Examen Final 2020-12-19- Buisness in global context PDF

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CASE%STUDY%% Business Purpose Framework (10pt) % % VISION& • To%have%an%electric%line%up%for%there%main%selling%products%% % MISSION& • %EXTERNAL:%Goal%to%become%global%leader%of%electric%vehicles%% • %INTERNAL:%Keep%the%mini%at%its%historical%home%base%in%the%UK%% % VALUES&& • Fun%% • Young%% • Stylish%% % CORE&BUSINESS& • %Mini%creates%a%sense%of%personality%and%it%is%very%appealing%to%many%costumers,%there%precut%is% no%just%a%care%but%a%statement%% & % Diamond-E Framework (35pt) Management:%%

Strategy:%% Organization:%

Resources%% Management / J.A. Pérez López Anthropological model (5pt)! %%% %Mechanistic%Model% • %Extrinsic,%Trying%to%make%the%highest%possible%profit%% • %effectiveness%%production%are%number%one%on%there%priority%list%% %%% Organization / Functional, Multidivisional or Matrix Structure (5pt) Functional: • High control, high efficiency • The only way to maintain there tight production schedules to very small margins • Hierarchical o Pros: maximization of production, cultivation of specialists

Environment:%%

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o Cons: slow response, Poor accountability, Restrictive organizational view Mine produces only four models and will ad the electric model, so employees can really specialize in each one of theme and there specific tasks Stable external environment(until the brexit change )

Resources (5pt) • Production plants in Austria, Germany, UK, Brazil, India Thailand, South Africa, USA, China, India, Indonesia, Egypt, Russia, Malaysia, Netherlands. • Part plats • The cooper heritage • The love for the mini and the icon it had become !

Strategy / Blu Ocean, Read Ocean, Differentiation Strategies (5pt) / Blue%Ocean% • %Fairly%new%market% • %It%is%massive%and%affordable% • %sustained%innovation% • %Competition%is%starting%to%emerge%there%is%not%yeat%cleare%leader%and%there%are%many%new% costumers%to%get%%% • BMW%and%MINI%can%be%consider%as%red%oceans%but%by%expanding%the%industry%buy%the%creation%of% affordable%electric%cars%% !

Environment / M. Porter Five Forces Model (10pt)! LOW,%MODERATE,%HIGH% % 1. Threat%of%new%entrants% • %Moderate%% o %The%investment%to%enter%is%very%big%but%there%are%steal%many%automotive%brands%that% have%not%yet%expanded%to%the%electric%power%sector.%% % 2. Bargaining%power%of%customers% • %High%% o %there%are%many%costumers%and%the%purchase%just%one%car%% o %competing%products%are%strong%and%as%mini%steal%in%development.%Several%new%thing%to% chose%from%% % % 3. Threat%of%substitute%products% • %Moderate%% o The%MINI%specialty%the%COOPER%and%COOPER%S%have%a%special%connection%or%sentimental% relation%with%its%fans%and%owners,%one%of%the%quintessential%racing%brans%(a%race%car%for% every%day)% • %Cars%such%as%the%VW%golf%also%create%this%relation%with%there%owners%non%the%les%they%are%not% celebrity%worthy.%% %% 4. Bargaining%power%of%suppliers%

• •

%the%power%of%suppliers%is%significant%when:% High%% o There%are%many%emerging%products%with%the%need%of%the%same%resources,%opposed%to% internal%combustion%engines%electric%engines%and%batteries%are%very%similar%amongst% each%other%% o %The%supplier%hold%of%the%products%can%cost%millions%of%dollars%to%the%firms%%

% 5. Intra-industry%rivalry% • High%% o %the%sector%is%not%concentrated,%every%day%new%development%arrive.%comparable%size% o %barriers%to%exit%are%high% o fixed%costs%are%high% o They%are%all%fighting%for%shares%of%the%market%(almost%all%consumers%are%new%)% % 6.%Barriers%to%exit% o competition%% o Infrastructure%(warehouses,%assembly%lines,%parts%)% % % Growing your venture (5pt) • %CAGE% • %(high,%moderate%or%low)% o %Cultural:%low%% § MINI%what’s%created%in%the%UK%and%haves%been%loved%for%generations% o %Administrative:%% § Before%Brexit%low,%after%refit%suspected%to%be%from%moderate%to% high(uncertainty)% o %Geographical:%low%% § Mainly%sold%in%Europe%and%china,%there%is%a%MINI%production%plant%in%Asia%that% supplies%china% o %Economical:%In%order%to%be%the%best%selling%brand%they%must%focalize%in%first%world% countries%with%the%best%electrical%infrastructure%for%with%the%living%standards%don’t% variate%widely%(except%for%chine%due%to%its%population%but%there%sales%will%be%in%the%burg% metropolitan%areas%were%the%gap%is%smaller)% % • Germany%% o Cultural:%low%% § Both%European%and%love%the%motors%sport%% o %Administrative:%% § Before%Brexit%low,%after%refit%suspected%to%be%from%moderate%to% high(uncertainty)% o %Geographical:%low%% § In%Europe%so%fairly%close%% o %Economical:%Low%% § World%powers,%different%Courtney%but%they%have%Ben%making%bushes%that%whay% for%decades%so%is%in%meaningless%and%new%tariffs%that%might%be%imposed%% • Netherlands%% o Cultural:%low%

