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BMW Strategic Appraisal Contents BMW Strategic Appraisal...............................................................................................0 Executive summary........................................................................................................0 Company background....................................................................................................0 Internal environment audit.............................................................................................1 Strengths....................................................................................................................1 Weaknesses...............................................................................................................2 Breakdown of BMW Group's worldwide automobile sales.........................................2 Leadership style.........................................................................................................3 External environment audit............................................................................................3 Pestle..........................................................................................................................3 Industrial and Competitors analysis...............................................................................5 Marketing strategies.......................................................................................................6 Target market..............................................................................................................7 Market segments........................................................................................................7 Branding.....................................................................................................................7 Position in market.......................................................................................................8 Conclusions and Recommendations.............................................................................8 References...................................................................................................................10 Appendix..........................................................................................................................14 Appendix 1................................................................................................................14 Appendix 2................................................................................................................15 Appendix 3................................................................................................................16 Appendix 4................................................................................................................16

Executive summary This report outlines analysis of BMW’s background and internal environmental factors, external marketing environment analysis, marketing strategies and recommendations for the organisation. (Complete description in Appendix 8) Methods of analysis include Strength and Weaknesses comparison, Pestle and Perceptual Map. Research and its analysis show that BMW is a known premium brand that produces vehicles for luxurious automobile market. BMW products are not just qualitative and advanced in technology, they also symbolise a specific, luxurious and dangerous lifestyle that many want, but only few can afford. BMW operates across four continents, in 14 countries and 30 sites globally. BMW’s marketing targets audience in a visionary way. Target market is classified as succeeders (Dudovskiy, 2013) as their sizeable income will retain them as loyal customers. It is recommended that BMW: broaden their target market to increase their market share ● look for ways to reduce costs while keeping high standards ● increase their advertising to keep consumers aware of new products and promotions ●

Company background Bavarian Motor Works (BMW) is a luxury car and bike manufacturer. BMW Group has a long history since they were founded in 1916 referring to Appendix 1. BMW employs 116,324 employees referring to (Statista, 2015). In 2014 sales have surpassed two million mark and revenues went up 5.7% to €80.40 bn referring to (BMW, 2015). Sustainable mobility is a vital feature in BMW cars today and is something that needs further development. BMW is looking at further innovations which include new forms of driving such as diverless technology and new ideas that would steer company to success while ensuring that BMW will be the market leader in future.

Internal environment audit Value chain shows the total value that BMW delivers as end product, therefore it is a good way to reflect on internal environment in the company. Figure 1 shows value chain of BMW based on Porter's Value Chain (1985). One of BMW core values is partnership between supplier, and relationship with customers. In order to keep high standards, BMW ensures that their employees are satisfied with the working conditions and salary.

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Fig. 1. Michael Porter's Value Chain based on BMW (2013)

BMW have developed production plants across the globe by manufacturing units in South Africa, USA, Australia due to high demand of their products. To ensure high quality standards they have established faculties for training, workshops and after sales services across Asia and Europe. Tangible assets of BMW are their headquarters, factories, machinery, assets, all the valued employees and designs of their vehicles. Intangible assets are their strategies and ideology which can be reflected in BMW’s brand image, associations, personality and core values. BMW’s customer perception of their company and the relationship with stakeholders.

Strengths ● Quality products - BMW focuses on high quality products made out of qualitative materials by skilled and experienced employees. This ensures that BMW brand image reflects highest quality products. ● Brand recognition - BMW brand is recognised worldwide and is associated with masculinity and luxurious lifestyle. ● Skilled employees - Employees working for BMW have in-depth experience and are skilled in order to produce quality products. ● Advanced technology - BMW has been using advanced technology in their cars and bikes and they have made environmentally friendly vehicles that reduce carbon footprint and even develop use of more efficient fuels. ● Focussed target market - BMW focuses on wealthy people that can afford luxurious products therefore maximising sales in this market. ● Various production facilities - BMW have multiple factories across the globe that produce products for those regions therefore saving on shipping costs while supplying demand in those regions.

