW aero engines markets and capital equipment were under serious threat as it lost its demand as a result of German losing the war.

The failure of acquisition causing loss of great deal of money and of public face (positioning)

Size modest compared with that of big five (5) that left them vulnerable to acquisition.

Customers expectations became a barrier to increasing prices later.

Increasing the production of smaller cars could have the effect of reducing the historically high margins enjoyed by BMW. Moving into smaller cars meant earning lower margins that were typical of those markets segments - But competitors in the lower segments were volume producers with lower costs than BMW.

Quality threats with pressure on costs the risks of quality lapses was bound to increase.

Increasing the output at the level planned would threaten the very reason for BMWs great success the Ultimate driving machine

Any model positioned in the proximity of a more expensive model could cannibalise it, 1st series model cannibalise the 3 series.

II PORTERS FIVE MODEL ANALYSIS

BARRIER TO ENTRY

Capital outlays for production facilities BMW automobile are powerful, reliable and luxurious and quite expensive, high level of specification offered by most models with retail margins comparatively high. These attributes would act as barriers to automobile companies that would wish to join because of high initial outlays for production.

THREAT OF SUBSTITUTE PRODUCTS

Most of the world automobile production was concentrated in five companies other than BMW.i) General motorsii) Fordiii) Daimler Chrysleriv) Toyotav) Volkswagen

BARGAINING POWER OF BUYERS

Buyers of automobiles have unlimited choices. BMW must carefully identify their target market and provide bespoke products to its customers if it is to survive as described by H. Panke at the Annual Accounts conference on 17 March 2004. We offer our customers emotional products which through the strength of the brand and the substance of the product fulfill the customers wish for individualization and differentiation. The BMW Group will never build boring products BARGAINING POWER OF SUPPLIERSThe automobiles industries have many players. In making purchase decisions the suppliers do not have absolute power over them.COMPETITIONSCompetition has manifested itself in many forms:-i) Other automobile production companies have posed competition to BMW General motors Ford Daimler Chrysler Toyota Volkswagen

ii) Brands Different brands before buyers.iii) DesignDifferent designs which positions buyers in different segment markets iv) PriceDifferent prices

ALTERNATIVES/ RECOMMENDATIONS

CONCLUSION