o

o

o •

•

§ Europeans,%regarding%cars%bouth%countris%benefit%from%small%economical%cars%% %Administrative:%% § Before%Brexit%low,%after%refit%suspected%to%be%from%moderate%to% high(uncertainty)% %Geographical:%low%% § Specially%considering%that%the%ports%are%close%and%a%ship%caries%a%lot%more%than%a% truck%% Economical:%low% § Similar%European%developed%economies,%different%currency.%

China%% o Cultural:%high%–%moderate%regarding%cars%% § Very%different%cultures%but%when%it%comes%to%cars%they%are%more%similar%than% realized,%china%needs%small%agile%cars%to%move%in%the%crowded%cities%and%there% love%for%Motorsport%and%car%history%is%significant.%% o %Administrative:%Moderate%–%High%% § Before%Brexit%moderate%to%high,%after%Brexit%suspected%to%be%the%same%or%a%little% higher%%% o %Geographical:%High%% § They%are%almost%on%opposite%sides%of%the%world%non%the%less%there%are%many% BMW%plants%in%asia%% o Economical:%moderate%% § %Electric%cars%need%the%most%advanced%electrical%grid%fount%only%in%Chinas% metropolitan%areas%where%GDP%per%capital%is%more%similar,%different%currency%%%% Slovakia%% o Cultural:%moderate%–%low%% § A%European%country%with%EU%ideals%but%cheep%labor%force.%% o %Administrative:%% § Before%Brexit%low,%after%refit%suspected%to%be%from%moderate%to% high(uncertainty)% o %Geographical:%low%% § Continental%Europe%% o Economical:%Moderate% § Variation%on%GDP%per%capita%and%different%currency

The Fifth Discipline

Success to Successful Success a = Electric MINI Resources to a = New plant Success B = MINI heritage Resources to B = UK plant Crating the new plan outside the UK will make mini more successful

Shifting the Burden Actual conditions in UK are to complicated as a solution build it some ware else that will creat an other problem the sens of losing an important advance to being made in the UK and add it to the minis long lasting UK heritage. The fundamental solution will be creating it in the UK but this is not posible at the time.

at least two archetypes that best describes what is happening in the case study; you cannot use balancing with delay due it is very basic for this midterm; complete maps are required: (30pt) %%%%%%%% SOLUTION&& & Produce%the%electric%MINI%were%it%is%chipper,%Turkey%is%a%good%choice%because%of%the%geographical% distance%between%Asia%and%Europe(were%it%will%be%mainly%sold%the%)%the%MINI%heritage%will%always%be% British%and%it%will%be%a%quintessential%British%brand%but%making%such%a%large%and%implant%(as%part%of%the% goal%to%make%there%main%cars%electric)%in%a%country%covered%flooded%uncertainty%is%never%a%good%idea.%% & Your Solution (20pt): The 4-Cap Model (10pt) -> include pros and cons of your proposal • Sense-making: It is just to logistically complicated and if possible it will take to many years to fit in the new UK regulations and deal with many delays creating huge loss. • Relating: reassuring the MINI will always in be a UK brand, maintain the actual plant and Lear how to deal in the new ciumnstances and later reevaluate, in order to build a new electric MINI plat there • Visioning: a MINI electric car is the future and one key electric of the future of the BMW grup • Inventing: an effective leader invents the future o large-scale inventing: new assembly line structure (the electric and internal combustion cars are built diferent) o small-scale invention: Adapt to Brexit changes

Business Continuity Map (10pt) MINI will keep with business as usual, a new group raking key elect por there line up will be added non the less it is not the soul focuse of the firm, regardless that it will not be built in the UK business as usual must continue, later on the new developments will be implemented in the previos plants. %%% %