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Weaknesses ● High costs - Skilled workforce and highest quality materials are expensive and this increases costs. Costs should be decreased by keeping quality high and ensuring employee welfare. ● Small target market - BMW has a very focussed target market that covers a fraction of car and bike market. If BMW would increase their target market by launching a new product series they would be able to target a new market segment therefore increasing potential customers. ● Product price - Average BMW car is more expensive than similar competitors vehicle. Price directly affects sales as some customers won’t we able to afford BMW and will chose a competitor’s vehicle instead. ● Advertising - In comparison to direct competitors BMW produces less adverts. This results in fewer people being aware of new BMW products and lower sales.

Breakdown of BMW Group's worldwide automobile sales BMW operates worldwide and judging by the regional sales of 2014 (Figure 2) largest market share for BMW is in China with 21.6% and United States with 18.7% followed by Germany with 12.9% and Great Britain with 9.7% of total sales. Referring to (Boston, 2015) these statistics reflect that BMW has been successfully using their strategy in order to appeal to masses.

Fig. 2. Breakdown of BMW Group's worldwide automobile sales (2015)

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Leadership style BMW uses visionary leadership style referring to (Karlgaard, 2015). When H. Panke became the chairman of BMW in 1982 he changed the way company was managed and made employees follow his vision which has “retooled BMW’s brand from yuppie toy to performance luxury car the equal of rival Mercedes-Benz” (Karlgaard, 2015). This management style allowed BMW to become the biggest seller of luxury vehicles. (See Appendix 2 for BMW Group compliance operations network).

External environment audit Pestle Political factors - political factors that BMW face are taxes that different governments set for the company. BMW can reduce costs on taxes by keeping their main operations in countries with lower taxes. Economical factors - economical factors that impacts BMW are constant GDP fluctuations in EU countries for the past years. These fluctuations have impact on BMW’s customer behaviour and spending patterns. Another factor which affects BMW’s sales is the drop of crude oil prices. Referring to (Bloomberg, 2015) price has decreased to 35$ per barrel. With prices of oil being so low, demand for hybrid and electric cars will decrease, slowing down the whole industry. Social factors - Changing trends and cultural preferences affect BMW sales. Target market criteria shows that those who buy BMW vehicles are aged from 30-50, of a non specific gender, have a high loyalty degree and have high disposable income. Rise of life expectancy in developed countries and changing social values have impact on consumer spending trends. Technological factors - BMW have tried to increase their levels of popularity through “green” technology. New selection of hybrid cars from BMW are advanced in technology that is environmentally friendly. BMW have been able to increase demand for their products by proposing an alternative. According to (BMW, 2015) by 2020 BMW hope to introduce concept of their driverless car, which would be appealing to customers and increase sales. Legal factors - Legal factor that affects BMW is the new CO2 emission regulation that European Commission have set mandatory for newly manufactured vehicles. This is a new strategy to improve fuel economy. Regulation states that any car which is

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registered in EU is not permitted to have more than 130 grams of CO2 per kilometre by 2015 according to (European Commission, 2015). BMW is already producing cars that meet this standard and also has launched their new environmentally friendly cars which are hybrids. Environmental factors - Referring to (Siu, 2015) BMW gained Newsweek Green Score of 72.2 percent. Ecological factors that surround BMW are the need to increase consumer concern in relation to environmentally friendly products. By BMW going “green” and having a loyal customer base, awareness will increase and this will generate sales. BMW should also recycle materials and reduce waste as this will reduce carbon footprint and lower costs. Reduction of carbon footprint attracts customers that care about environment and therefore increases sales.

