BMW Final

BMW factory in China

Efficiency & Ability to React Quickly“The ability to react quickly and increase or decrease production for various markets was a major factor for BMWNorth America in turning the recession year 2008 into the highest production volume year ever in its history.”

In the past five years, the plant had lowered energy consumption by 48%, halved water consumption, reduced CO2 emissions by 44%, and waste output by 65%.16

& Economy“…rising public debt levels in the USA, alongside ongoing unsolved structural problems on the US employment and property markets also pose a risk to global economic growth in the current year, despite any temporary signs of the situation stabilising.”

“Signs are emerging in China – currently the mainstay of global economic growth – of a significant increase in bad debts within the banking system, for which the property boom of recent years is partly to blame.”

Annual Report 2011

More History:

More History:

BMW: Redefining Premium Brand Identity (2012)

Key History:

Herbert Quandt acquires a 47% share of BMW, saves BMW through a restructure which allows the company to exploit its capabilities for producing high-performance saloon cars. A new segment in the car market emerges, and has since been BMW’s model to success.

Key History:

• Introduces “Ultimate Driving Machine” slogan in 1975

• First European carmaker to recognize Asian opportunities

Key History:

• Dr Bernd Pischetsrieder, Chairman of the Board purchases Rover Group for 1.7 billion euros in January 1994– including the MINI and Land Rover brands

• 1998, Pischetsrieder purchases Rolls-Royce brand from Vickers for 40 million euros

• Estimated 700 million euros in losses, profit expected to be generated in 2002 at the earliest

• Joachim Milberg takes over as BMW’s new CEO in February 1998

• Concentrate only on premium market segment

• “In 2000, BMW sold Rover at a loss of €3.2 billion however it was able to recoup €2.9 billion by selling the Land Rover brand to Ford. BMW kept the MINI brand as part of its strategy to enter the compact car market. The disposal of Rover and the appointment of Milberg as the new CEO signalled a new era for BMW. “

Milberg’s strategy:Concentrating only on the premium segments of the automobile

market. Creating a demanding product and market offensive in the premium

segments, ensuring that the brand is represented in all relevant parts of the market.

The appropriate expansion of the production and sales network. The agility of the overall company with quick reactions and

innovations. Cooperation and networks using external resources through strategic

partnerships rather than mergers.

A new style of leadership and guidance oriented. Profitable growth.

“The sale of Rover and Milberg’s premium brand strategy brought about an increase in profits of more than 400% in 2002 compared to 1999, despite the economic downturn in both Germany and the US”


• Helmut Panke succeeds Milberg as BMW’s new CEO in 2002

• Panke’s vision was to build on Milberg’s premium brand strategy which was ‘always premium’

• January 2004, BMW appointed separate brand managers for each of the three brands, whilst marketing functions were to be centralized under one leadership.

• In November 2002, BMW opened the Brand Academy to promote brand orientation amongst its staff on the brilliance and fascination of the three premium brands. The academy was unique and the only one of its kind in the automobile industry. The Brand Academy aimed to educate BMW’s staff and partners to better understand the different identities of the brands and identify the features that distinguished these brands from their competitors.

• In May 2004, BMW entered the Chinese market through its joint venture with Brilliance China Automotive Holdings Limited.


Strategy Number One

3. What are the different brand positioning strategies of BMW's main competitors? [You may analyze slogans, advertisements, company homepage, etc.] In particular, carry out a detailed comparison between BMW and Audi.




http://www.interbrand.com/en/best-global-brands/2012/BMW


Film Product Placement BMW Brand Academy

BMW Performance Driving School


Competitors

BMW Audi



Audi.com


Audi - brand management driven success Michael Renz, Head of Central Marketing AUDI AG






Fair Competition: BMW vs Audi, WIPO-US

BMW AUDI

“Sheer driving pleasure Advantage through Technology

Joy of driving Truth in Engineering

The Ultimate Driving Machine Truth in Motion

Cultural insight Green Police

2. How is the US new car distribution system different from that of Korea or Europe or any other country that you are from? Is the impatience factor driven more by actual customer characteristics or by the characteristics of the distribution system?

2. How is the US new car distribution system different from that of Korea or Europe or any other country that you are from? Is the impatience factor driven more by actual customer characteristics or by the characteristics of the distribution system?

4. How is the purchase for a specific model type (e.g., compact car, minivan etc.) affected by the family life cycle (single, married w/ young children, married w/ teenage children, empty nest, retired seniors)? Towards which segment is the X3 targeted to?

The Family Life Cycle• Individuals and families tend to go through a “life cycle”.

