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Bavarian Motor Works
Group No. 3 Amish Agarwal (063005) Deepak Bhatt (063015) Naman Gupta (063027) Pushkal Arora (063038) Shikha Mittal (063048) Tarunjeet Singh (063058)
......................................................................... 1 ...............................................................................................................................................................Table of Contents Mission Statement ......... 3 Industrial Environment ................ 9 References .............................................. 2 Reason for Existence .. 2 Vision Statement ...................................................................................................................................................... Error! Bookmark not defined.......................................................... 2 Goals .................................................................................................................. 6 Operating Environment .............. 3 Remote Environment ...............
Also the responsibility of BMW towards it‟s customers through pioneering products and services. This includes finding answers to the questions of tomorrow and acting with a foresight so as to shape the future right now. 2 . Reason for Existence Raison d'etre means the purpose that justifies a thing‟s existence.includes socially conscious.are high-earning innovators like architects. moves and drives the BMW Group towards an exciting future. They are highly individualistic and gravitate toward head-turners like convertibles and roadsters. 2. Vision Statement The vision statement of the BMW Group is to ensure that it is “The leading provider of premium products and services relating to individual mobility” (BMW Annual Report. entrepreneurs and artists. many things drive the vision for the future. one of the world‟s most profitable car makers. towards the society and environment through the development of sustainable forms of mobility and towards it‟s associates by offering them a safe and rewarding job sustains. Apart from this. Before explaining the purpose of existence it is necessary to understand the target consumers. BMW added the X5 to appeal to this group‟s active lifestyle. 2011) Complying with the mission statement.Mission Statement “BMW Group is the world's leading provider of premium products and premium services for individual” (BMW Annual Report. This strategy has made BMW. It avoids the high volume market of the middle of the road vehicles and focuses strictly on the luxury sector. BMW only strives to sell premium priced cars and does not strive to compete in every segment of the auto industry. “Post-moderns”. 2011) The statement is not too ambitious as BMW has all the necessary resources to meet its vision. That is a broad classification which can be subdivided as: 1. luxury and performance because BMW builds those attributes into its automobiles. They were predominantly SUVs drivers. It is driven by the vision to offer the best premium products in the world. a) “Upper liberals”. BMW vehicles sell well to consumers who have high standards for quality. despite its relatively small size. open-minded professionals often with families who were successful in the 90s.
It has maintained its leadership brand positioning for many years. 4. BMW launched the new Mini. Profitability: This is to be maintained through high sales volume and high pre-tax earnings for the group. 4. Modern mainstream-These are family-oriented and active and normally purchase the near premium brands like Honda or Volkswagen: BMWs were considered too expensive for them. which is as follows: Political Germany has a robust democratic setup Elections are considered to be fair and transparent 3 . But increasing numbers of them are looking to move up above the middle class and are open to luxury-brand cars. aimed at upper-middle-class buyers who were not quite affluent enough to buy a real BMW. Shaping the future: This is to be achieved through innovative product line and by focussing on quality.3. 2. In 2001. that is intended for the very wealthiest upper conservatives. Phantom. Upper conservative. These goals have helped BMW to stay focussed on its long term goals charted till 2020. traditional thinkers. 3. To target this segment BMW -developed the Rolls Royce. Now to maintain its premium brand reputation among consumers it has never compromised on its quality and keep coming with innovation to woo customer‟s loyalty. Its success is the result of a consistent strategy and is oriented towards meeting the needs of customer. Goals The set objectives for BMW are as follows: 1. Remote Environment The Remote Environment will consist of the PESTLE Analysis. They would normally purchase the Mercedes S-class and Jaguars as they strive for elegance and sophistication. Growth: This is achieved through acquisitions and mergers when the right opportunity presents itself. Access to technology and customers: Continuous investment in research and development and strengthening its dealership and retail network in order to meet customer‟s demands. They‟ve never been that interested in driving sporty cars like BMWs.are wealthy. and consider luxury and comfort over driving performance. Also the level of comfort is quite unique and efficiency in performance level proves its worth. These are in synchronisation with the vision to provide premium quality to customers.
