BY GROUP 8, SECTION B
MONISHA B R(PES1201702279)
KARTHIK B A(PES1201702061)
MITHUN M BHAT(PES1201702413)
TABLE OF CONTENTS
Excecutive summary 3
Company analysis 3
Customer analysis 3
Competitor analysis 3-4
Environmental analysis 5
Situational analysis 6-7
Marketing strategy 8-9
Ansoff’s matrix 10-11
Marketing mix 12
BMW Distribution channel 13
Competitive strategy using Porter’s model 13-14
Financial forecasts of BMW 15
Bayeriche Motoren Werk (BMW) was established in 1913 in Germany who build military aircrafts & aircraft engines. As the company grew, the BMW group also began to produce automobiles, motorcycles etc. It has achieved strong market presence in over hundred countries like United States, United Kingdom, Canada, China, India, Korea etc.
Now, the company has positioned itself in the premium segments with three world’s famous brands i.e. BMW, Mini, Rolls-Royce. In the following marketing plan the things discussed are
? The challenges ; strategic goals
? The Situational analysis
? Competitor analysis with rivals like Mercedes Benz.
The collaborators of the company, the PEST analysis, SWOT analysis are presented to identify the factors that determine where the company stands out in the auto – making industry.
The market segmentation of the company has been discussed briefly as what kind of strategy the BMW has adopted to be profitable ; remain to be the best of all. It includes the concept of the marketing mix 4ps ; defines every aspect of the company from its product, price, place etc for the promotional tool that they use to market their products.
In the end, the current revenue ; growth of the company has been mentioned. The marketing plan has been made to understand the efforts of the BMW Company as how their brand has been ingrained in the minds of its customers.
Strategic goals of BMW is to lead BMW group in to completely new era, by leveraging innovative technology, digitalizing and focusing on sustainability to deliver unique and satisfying customer experiences. It also involves embracing the opportunities that leads to complete transformation provided by their industry through innovation, expanding technological competencies, enhance the interaction with individuals, products and services and drive progress in sustained mobility which will secure the success of BMW group against its competitors. Its strategic approach involves:
Brands and designs of products.
Customer services and experiences.
The BMW Group has aimed to make an everlasting impact and to be the world’s no.1 premium automaker. To achieve this goal, the company is working on strengthening its internal synergy among its brands BMW,Rolls-Royce and Mini as well as together form a new platforms and produce engines that can be shared by more model brands.
The Vision right now is to create brand new picture of the BMW Group’s premium mobility for the future. Currently they are focusing on “vision next 100 vehicles” ie to build autonomous, connected, emission-free-vehicle,
The BMW group is known for its passion to bring first class performance and to keep up with this culture, the company hire those employees who can bring out team spirit, takes independent risks and has a thirst for learning. They also look for combination of operational excellence and fresh thinking in their employees.
The Germany’s big three automobile manufacturers Audi, Mercedes Benz and BMW conquers about 80% of the global luxury market. According to survey conducted by statista from 2006-2017 BMW groups has sold around 2.6 million vehicles worldwide and has been ranked among the leading automobile manufacturers in the world. It owns a crown of global luxury sales before slipping behind Mercedes in 2016.
BMW has customers only from premium income level group, since its portfolio consists of only expensive vehicles not the budget vehicles to target households or individual with lower income. The company has very broad range when it comes to demographic segmentation (i.e age) from 25-65 both females and males of different life-cycle stage. They have both domestic and international customers mostly from urban areas and the one who are very loyal to them. These customers are very determined and ambitious in their life and belong to upper societal class.
The other two brands of Germany’s big three leading automobile manufacturers Audi and Mercedes Benz has been a really tough competitors for BMW. They are also named as traditional rivals of BMW. When it comes to sales Mercedes Benz is giving tough competition to BMW than Audi. Not just these traditional rivals, its facing competition from non traditional rivals like jaguar.
Mercedes Benz the German automobile manufacturer, which is a multinational division of the German manufacturer Daimler AG is well known for its luxury automobiles.
The market positioning is always meant for the upper affluent class. BMW’s long-standing marketing message is “the ultimate driving machine” for past 40 years. It has been positioned as the world’s leading premium manufacturer in the automobile industry. Since its inception brand has stood for one thing “sheer driving pleasure”. For many of its customers owning a BMW has symbolic meaning of quality, social class, engineering expert and social class.
• Subsidiaries: South Africa, china, India, USA, Egypt, Canada etc.
• Joint Ventures: BMW had extended its joint venture with Brilliance China Automotive Holdings till 2028, which will contribute the growth of both the companies.
