BMW GROUP

1
OVERWIEW
BMW was founded in 1916 as an aircraft-engine factory in Munich. In 1923 BMW builds
first motorcycle. In 192 BMW bought the car factory at !isenach" #huringia with the license
to build a small car called the $i%i. #his first BMW car was de&elo'ed in Munich" li(e all
other BMW 'roducts. In 1932 BMW 3)2* was de&elo'ed in Munich" in 1933 - 6 cylinder+s
BMW 3*3. ,ntil second World War BMW showed acti&e growth in all three branches-
automobile" aero engine and motorcycles industries.
In 19.3 the first BMW subsidiaries were created in /rance and 0orth 1merica. In 19.9
BMW de&elo'ed first digital engine electronics and began 23$ on hydrogen engines. In
194 the first !uro'ean models with catalytic con&erters a''ear. 5om'uters and robots
re&olutioni6e wor( in 'lanning and 'roduction. In 199 in the year the Iron 5urtain fell"
BMW has another first by 'roducing half a million cars. #he com'any also has a turno&er of
$M 2*.*** million" and ac7uires 8ontron 9mb:" a s'ecialist in 'rocess engineering.
0owadays BMW 9rou' 5om'any is 'owerful international com'any re'resented all o&er
the world with more than 94.*** em'loyees and o&er one million &ehicles sold e&ery year.
Im'orters in 12* countries re'resent the BMW and worldwide sales organi6ation com'rised
24 sales subsidiaries. BMW has worldwide subsidiaries and manufacturing 'lants in
9ermany" 1ustria" the ,8" the ,;1" Me%ico" Bra6il" ;outh 1frica" !gy't" #hailand"
Malaysia" Indonesia" the <hili''ines and =ietnam.
#he acti&ities of the business fields of the BMW 9rou' are bro(en down into the segments
BMW automobiles" 2o&er 1utomobiles" BMW motorcycles and /inancial ;er&ices.
2
BMW automobiles and 2o&er automobiles account for the larger 'art of acti&ities within
9rou'. #hese business fields manufacture" assemble and sell automobiles" s'are 'arts and
accessories.
#he BMW Motorcycles segment de&elo's" manufactures" and sells motorcycles as well as
s'are 'arts and accessories.
1
#his case study has been written by 8as'ers(aya >ulia " with the collaboration of ?riol 1mat" $e'artment of
!conomics and Business" ,ni&ersitat <om'eu /abra @BarcelonaA.
2
#he 1999 BMW 9rou'B structure is gi&en.
1
#he /inancial ;egment focuses on the leasing of automobiles and financing credit for
customers and dealers.
Miscellaneous and consolidated com'anies segment include 1ero !ngines business"
;oftware and other intra-segment acti&ities.
BMW GROWTH POLICY
#he fundamental obCecti&e of the BMW 9rou' is to continue the 'rocess of 'rofitable growth
by concentrating on high-'rofit mar(et segments. <recisely" this is why the BMW grou' will
use the 'otential of the BMW brand to an e&en greater success in a future.
In the first half of the year 2*** BMW has already achie&ed best sales results e&er in the
history of the com'any. Worldwide deli&eries ha&e increased by almost 9D to 421 *** unitsE
the turno&er was a''ro%imately 1FD abo&e the corres'onding figure in the first half of
're&ious year.
#he 'roduction of BMW 9rou' is de&elo'ed to satisfy different customerGs needs" 'ro&iding
a &ariety of models for lu%ury" middle and low segments of mar(et. 5om'any constantly
wor(s out new technological decisions and im'ro&ements and nowadays sets new standards
in 'roduction.
BMW has already achie&ed in indi&idual re7uests fulfilling. 0ow itGs ambiguous obCecti&e is
to 'ro&ide e&ery customer with his indi&idual" 'ersonali6ed car on a defined date agreed in
ad&ance. Moreo&er" BMW 9rou' is setting a new benchmar( to 'rocess the time re7uired for
a new car in distribution and 'roduction to 1* days.