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BMW MINI: BIG DECISIONS UNDER THE BREXIT CLOUD1 Ken Mark wrote this case under the supervision of Professor Klaus E. Meyer solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality. This publication may not be transmitted, photocopied, digitized, or otherwise reproduced in any form or by any means without the permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, Western University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e) [email protected]; www.iveycases.com. Our goal is to publish materials of the highest quality; submit any errata to [email protected]. i1v2e5y5pubs Copyright © 2019, Ivey Business School Foundation

Version: 2019-02-22

In April 2017, BMW AG (BMW) faced a big decision regarding which plant should receive the mandate to produce the first electric version of BMW’s iconic Mini car. The leadership team of BMW’s operations in the United Kingdom (UK) was determined to keep the Mini at its historical home base in the UK. However, given the uncertainty arising from the UK’s decision to leave the European Union (EU)—a move commonly known as “Brexit” 2—how would the team be able to convince corporate headquarters? The main assembly line for the Mini was in Cowley, England. It employed a highly integrated production and distribution network spanning the UK and Continental Europe. Gasoline engines for the Mini were manufactured by BMW in Hams Hall in the UK, but many parts came from Germany or other parts of Europe. The decision of where to produce the Mini Electric was strategically important for BMW because it represented a key element in BMW’s plans to introduce electric versions of its main models and for 15 to 25 per cent of its cars to be sold with an electric engine by 2025.3 The Brexit process was set in motion after a nationwide referendum in June 2016. At the time, the future legal basis for trade between the UK and the remainder of the EU was highly uncertain. In 2017, the UK economy continued to be resilient despite the uncertainty around Brexit negotiations. However, depending on how the negotiations turned out, different types of trade barriers between the EU and the UK were expected to emerge. BMW needed an arrangement that would support its electric-mobility ambitions under a variety of different policy scenarios.

BMW AG

BMW was founded in 1916 and headquartered in Munich, Germany. The company focused on luxury car and motorcycle brands, manufacturing vehicles in Germany, Brazil, China, India, South Africa, the UK, and the United States. In 2016, BMW sold 2,367,603 cars and 145,032 motorcycles. The largest markets were China (516,785 cars sold in 2016), the United States (366,493), Germany (298,928), and the UK (252,205). In 2016, total group revenues were €94.1 billion,4 and earnings before interest and taxes (EBIT) were €9.39 billion. A list of BMW’s global production plants can be found in Exhibit 1. Mini was part of the BMW group; it sold 360,233 cars in 2016.5

This document is authorized for educator review use only by ROBERTO ALVAREZ LANDEROS, University of Navarra until Apr 2021. Copying or posting is an infringement of copyright. [email protected] or 617.783.7860

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The Mini—Heritage and Target Market

A fuel shortage sparked by the 1956 Suez Crisis inspired Leonard Lord, president of the British Motor Corporation (BMC), to commission the creation of a “proper miniature car.”6 Designed by Sir Alec Issigonis, it was a small, no-frills car that made optimal use of its small structure. Called the “Mini” and introduced in 1959, the car was manufactured at BMC’s plants in Longbridge and Cowley, England, as well as around the world. The car focused on functionality. Customers had to request heating units, as they did not come standard.7 It was after a partnership with racing car maker John Cooper that the Mini earned a reputation for performance, and its popularity grew when British fashion model Twiggy and American actor Steve McQueen were photographed driving the car, as well as when the brand was featured in several movies.8 The Mini brand had been owned by a series of British firms and was last owned by the Rover Group when BMW acquired it in 1994. The latest iteration of the Mini retained the design heritage of the original. Anders Warming, Mini’s head of design, described the brand as follows: “Mini has always been about new ideas, inspiration, and a lot of passion, and these things are not going to change. Mini crosses cultures, class, gender, and age. Anyone who buys a Mini feels immediately younger while driving it—it just puts a smile on your face. People keep coming back to Mini because it has real substance.” 9 In 2016, Mini’s total of 360,233 units sold set a new sales record, selling 6.4 per cent more units than the previous year.10 A typical Mini sold for between US$17,39211 and $28,892, 12 with an average price of $23,142. With BMW’s EBIT margins at about 10 per cent, the Mini brand contributed EBIT of about $830 million. In 2017, Minis continued to be manufactured in Cowley, and new models incorporated styling cues— such as horizontal double doors—that linked them to the original versions. Under the ownership of BMW, the Mini continued to be known as a quintessential British brand.13 The Mini was an urban brand, especially popular for driving shorter distances within a city. The Mini was aimed at car buyers who were—or thought of themselves as—young and who wanted to stand apart from the crowd. For example, Mini’s 2016 Super Bowl advertisement,14 its first in that highly popular space in five years, had the tag line “Those Who Defy Labels, Define Themselves” and featured sports celebrities Serena Williams, Abby Wambach, and Tony Hawk, as well as actor Harvey Keitel.15 Consumers could buy Minis from 1,580 dealerships around the world.16 The UK was the most important market, accounting for about 20 per cent of sales (see Exhibit 2). In recent years, sales had been growing throughout Europe but declining in the United States. Moreover, China was emerging as a major market, with sales expected to reach 30,000 units in 2017. Supply Chain for the Mini