2011) There are prudent economic policies especially regarding lowering of corporate tax rates Euro Zone crisis threatens the stability of Germany‟s economy Rating agencies threaten to downgrade Germany due to the Euro Zone crisis Social Germany boasts of a high Human Development Index It has a high healthcare and education expenditure as a percentage of GDP Increasing labor productivity in the country augurs well for the economy The country lags in higher education and training compared to other developed economies Inadequately educated workforce is one of the problematic factors for doing business in the country Growing social divide between the rich and poor hampers social harmony Aging and decreasing population puts pressure on the resources of the country Problems related to ethnic discrimination also threats to disturb the social harmony 4 . 2012) Rigid labor market laws leads to a lower efficiency in the German market Germany has not ratified the UN Convention against Corruption and has not implemented all of the recommendations of GRECO (Group of States against corruption) which gives a perception of corrupt political system in the country Increasing right-wing extremism in the country threatens the stable political system Economic German Economy is 6th largest economy in the world in PPP terms and Europe's largest economy (CIA Factbook. 2011) There is a reduction in the fiscal deficit in line with the Euro convergence criteria It‟s economy remains stable despite the continued economic difficulties of Euro Zone The depreciation of Euro due to Euro Zone crisis against major currencies facilitates the German Exports Financing for companies is very cheap in Germany due to low interest rates during sovereign debt crisis It has a decreasing inflation rate to currently 2. 2012) The country boasts of excellent infrastructure and facilities across all modes of transport Germany is the leading exporter of machinery. vehicles. and household equipment making it a highly competitive country (CIA Factbook. chemicals. It benefits from being member of the EU ( major political and economic power) There is a political will to minimize ecological footprint Increasing international role within the EU and with US is to the advantage of Germany (major contributor to EU and UN) Tax regulations and rates viewed as one of the problematic factors for doing business in Germany (GCR.1% It is an innovation driven economy (GCR.
sustainable transport policy etc.Technological German companies are among the most innovative in the world due to high spend on Research and Development (GCR. investment and trade freedom The law in the country does not differentiate between foreigners and Germans with areas pertaining to investments or establishing companies The loopholes in the taxation system has led to a huge revenue loss for government Treaties with other tax havens (e.g. Cayman Islands) needed to overcome loopholes In addition to that there are cases of tax evasion by hiding money in Switzerland or Liechtenstein The tax evasion treaty with Switzerland is still pending Cuts in government subsidy in the renewable energy sector will affect the industry Environmental The country has a strong environmental record as compared to other developed countries There has been a fall in greenhouse gas emissions since 2008 In addition to that. 2012) Very High competition in the domestic market and low market dominance by large companies Well-developed ability to absorb the latest technologies at the firm level (GCR. High level of air pollution in different cities is hampering the wellbeing of Germans The government has established “green zones” in urban areas to reduce air pollution in cities There is a likely increase in emission levels as Germany is phasing out the nuclear power plants 5 .CO2 emissions have been declining since 2006 There is an increased focus on renewable energy in the country The efforts to follow EU regulations has been reflected in emissions trading. 2012) Government has introduced policies to improve Research and Development in high-tech industries Germany has a sophisticated technological infrastructure in production process and distributed channels to facilitate better utilization of resources Growing ICT(Information and Communications Technology) sector in Germany The country faces a shortage of skilled engineers and a decline in its technical workforce only adds to the existing problem of paucity of skilled labor Legal Germany boasts of an independent judicial system It has a comprehensive legal structure Germany is also known for strong business.
This limits their willingness to buy from new entrants. The new entrant may not be able to provide the required post service standards. Customer Switching Cost: Switching cost is medium for buyers in monetary terms. However as compared to other manufacturers of luxury cars.Industrial Environment Industrial Environment will involve using Porter’s 5 Forces Model for assessing the attractiveness of the industry Industry: Luxury Cars Threat of new entrants: [Very Low] Bargaining power of Suppliers: [Moderate] Rivalry Among Existing Players : [Very High] Bargaining Power of Buyers: [Low] Threat of substitutes and Prroducts or services : [ Moderate] Threat of new Entrant: Barriers to Entry: (i) Supply side economies of scale: BMW started its mass production of luxury cars. largely due its quality and brand image. (ii) (iii) 6 . Demand Side Benefits of scale: BMW enjoys network effects. This is because luxury automobiles require special parts of the company (the automobile belongs to) and proper maintenance. and at the same time provides quality and customization. Buyers (or customers) value being in a network of people „owning BMW‟. its supply side economies of scale are low. However it can pass higher cost to the customers (in form of premiums charged from them for customization).