BMW 5om'any continues to de&elo' the conce't of hydrogen engine automobile which
according s'ecialistsG estimations will dominate in the future automoti&e mar(et because of
the limited natural resources. /irst e%'erimental cars with hydrogen engines already e%ist.
In the future BMW hea&ily relies on the big !-commerce 'roCect" which su''osed to increase
the number of em'loyees and customers fi&e times within the ne%t three years.
BMW 9rou' will bundle its e-business acti&ities in a new com'any named ne%olab. With
ne%olab" BMW 9rou' creates a 'latform that will su''ort the entire 'rocess chain - from the
buying to the sales 'rocess for the manufacturing industry.
5om'any has well-defined 'ersonnel 'olicy. BMW treats 'eo'le who wor(s for the com'any
not li(e cor'orate funds" but rather the (ey to itsG success. #his conce't leads to lower cost
and economic growth.
2
0e&ertheless, the commonwealth of big multinational com'any strongly de'ends on
successful 'erformance of all itsG segments and di&isions.
#herefore" the ne%t analysis of the BMW 9rou' can not be 'resented without a short
o&er&iew of one of the BMW segments" the 2o&er automobiles.
ROVER STORY
2o&er 5om'any entered BMW 9rou' in 1994. #his bargain was widely discussed in mass
media and the big 'art of leading managerGs staff had to lea&e this com'any
'rotesting against this ac7uisition. !%tending the share of BMW 9rou' in
automobile mar(et 2o&er 9rou'Gs entry of also significantly affected the financial
'osition of com'any. #he constant decrease of demand in ,8 mar(et" inefficient
cost and 'roduction 'olicies in 2o&erGs enter'rises were among the reasons of 2o&er
failure. 5onstant growth of British 'ound against $M" later against !uro made the
2o&er 'roduction noncom'etiti&e against others !uro'ean car-manufactures.
FIGURE 1 Rover market share 1!"1
Big in&estments made
in order to cut
cost and
increase the
'roducti&ity of
2o&er 'lants
were useless.
;tarting from
1994" 2o&er
mar(et share in 9reat Britain has been dro''ed from 11.3D to 4.6D " nearly 3
times @;ee /igure1A.
In the course of 1999 2o&er des'ite ha&ing itsG cost significantly cut continued to loss the
sales &olume and 'rofitability. British 'ound continued to increase against !uro. #herefore
automobile ma(ers in the !uro currency area continued to ha&e a substantial com'etiti&e
ad&antage which can not be set off e&en by an additional increase in 'roducti&ity with 2o&er.
3
#he BMW 9rou' had to set aside substantial 'ro&isions for the 'rocess of restructuring and
other ris(s with 2o&er. In all" this e%traordinary e%'enditure totaled to 3.1F* million euro and
'roduced net loss of 2.4. million euro @;ee 'rofit and loss accountA.
In the course of the first half of the year 2***" the BMW 9rou' com'leted its reorientation
and on 9 May 2*** British <hoeni% 5onsortium ta(es o&er res'onsibility for the
de&elo'ment" 'roduction and sale of 2o&er 5ars. <hoeni% has ta(en o&er
a''ro%imately .*** associates of the former 2o&er 9rou'" the Birmingham <lant and
accordingly 'roduction of the 2o&er 2F" 4F" the M9/ and Mini 5lassics.
?n Hune 2***" Iand 2o&er together with /reelander" $efender" $isco&ery and 2ange 2o&er
models was sold to /ord Motor 5om'any for a 'urchase 'rice of euro 3 billion.
#he BMW 9rou' remains su''lier for <hoeni% and the /ord Motor 5om'any with certain
engines" 'arts" and com'onents.
FI#$#CI$L %$T$
1s was already mentioned" the BMW 9rou' entered the 2***-year with the net loss of 2.4.
million euro. #he main indicators of BMW financial 'erformance in two year
'ros'ecti&e are listed in the !%hibit 1.