• Distributors: The Company has several distributors worldwide
Political and Legal Environment
The laws and regulations of the country always impact the automaker industry. These laws are associated with the environmental norms that constitute any automaker industry. Since Germany is highly stable in its politics there is no fear of political riots, the only drawback is the highly possessed tax within the country, and the politically instability in emerging countries like Brazil, Russia and China may influence spending pattern of local customers.
Export duties are high to few countries like Europe which has 10%, due to its increasing popularity in European countries.
Most of the economic factors that affect the company are the changing customer demands, exchange rates, customer’s inflation. However it’s impossible to meet expectation of international markets due to change in these factors which vary with each country especially for the premium brands like BMW its impossible to meet expectations of customer of all income level group and hence should focus on improvisation of their products.
BMW has been renowned for its technological expertise. Even then its constantly striving to be the best they can be by improvising technology to gain clear competitive edge, by using new and sophisticated design to attract more customers in the market and by modifying or restricting technology resulting in environmental pollution.
Social and Cultural Environment
Social and cultural factors differ with each country, which may change their perception of product depending upon their values and beliefs. From past few years BMW has been specializing to deal with different cultures, values, expectation and income group of people. As success formula in one country may not work in other country.
SWOT Analysis of BMW
BMW group: Group consist of 3 brands namely BMW, MINI ;Rolls Royce all positioned in the premium segment. Also BMW is not only a car maker, they are one of the world leaders in motorcycle production, aircraft engines and marine engines.
Innovation ; technological advancement: Continuous process improvement ; technological advancement in its R;D has made it a market leader in the premium segment for car sales. The Brand is known for its quality, reliability ; superior customer servicesupport. And more importantly for the lovely design of its range of cars.
Renowned brand in automobile industry: With its innovative advertising campaigns company has succeeded in positioning it as a premium brand resulting into High TOMA (Top of mind awareness).
Workforce: It has created a pool of 100000+ highly skilled employees who continuously work in 100+ countries to differentiate BMW’s offering from their rivals.
Product portfolio: BMW have diversified product portfolio from SUV’s to Luxury Sedans to sports cars. The product line and product depth are fantastic in terms of quality and design.
Asian markets: There is very little to work upon in matured and developed economies. BMW has made the smart move by starting early in developing economies. And it is now the top selling luxury car in developing economies like India and China (in terms of total number of vehicles sold in a year).
Plans for hybrid models: BMW has plans to launch models which run on alternative fuels like Electricity and natural gas. These plans show that the company is making inroads to be prepared in the future where fuel might become a problem.
Cars recalled: Controversies relating to recall of cars on account of some technical functionality or non-abidance to govt. led rules is becoming very common, most recent one is BMW recalling 1.6 million cars due to airbag concerns. For a brand like BMW it is affecting its brand image.
Strategic alliances: BMW group has very few strategic alliances. This gives the competitors an edge over BMW. BMW is capable of good R;D but the implementation of the researched vehicles takes strategic alliance with different companies which BMW lacks.
Younger generation less brand conscious – The younger generation is more likely to spend the money on electronic appliances then saving it for a premium car.
Increasing product portfolio: By increasing their product portfolio and introducing new series in different segments they can increase their sales as there will be more choices for customers under the same brand. Off course, this is the best opportunity for any brand in the market.
Strategic Alliances: This can prove a smart strategy for BMW. BMW can use other company’s specialized capabilities to differentiate their offerings.
Changing lifestyle & customer groups: With changing customer lifestyle and more & more inclination towards premium brands it is certain that this segment is growing fast. In developing nations the growth rate is even as high as 33% YoY.
Market expansion: Entering new markets will help the company to increase their targeted revenue. This is the only way to ensure that they remain on top of the revenue chain for developing economies.
Competition: Low cost car companies with their stylish & inexpensive offerings will be major threat to the company. Also Stiff competition from other companies in premium segment like Audi, Mercedes is a determining factor.
Price factor: More and more people are becoming price conscious and with the younger generation on an electronic purchasing spree, there is threat that in the near future luxury cars will stop receiving as much attention.
Rising fuel problems – BMW needs to strongly adapt to the need of green fuel and green machines so that it can absorb the potential customers who are looking for green car solutions, especially in the mature markets.
The market segmentation, targeting and positioning is mostly done by companies as businesses cannot fulfill the demands and needs of the consumers of the whole population in an equal manner. Segmentation helps in dividing the population into different market segments according to the criteria of demographics, geographic, behavioral and Psychographic.
City/town: since its sports sedan car it is for the people living in cities.