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Industrial and Competitors analysis Referring to (Jankovic, 2015) luxury car & automobile industry is estimated at €351 bn with annual growth of 5.4% (2010-15). ● Luxury vehicle industry is filled with independent dealerships ● Dealerships sell new and used luxury vehicles and offer after sales service ● Entry barriers are high ○ Medium competition ○ Matured lifecycle ○ High technological changes ○ Medium regulation ● Market is owned by large companies, but also affected by small ones ○ Market leaders: appeal to masses with variety in models and lower cost ○ Smaller companies: offer personalised experience and highly customised product Even though BMW is at the top in luxury car market doesn’t mean that BMW controls the industry. Referring to figure 3 which shows U.S. luxury car market share in 2014 (Statistika, 2015) it’s visible that Mercedes-Benz (17.1%) is close to the BMW (17.6%) and Lexus (16.1%) isn’t far behind either. These statistics indicate that the main BMW competitors are Mercedes-Benz and Lexus. This is because Mercedes-Benz and Lexus are also producing luxury cars and they both are known as premium brands. BMW should monitor what their closest competitors are doing and change their strategy accordingly to keep their market share.

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Fig. 3. U.S. luxury car market share in 2014 (2015)

Marketing strategies BMW released their new i8 referring to figure 4, marketing strategy used for BMW i8 advert was evolution of BMW vehicles. This is a great example of the way BMW promotes their new products. BMW i8 was the first hybrid car from the German manufacturer. It has performance of a sports car but fuel efficiency of a small car. “We deliberately decided on a campaign that tells of the genesis of the BMW i8 - a journey from the impossible to the possible” Althaus, S. 2015. BMW i8 Launch Campaign. 2015, Tokyo.

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Advert is minimal, it allows consumer to focus solely on the car.

Fig. 4. BMW i8 Adverts (2015)

Target market BMW has a very specific target market as it helps develop product that will have demand. (More on BMW target market in Appendix 6) ● Demographic ○ Age 30-50 ○ Gender neutral ○ High disposable income ● Behavioural ○ High loyalty ○ Benefit sought status and comfort ● Psychographics ○ Social class A ○ Succeder lifestyle

Market segments BMW uses market segmentation to divide consumers in groups of similar characteristics. The market segment BMW focusses on is their target market. Target market segments are broken down into different categories which are psychographic, demographic and behavioural these are explained in depth in Appendix 7.

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Branding BMW’s branding strategy directly affects how well they will perform. BMW branding connects to what their target market needs and wants. BMW’s strategy has always been to keep its clientele faithful to the brand for long term as it is more profitable to keep existing customers than to looking for new ones. BMW brands their products in a way that their customers see that it's not just about the product that is offered to them, but also the status it offers.

Position in market

Fig. 5. Positioning Perceptual Map (2015)

Figure 5 shows position of BMW in comparison to its competitors. Bentley, Range Rover, Jaguar and Volvo are on the top-of-the-range in the perceptual map as they are high quality standard cars as well as high priced. Audi, Mercedes and BMW are also high quality and high price cars. BMW should aim to increase their quality by adding features and reducing prices as it would attract more customers. It is important to lower costs and prices but it is vital for BMW to keep their quality high.

Conclusions and Recommendations In conclusion BMW’s innovative approach have enhanced them to be creative and leading marketers in the industry of automobiles. Customers perceptions of their products and services is appreciated, recognised and the brand being high-valued globally.

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Main strength of BMW is the brand recognition, and status it provides, that have been developed over long time as it attracts most customers. Main weakness is the small target market. This is because BMW could obtain much larger market share by launching a new product series and targeting broader demographic referring to Appendix 7. Pestle analysis revealed that BMW can save on taxes by opening new factories in countries where government has lower tax rates. BMW might need to freeze any new hybrid car series taking in consideration the reduction of oil prices as this will affect demand of their alternative fuel. Technologically BMW has been well established and they have projects in place to make their driving experience even more comfortable with their driverless car which will boost their sales. Legally BMW has to look towards future regulations and abide them. Environmentally BMW has been placed at the top of Newsweek Green Score, this is a good thing but BMW needs to keep improving to stay at the top as the industry won’t stop becoming more environmentally friendly and standards will increase over time. Key findings show that BMW doesn’t have as many advertisements as some of its competitors and their target market is very small which keeps their products very desired, but lowers the number of potential customers. It is recommended that BMW: broaden their target market to increase their market share. BMW should launch a new budget product series or acquire a company that produces middle class vehicles in order to expand their market share. ● look for ways to reduce costs while keeping high standards. This can be done by reducing waste of expensive materials that are considered leftovers and to reduce leftovers the product design has to change to maximise use of all materials. ● increase their advertising to keep consumers aware of new products and promotions. This can be achieved by using social media and interacting with consumers. This is very effective way and will also increase customer loyalty. ●