The simple life cycle goes from:

Young single

Newly married, no kids

Young couple,Kids < 6(Full Nest I)

Young couple, Kids >6 (Full Nest II)

Older married with dependentchildren (Full Nest III)

Older married couples, no children living with them, still working

(Empty Nest I)

Older married couples, no children living with them, retired

(Empty Nest II)


What is the Family Life Cycle (FLC)

Changes Over Life Cycle

Financial situation

Brands considered

Interests

Primary decision maker

The family life cycle concept attempts to explain consumer behavior patterns of individuals as they age, marry, have children, retire-- and their discretionary income variations over their life span


Stage Situation Buy

Young Single (a) Few financial burdens,(b) Recreation orientated,(c) Experiment with personal financialmanagement

basic kitchen equipment,basic furniture,cars

Young Couple (a) Better off financially than they will be in the near future

(b) High levels of purchase of homes and consumer durable goods

(c) Establish patterns of personal financial management and control

cars, fringes, cookers, life assurance, durable furniture

Full Nest I (a) Home purchasing at peak (c) Dissatisfied with financial position and amount of money saved (d) Reliance on credit finance, credit cards, overdrafts etc.(e) Child dominated household

necessities - washers, dryers, baby food and clothes, toys, books


Stage Situation Buy

Full Nest II (a) Financial position better, (b) Some wives return to work, (c) Child dominated household,

necessities - foods, cleaning material, clothes, sports gearetc.

Full Nest III (a) Financial position still better, (b) More wives work, (c)Expenditure to support children's further/higher education

new, more tasteful furniture, non-necessary appliances

Empty Nest I (a) More satisfied with financial position and money saved, (b) Interested in travel, recreation, self-education

luxuries, home improvements

Empty Nest II (a) Significant cut in income, (b) Concern with level of savings and pension,(c) Assist children

medical appliances or medical care, products which aid health, sleep and digestion, hobbies and pastimes


Number of people (children and adults) in the family,

Ages of family members

Number of employed adults

What are the critical consumption factors when purchasing a vehicle?


X3 Consumer Target• Young couple & Full Nest I

• Need a SUV with space but don’t need a large one with young children

• Looking for a SUV but Price-sensitive

• Empty Nest I & Women back to work

• Downsize their SUV with no children living with them

• Have money to afford luxury

6. Why is local manufacturing a source of differential advantage for an automaker? [Almost all the major import brands in the US have local manufacturing facilities. For example, Hyundai and Kia have their plants in Alabama and Georgia, USA, respectively, and Toyota's plant is in Kentucky, USA]

Advantage for Local Manufacturing

• Assembly line was completely integrated to shorten the delivery time of car

Improvement in delivery time

• With local production, the car price of imported brand may be as low as the local brand

Exempt from customs duty

• Logistics cost advantage

• government incentives, regional interest rates, wages and trade agreements

Cost advantage

1. What would be benefits of the mass customization in automobiles for (a) the consumer (b) the manufacturer (c ) and the dealer?

• Mass customization was commonly known as “using flexible processes and organizational structures to produce varied and individually customized products and services at the price of standardized mass-produced alternatives.”



“By capturing this lost or locked-up capital and by reducing discounts offered to move inventory, carmakers could realize total savings (reckoned by capital spent) of $65 billion to $80 billion a year. Nissan motor, for one, has estimated that this could amount to a savings of up to $3600 a vehicle”

The False Promise of Mass Customization


• Ability to find what they want without paying exorbitant premium prices

Consumer

• Customize products at lowest costs, reduced overheads, produced higher margins

• Less inventory with dealer

Manufacturer

• More profit, don’t need to offer discounts to sell cars

Dealer


Cracking the Code of Mass Customization (2009)




• “The fundamental message is that a company should “customize its mass customization strategy” based on the requirements of its customer base, the state of its competition and the technology available.”

• “After all, what is hard to develop will be difficult to copy, and as such the capabilities can be a powerful source of sustainable competitive advantage.”


• “The alternative does so by connecting customers, either over the Internet or in a dealer’s showroom, to the vast, albeit far-flung, array of cars already in existence, including vehicles on dealer’s lots, in transit, on the assembly line, and scheduled for production. In this way, customers are likely to find a vehicle with the color and the options they most want. Automakers would not have to build to order; rather, they would enhance the customer’s ability to locate to order (a term coined by Forrester Research).



5. Would you recommend that mass customization program be expanded to other BMW models? [Back up your answer]

Failure cases in Mass Customization: BMW, Ford Motor, GM

Limited forward integration:

Prohibition of direct car selling

Interest conflicts between car dealers and manufacturers

Weak connection between carmakers and customers:

No active platform to communicate with customers

Many required

operational changes:

Achieve Strategic manufacturing flexibility

(from batch to module system, redundancy involved, more floor space)

High cost of mass customization:

Customer price sensitivity

Labor union opposition to the external assembly of modules

Not successful!


Success Case of MC: BMW X3 Model




“Your X3 on the Assembly Line”

X5 Full-size SUVs

2014 X4

X5 Full-size SUVs 2014 X4

Production 1999~ 2014~

Class Mid-size CUV Compact crossover SUV(like BMW X3)

Assembly • Spartanburg, South Carolina, USA• Mexico at the BMW de México Toluca plant.

Spartanburg, South Carolina, USA

Others Online customization available The latest addition to BMW’s X Series



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BMW Final

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