Country: It is meant for those countries where racing is popular.
Age group: 20-45 (racing is popular among these age group)
Gender: Mostly popular among men.
Occupation: For racers.
Social Class: racers, premium class.
Income: high income group.
Usage occasion: Racing.
Marketing Strategies of BMW
Global marketing strategy of BMW
The company understands the logic of marketing the product globally and serves the customers based on their needs and expectation; It has adopted different marketing mix to sell its cars to different socioeconomic segments, aggressively focusing on premium segment customers. BMW try to sell only those consumers who have high standards for quality, performance and luxury as their products are comprises these attributes. The company focuses on the premium segments on a global scale. Producing attractive and trend setting products which ranges from 3-7 series that focuses on affluent customers by successfully demonstrating the global marketing strategy. BMW has managed its global marketing strategy by integrating the emotional marketing perspective, In Korea the company also donates pre-production automobiles to the faculty and students of reputed universities to further study in the automobile technology.
Innovation Strategy of BMW
BMW M5 safety car gets its special Motorsport colours applied to a special paint scheme. The paint, lights, and the M performance parts ie complete package applied to BMW M5 model which is most powerful and technologically advanced sports sedan is amazing.
BCG Matrix in the Marketing strategy of BMW
Using the BCG Matrix, we can say that BMW Group’s automobile business is a star, in terms of large share in the premium market segment and a high growth rate for its models. Its motorcycle and financial services units are considered to be question mark.
This segment has been a prime source of financial earnings, driving the company towards growth over the years. In 2015, the company has achieved more than 10% increase in net profits in the second quarter. This growth is attributed to the higher of its cash cow, the Rolls Royce (Geiger, 2016) has stated that the financial performance of Rolls Royce division indicated the setup of record sales in the fiscal year 2015, with the highest consumption of the luxury car in the US.
There are many products being managed by BMW which can be identified as Stars. For instance, cars included in BMW series 5 such as Sedan ; Touring are some of the cars that have been performing well. BMW mini is another vehicle that can be placed in this quadrant due to its financial performance ; future growth prospects. The investment in BMW Mini is deemed as a profitable decision by the management, which has sold an average of 250,000. The company has the product line, adding new designs of the BMW mini, strengthening the performance of its star product.
The question marks for BMW is its SUV series which has been a profitable venture, however it’s revenue generation potential has declined, resulting in loss of its market share in the luxury car segment. The SUV business unit may be able to improve its financial performance in the coming months. SUV may increase, helping the company to improve its market share. The industry has the potential to further grow, suggesting at the future promotion of SUV br& into a leading position in the global automotive industry.
The BMW Z3 & Z4 cars have been identified as dogs as these vehicles have not been able to gain similar amount of sales as generated by the other being produced by the company. The performance of these vehicles was not up to the performance standard that other BMW cars have established, making the Z3 & Z4 gain negative feedback from the customers.
Competitive advantage in the Marketing strategy of BMW
Continuous process improvement & technological advancement in its R&D is the core of the competitive advantage of BMW. It is known for its quality, reliability & superior customer service support. BMW has adopted policy of customer service=growth driver as an underlying principle to grow its market.
It is Present in 150+ countries around the world, Europe & North America is the market from where 65% of its sales come from but with the advent of growing developing nations like Asian markets, company started focussing on these markets aggressively to drive the future sales.
Segmentation, targeting, positioning in the Marketing strategy of BMW
The luxury car manufacturer segments its offerings on the basis of demographics, psychographics & Behavioural factors.A typical customer of BMW is the one in the mid age (35-50), is excelling in his/her career, have a taste of aspirational products & values his own social status. The benefits required by these people are superiority, performance, reliability & quality.
Like all other organizations, BMW followed some strategic development directions in order to expand them and to increase their sales. Ansoff matrix is a tool which helps organizations, like BMW, to develop strategy directions that they can follow, regarding the products range and markets, while considering the capabilities and stakeholder’s expectations of the organization. As it can be seen in the figure#1, there are four strategy development directions. BMW followed almost all of them. We will be discussing them one by one.
Market penetration involves increasing market share by achieving growth with existing products in existing markets. BMW’s strategy for this was ongoing growth & expansion. One such expansion was opening of new sales subsidiary in Malaysia “BMW Malaysia Sdn Bhd”. This was a joint venture with BMW’s local partner Sime Derby. BMW’s target was to further intensify their presence in the market so that it can fully exploit the growth in the market*1. As part of its expansion to improve its international presence BMW its sales organizations in Greece, Irel&, Luxembourg & Denmark*2. In 2003, BMW group also signed a contract for joint production & sales venture in china, which was fast-growing market for BMW*3. BMW was careful at this stage because it had to sell off its previous alliance Rover in 2000.