#he automobile 'roduction by BMW 9rou' in 1999 was down by FD" more than 1 14. 4**
units" com'ared to the 're&ious year because of 2o&erGs stoc(s reduction. $eli&eries by the
BMW 9rou' remained at the same le&el" with total sales of BMW" 2o&er" Iand 2o&er" M9"
and MI0I automobiles amounting to more than 1 1* 4** units.
$ue to the growing sales of BMW 1utomobiles segment sales of the BMW 9rou' in fiscal
1999 increased by 6.6 D to 34 4*2 million euro.
5ost of 'roduction was u' o&er the 're&ious yearGs figure by 6.1D to 2 .F. million euro.
#he share of 'roduction costs in sales was down by *.4D. #he cost of sales and general
administration increased by a total of 13.4D.
$es'ite of the declining result in the 2o&er 1utomobiles segment" the result of the BMW
9rou'Gs ordinary business was u' by 4..D to 1 111 million euro. 1fter deduction of 'rofit-
related and other ta%es the BMW 9rou'Gs annual sur'lus before the e%traordinary result was
663 million euro" 43.FD o&er the 're&ious year.
In&estments by the BMW 9rou' amounted to 2.1FF million euro" remaining at almost e%actly
the same le&el as the year before. #hese funds were in&ested in the 're'aration of new
4
models" the moderni6ation and 'roduction facilities. #hese in&estments were financed fully
trough the 9rou'Gs cash flow. #he BMW 9rou' continues to ran( at the to' of the automoti&e
industry in in&estment &alue.
2e'resenting 2?! into the chain of factors @;ee /igure 2A we can conclude in a fa&or of
highly 'ositi&e and increasing financial le&erage in the analy6ed 'eriod which means &ery
efficient and 'rofitable use of the debt by the com'any.
FIGURE & Du Pont analysis
EBT
profit net
equity
assets
EBIT
EBT
assets
sales
sales
EBIT

5om'uted finance
le&erage
1
2.7% X 0.92 X 1.19 X 9.54 X -2.24
11'()
1*
3.8% X 1.05 x 0.86 x 4.75 x 0.44
!'+
THE BMW SEGME#TS PERFORM$#CE @;ee /igures 3"4A
#he result of ordinary business acti&ity in the BMW 1utomobile segment was u' by F.1D to
2.1*6 million euro. 9enerated by BMW automobile 2?I has increased from 2*.46D in 199
to 2*.3D in 1999. #his branch also generates the highest earnings on sales .F6D in 1999.
;ales in BMW Motorcycles segment rose significantly by 1..D to .69 million euro. #his
allowed an im'ro&ement of the o'erating result u' by 12.FD com'aring to the 're&ious year.
;ales in the 2o&er 1utomobiles was u' by 2D o&er the 're&ious year to 36 million euro.
#he losses in the 2o&er 1utomobiles due to the mar(et conditions and currency effects were
u' by 2F* million euro to 1 2*. million euro or 26.1D. #he 2?I dro's from J16... D in
199 to J 19.23D in 1999. #he return on sales declines from -11.3*D in 199 to -13.9.D in
1999.
FIGURE ( The BMW se,me-ts .er/orma-0e
assets, sales result from ordinary
BM se!ment
million euro million euro
"us. a#ti$ities, mil. euro
1999 1998 1999 1998 1999 1998
BMW automobiles 10108 9792 24610 21980 2106 2003
o!er automobiles 6277 5705 8638 8466 -1207 -957
BMW motor"#"les 313 303 769 653 18 16
$inan"ial %er!i"es 20530 15287 6153 5771 316 298
F
FIGURE ! The BMW se,me-ts rat1os
(
return return
BM se!ment on in$estment, % on sales,%
1999 1998 1999 1998
BMW automobiles 20.83% 20.46% 8.56% 9.11%
o!er automobiles -19.23% -16.77% -13.97% -11.30%
BMW motor"#"les 5.75% 5.28% 2.34% 2.45%
$inan"ial %er!i"es 1.54% 1.95% 5.14% 5.16%
#he /inancial ;er&ices di&ision was successfulE sales increased by 6.6D to 6 1F3 million
euro. #he result in this segment of the BMW 9rou' increased by 6D to 316 million euro.