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References Avery, Gayle C. Understanding Leadership. London: Sage, 2013. Print. Figure 1. Michael Porter's Value Chain based on BMW. (2013) [Diagram] At: http://writepass.com/journal/2012/11/strategic-analysis-pestel-porter-and-swot-of-bmw/ [Accessed 14 Dec. 2015]. Figure 2. Breakdown of BMW Group's worldwide automobile sales. (2013) [Diagram] At: http://www.statista.com/statistics/267252/key-automobile-markets-of-bmw-group/ [Accessed 10 Dec. 2015]. Figure 3. U.S. luxury car market share in 2014. (2015) [Diagram] At: http://www.statista.com/statistics/287620/luxury-vehicles-united-states-premium-vehicle-market-share/ [Accessed 11 Dec. 2015]. Figure 4. BMW i8 Adverts. (2015) [Advertisement] At: http://www.autosaur.com/bmw-i8-ads-set-forlaunch-created-by-good-will-hunting-director/ [Accessed 13 Dec. 2015]. Figure 6. BMW i8 Adverts. (2015) [Diagram] At: http://www.bmwgroup.com/bmwgroup_prod/e/0_0_www_bmwgroup_com/unternehmen/unternehmenspro fil/compliance/organisation/index.html [Accessed 1 Dec. 2015]. Statista, (2015). Key automobile markets of BMW Group in 2014 [online] Available at: http://www.statista.com/statistics/267252/key-automobile-markets-of-bmw-group/ [Accessed 29 Nov. 2015]. Boston, W. (2015). BMW Retains Title of World’s Top Luxury Car Brand. [online] Available at: http://www.wsj.com/articles/bmw-retains-title-of-worlds-top-luxury-car-brand-1429022230 [Accessed 29 Nov. 2015]. BMW. (2015). BMW Group : Cultural Background. [online] Available at: http://www.bmwgroup.com/bmwgroup_prod/e/0_0_www_bmwgroup_com/verantwortung/diversity_inclusi on/kultureller_hintergrund.html [Accessed 29 Nov. 2015]. BMW. (2015). BMW Group : Company : History : Milestones. [online] Available at: http://www.bmwgroup.com/bmwgroup_prod/e/0_0_www_bmwgroup_com/unternehmen/historie/meilenste ine/meilensteine.html [Accessed 29 Nov. 2015]. BMW. (2015). BMW Group : Company : Company Portrait : Compliance : Management System. [online] Available at: http://www.bmwgroup.com/bmwgroup_prod/e/0_0_www_bmwgroup_com/unternehmen/unternehmenspro fil/compliance/management_system/index.html [Accessed 29 Nov. 2015].

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DeMattia, N. (2015). Who is BMW's biggest competitor now?. [online] Available at: http://www.bmwblog.com/2015/03/02/who-is-bmws-biggest-competitor-now/ [Accessed 29 Nov. 2015]. Statista. (2015). Luxury car market share - United States 2014 | Statistic. [online] Available at: http://www.statista.com/statistics/287620/luxury-vehicles-united-states-premium-vehicle-market-share/ [Accessed 29 Nov. 2015]. Dudovskiy, J. (2014). BMW PESTEL Analysis - Research Methodology. [online] Available at: http://research-methodology.net/bmw-pestel-analysis/ [Accessed 1 Dec. 2015]. European Commission. (2015). Reducing CO2 emissions from passenger cars. [online] Available at: http://ec.europa.eu/clima/policies/transport/vehicles/cars/index_en.htm [Accessed 13 Dec....