The Mini was one brand in BMW’s Global Production Network consisting of 30 production and assembly sites in 14 countries. The aim of having an integrated global production and logistics network was to achieve greater efficiency in the manufacturing process, specialization in each plant, reducing cost, and shortening the time to market for cars. Buyers looking to customize their Minis had up to six days before assembly to lock in their final selections. Minis were manufactured at Cowley in the UK, with contractor manufacturer VDL Nedcar (VDL) in the Netherlands, and at three Asian locations: Chennai, India; Kulim, Malaysia; and Rayong, Thailand.17 In 2016, the majority of Minis were manufactured in Cowley (210,971 units) and in the Netherlands (87,609 units). However, VDL had spare capacity; with an extra shift, it could produce up to 200,000 cars. 18 In

This document is authorized for educator review use only by ROBERTO ALVAREZ LANDEROS, University of Navarra until Apr 2021. Copying or posting is an infringement of copyright. [email protected] or 617.783.7860

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2016, all Minis still had internal combustion engines. The sales volumes for the four models were as follows:19 • • • •

Mini Hatch, three- and five-door—198,373 units Mini Convertible/Roadster/Coupé (Coupe in the United States)—30,050 units Mini Clubman—63,509 units Mini Countryman/Paceman—98,301 units

The Cowley plant covered 65,000 square metres and employed a staff of 4,600. It was a complex operation: 12,000 different parts for the Mini came from 500 suppliers, with the average part travelling 660 kilometres (km).20 BMW manufactured some of its own parts, such as the Mini’s sub-assemblies and doors supplied by a company-owned plant that was 50 km away in Swindon.21 Each day, 270 trucks filled with parts arrived at Cowley. Petrol engines came from BMW’s plant in Hams Hall near Birmingham. However, 90 per cent of parts came from Continental Europe, including car bodies from Germany, main harnesses from Romania, cooling modules from Poland, fuel tanks and centre consoles from Germany, and diesel engines from Austria. Moreover, each day several truckloads of parts came from North America and Asia. To manage the flow of parts in an efficient manner, the Cowley plant relied on a number of standard delivery and supply processes. There were three network procedures in place overseeing inbound goods: just in sequence (JIS) and just in time (JIT), steered network, and base network. The JIS and JIT procedures had full truckloads of parts delivered to Cowley in high frequency from supplier locations.22 Some of these locations were close to Cowley, while others were as far away as Romania—a distance of nearly 2,500 km. The steered network encompassed commonly used parts, delivered on a frequent basis in full truckloads and with low fluctuations. The base network oversaw the consolidation and delivery of low-volume, high-fluctuation parts. These parts were collected into consolidation centres by shippers and then sent to Cowley.23 Suppliers received firm orders for parts four to 12 months in advance of the delivery date. Parts received at Cowley were either placed in inventory or sent straight to direct-to-assembly storage facilities, consisting of buffer zones close to the assembly line. BMW relied on specific terms to indicate to suppliers when product was expected to be at Cowley. For example, the term “JIS50” meant that suppliers had four and a half days—upon receipt of the order—to deliver the parts to Cowley’s assembly line. The JIS50 designation was used at Cowley for 17 part families. Of these 17, the majority (15) were from UK suppliers and another five were from EU suppliers. The overlap was due to the fact that some part families were sourced from more than one supplier. Parts used in the production of the Mini could cross country borders several times before they were installed in the car. For example, the car’s crankshaft—the part that transferred motive power from the pistons to the wheels—started its life as a cast steel part in Haute-Marne, France. Next, the part was sent to BMW’s Hams Hall plant, where it was drilled and milled into the shape of a crankshaft. Then the crankshaft was shipped to Steyr, Austria, to be assembled into the engine. The finished engine was then shipped from Steyr to Cowley, where it was placed into a car. The crankshaft, from start to finish, travelled 3,200 km—and this journey did not account for any additional travel once the car was sold.24 GROWING DEMAND FOR ELECTRIC VEHICLES

In 2016, 2 million...