COMP$RISO# WITH THE FOR% MOTOR COMP$#Y
#he main com'etitor of BMW 9rou' ta(es the greater share of automobile mar(et.
#he total balance sheet &alue of /ord Motor 5om'any e%ceeds . times corres'ondent &alue
of the BMW 9rou'. ;ales of /ord Motor 5om'any counted .22* thousand of &ehicles
@1369.3 million of dollarsA against 11. thousand of &ehicles @346.. million of dollarsA sold
by BMW 9rou' in 1999.
4
;ee !%hibit 2 to com'are financial 'erformance of the com'anies.
I#VESTME#T OVERVIEW
#he BMW ordinary share is listed since 1926. 1fter the currency reform BMW shares were
traded as shares with a 'ar &alue of $M F*" $M 1** and $M 1***. In 199 BMW
introduced 'referred shares J traded with a 'ar &alue of $M F*. #he 'referred shares are in
contrast to ordinary shares non-&oting shares" but bear an e%tra di&idend. In 1999 BMW
9rou' introduced the 1 !uro 'er &alue share. 1s of $ecember 31" 1999 the subscribed ca'ital
of BMW 19 amounted to !,2 6.*"6.".3* and com'rised of 622"22."91 ordinary shares
and 4"4F9"12 'referred shares.
0ow BMW shares are listed in the $ow Hones ;ustainability 9rou' inde% for com'anies
a''lying 'rinci'les of sustainability. #he 2** com'anies ma(ing u' the inde% ha&e been
selected from more than 2*** international com'anies basing on the sur&ey conducted by
;wiss in&estment and rating agency ;1M ;ustainability 9rou'. #he rating is based on
benchmar( criteria such as technological leadershi'" social and en&ironmental com'atibility"
3
#he segment ratios are calculated res'ect to result from ordinary business acti&ities
4
#he figure are gi&en in million of dollars" the e%change rate 1 euro K 1.** ,;$.
6
'ersonnel management" management culture" 'roducti&ity" growth. #he com'any is
accordingly recogni6ed as the worldwide leader in the automobile sector.
FIGURE 2
$uring 1999
BMW ordinary and
'referable share
trends (e't with
mar(et trends @;ee
/igure 6A. ,ncertainty
about de&elo'ment at
2o&er decreased the
share 'rice in the first half of the year. #hen the successful de&elo'ment of the BMW brand
and the mar(etGs growing confidence in successful outcome of the restructuring measures at
2o&er 'ushed u' the 'rice. ?n the last day of the month year-end 'rice was 3*.6F euro and
the BMW ordinary share lay 22 D abo&e the 'rice 7uoted in the 're&ious year" beating
5$1L automobile inde%. While the BMW 'reference share in contrast was enable to turn in
the same result as the ordinary share. #he closing 'rice of 14 euro 'ut the 'reference share
FD bellow the 're&ious year 'rice.
In the course of a decade" in&estors who bought shares at the beginning of 199* ha&e
achie&ed an a&erage annual return of nearly 19 D. ?&er the 'ast F years yields ha&e been
high as 24 D @yields on federal bonds only reached . D res'ecti&elyA.
In the first half of the year 2***" BMW common stoc( showed a better de&elo'ment than the
shares of any other 9erman car manufactures. 5om'ared with the &alue of 2F.42 on 3* Hune
1999" stoc( &alue has increased in the meantime 24..D to euro 31..*.
M,!;#I?0;-
1A What do you consider to be the main strengths and wea(nesses of the BMW from the
economic and financial sideN
2A 9i&e your intuition about 2*** 'erformance of /ord Motors 5om'any and BMW 9rou'.