This strategy involves about how an organization can sell new or modified products into its existing markets. BMW’s approach towards this was to launch a new model every three months from 2003 to 2005*4. BMW named it as” product & market offensive” ; pushed itself hard to achieve this*5. This can also be linked with BMW’s diversification strategy.
6 series provides an attractive mix style, performance, modern technologies & practicality at a price that appears to hail from the past decade. BMW launched this when the international demand for luxury cars is at the high end*9. It is very important to know that many few companies balance themselves between the intersection of art & business as successfully as BMW does.
This is a strategy where a business sells new products in new markets using organization’s existing capabilities or resources. BMW’s approach can be linked to related diversification by developing beyond current products & services with its existing capabilities. BMW diversified itself by producing smaller 1 series cars. One may argue that BMW was already producing MINI, but it never had small cars with their main BMW. BMW also entered the same year in the new market segment, car racing, with the launch of X3 Sports Activity Vehicle & the large 6 Series Coupé.*10
This is a strategy where a business aims to sell its existing products in new markets. While doing product development, BMW was following the market growth strategy at the same time. Main reasons because of which an organization decides to itself in the new market are its capabilities & market considerations. While Western Europe, the USA, Japan & the Pacific region have been the main markets for BMW, new markets were to be exploited as well. BMW Z4 reached in Europe & Asia & BMW X3 was also introduced in these regions, while the high-end models, like 7-series & 5-series was also growing in emerging china. It was also important to exploit the fast-growing UK, the Italian & the French markets. India was also a new market for BMW where it can introduce its vehicles
Marketing Mix 4Ps OF BMW
BMW M5 is a sports sedan version of the series executive car, it has been built by the Motorsport division of BMW. It had made impossible possible: the performance of thoroughbred sports car combined with space for family and luggage.
The strategy adopted by BMW is the Value based pricing. BMW M5 price was 1.5cr in india. BMW also uses Segment pricing strategy by offering the best pricing options to the students. Factors that affect the prices are engine size, motor sport version etc. The BMW group also has many discount offers for its valuable customers.
The company use huge market dealership and imports from non dealership networked countries. The company is operating in almost 100 countries worldwide with approximately 4000 dealers who are authorized to sell new and used cars. BMW M5 was launched in many countries.
BMW has used several advertising means for promoting their products. This includes television for branding campaigns, videos, new car launches, publications and magazines, outdoor campaigns, brochures, internet etc.
PORTERS 5 FORCE MODEL
Rivalry among existing competetors: High
Some competitors of same size
Low industry and market growth rates
Barriers toexit are high
Threats of new entrants:Low
High initial investments and fixed costs
Limited access to specialized suppliers
Existing players have close customer relations
Bargaining power of buyers:Medium
Buy large volumes
Switching to an alternative product is relatively simple and not related to high costs
Products are undifferentiated and can be replaced with substitutes
Bargaining power of suppliers:High
Products are customized and valuably differentiated
High switching cost to alternative suppliers
Market dominated by many suppliers
Threats of substitutes and products and services:Medium
Close customer relationship
Brand loyalty of customer is high
No penalties or low switching cost for customers
As we have discussed, strategic planning is very important for any organization to achieve its short & long term goals. Especially, with the booms & busts of the global economies in the last few decades, it becomes important to execute their strategies carefully. An important part of the strategy is to get ready for any future changes & to be prepared to face the challenges brought by these changes. This is the reason; strategy should be capable of minimizing the threats & maximizing the opportunities which are brought by the changes.
BMW brand earned the reputation of engineering excellence over the years. In this report, we have stated & evaluated the strategies of BMW for two different periods of times. We discussed the strategies brought by Helmut Panke, the CEO of the company. We evaluated how well his strategies performed with respect to external environment.
In the second part of the report, we discussed the strategies from 2005 till today. We mentioned the steps which BMW took due to the recession. We also discussed about the political & economic factors which BMW had to cope with because of the recession. BMW’s sales went down but as of today they started to bounce back ; company sees itself as one of the best ; profitable company in the automobile industry.
BMW group is having the firm commitment to be a global player, which is aided by its regular attempts to further differentiate its product line, because of which it had been able to reach to different markets ; thus different customers, as it products provide value for money (Brand Image). But our main concern is about BMW’s strategy of mass production along with its premium brand. BMW has a threat & need to be very careful about it because it has already seen the problem with the acquisition of the Rover.