3A Would you in&est in BMW 'reference share and whyN
4A !&aluate the contribution of BMW 9rou' segments on o&erall com'any 'erformance.
.
E3HIBIT 1 THE BMW GROUP FI#$#CI$L $#$LYSIS 4 M$I# R$TIOS $#% I#%IC$TORS
1999 1998
&'()'D'*+
,urrent ratio -current assets/current liabilities
5
) 2.13
.,'D */0* (liquid funds/current liabilities) 0.16
D/B*
6
(uantity
debt/(debt + equity) 89% 80%
(uality (current liabilities/debt) 39%
,ost of de"t (interest paid/debt) 6% 7%
.00/* M.1.2/M/1*
.00/* *)3145/3
sales/assets 0.92 1.05
sales/fixed assets 3.92 4.13
D.+0
#olle#tion 6eriod (trade receivables/sales x 365) 25.64 22.91
#redit 6eriod (trade payables/sales x 365) 23.74 20.64
/XP/10/0
production cost/sales 83.59% 83.96%
marketing and administration cost/sales 13.66% 12.84%
total expenses/sales 97.25% 96.80%
P/3743M.1,/
-sales 98 8 sales 999:sales 98 6.6%
results from ordinary "usiness a#ti$ities, mil.euro 1111 1061
net in#ome:loss, mil.euro -2487 462
#as; flo<, mil.euro 2807 2479
M.32'1 .1D P347'*
ROS (profit/sales) 2.71% 3.82%
gross profit/sales 16% 16%
34' &E!"
#
/assets) 2.48% 4.02%
34/ net profit/equity (after extraordinary result) -63.25% 7.17%
=/+ D.*. P/3 0>.3/
di$idend in euro or'inar# s(are 0.4 10.23
)re*eren"e s(are 0.42 10.74
+as( $lo, -er %(are 4.19 3.71
s(are(ol'ers e.uit# 5.47 9.28
F
#here is not a&ailable information to distinguish current liabilities in 199 in BMW notes to balance sheet. In
1999 a grou' of liabilities u' to 1 year without 'ension and other 'ro&isions is considered as Ocurrent
liabilitiesP.
6
$ebt is considered as liabilities without 'ension 'ro&isions.
.
!BI# I; calculated li(e- 9ross earnings from sales J ;ales and mar(eting cost J 9eneral administration cost Q
?ther o'erating income J ?ther o'erating e%'enses.

E3HIBIT & SELECTE% BMW $#% FOR% R$TIOS I# COMP$RISO# , 1

BM 743D
&'()'D'*+
,urrent ratio 2.13 1.98
D/B*
8
(uantity (total liabilities/total funds) 89% 90%
(uality (current liabilities/debt) 39% 17%
.00/*0 M.1.2/M/1*
.00/* *)3145/3 -sales/assets9 0.92 0.50
D.+0
#olle#tion 6eriod 25.64 10.04
#redit 6eriod 23.74 38.51
0.&/0
&sales 99 - sales 980/sales 981100% 6.6% 15.0%
/XP/10/0
production cost/sales 83.59% 86.91%
marketing and administration cost/sales 13.66% 6.97%
total expenses/sales 97.25% 93.88%
M.32'1 .1D P347'*
340 (profit/sales) 2.71% 6.12%
23400 P347'* &gross profit/sales) 16% 13%
34' (E!"/assets) 2.48% 3.03%
D)P41* .1.&+0'0 :34'
(E!"/sales x sales/assets) $%#&' ( )%*$ 6.12% X 0.50
34/ (net profit/equity) before
extraordinary result
16.86% 26%
ROE (after extraordinary result) 86?.@5%

In order to 'ro&ide uniform base for com'arison BMW and /?2$ com'anies for debt 7uantity estimation
ratio Ototal liabilities)total fundsP has been chosen.
9