night vision systems etc. SCHULER for customized machines and other requirements etc) and cumulative experience which allows it to produce cars efficiently. (Higher importance is given to switching cost as compared to other two factors). 7 . to automobile industry.) possess low entry barriers to the new entrants.(iv) (v) (vi) (vii) Capital Requirements: The amount of capital (recoverable as these can be sold) required is large in terms of investments in machines and manufacturing processes. the barriers to entry for luxury car automobile sector are concluded to be very low. with BMW earning second highest revenue from country) may favor the local companies. established brand identity.g. Certain suppliers serve many industries. However most of its suppliers depend heavily on the automobile industry for its revenue. However the market has declined in many developing countries like Germany and USA in past years. radar systems. However the large non recoverable capital in terms of R&D for new innovations and developing new technologies. Hence it can be said that industry growth is not slow. However certain countries like China (new potential market for BMW. Incumbency advantage independent of size: BMW has number of advantages not available to entrants like. As recognition of these innovations. Unequal Access to distribute channels: Distribution channels though being capital intensive (new entrants might have to set their own stores etc. BMW recognizes its suppliers through „BMW supplier Innovation Award‟. raise the entry barriers further. These parts are also customized by the suppliers as per the company needs. However. It‟s a major supplier for BMW. Hence high switching cost is involved for BMW to switch suppliers. architecture and industrial app lications industries. As a consequence suppliers charge reasonable prices and assist the industry through innovations. Expected Retaliation: The luxury automobile segment is poised to grow in emerging markets like India and China. as each supplier specializes in its own respective equipment like gear box. BMW has in past used its innovation and technological advantage to dissuade new luxury car models in the market.g. KG supplies seat belts.V. Novelis AG supplies aluminum sandwich alloy to automobile. & Co. (iii) As a result of the above analysis we can see that bargaining power of supplier is moderate. Hence with above analysis. E. Automobile companies work closely with its suppliers to maintain its quality of parts used in its cars. LED headlights etc. The power of suppliers: (i) (ii) Suppliers cannot creditably threaten to integrate forward into the industry. Restrictive Government policies: There are no such government policies that restrict or encourage automobile sector as such. Autoliv B. preferential access to best raw material sources (long term contract with best manufacturers. E. are not expected to retaliate fiercely. hence incumbents like BMW etc.
8 . BMW and Audi) are highly committed to their business of luxury cars and aspire to be market leaders.The power of buyers: (i) (ii) The luxury car segment of automobile caters to rich people. Further intense rivalry can also be seen in the advertising fight being played by the rival companies (engaging in hoarding wars and ambush marketing). As a result companies in luxury automobile market want to use their developed capacities at the cost of profitability of the industry.g. The above analysis shows that threat of substitutes is moderate (more importance is given to second hand car market for the analysis). Exit barriers are high due to specialized assets and high capital involved in manufacturing. However. At the same time the switching cost to these substitutes is also low. technological advances and new innovations would not be imbibed in these substitutes to be used as status symbols. (iii) The above analysis shows that bargaining power of buyers is low. with variations in functionalities and quality. The rapidly changing technology and customer needs impact the quality of product. The industry offers differentiated products. is already devising a strategy to stay ahead of competition offered by second hand car market in China. The quality of products is very much affected by the industry. The switching cost among rival companies is low. Rivals (E. These are not price sensitive buyers. Indeed BMW. Super Cars etc. The above analysis shows that rivalry among existing players is very high reducing profitability of the industry. the overall profitability of the company decreases. Buyers usually value high reliability and good quality with innovative functionalities in luxury cars This limits the buyer‟s attention to price. With BMW and Audi cutting its prices to sell more. Rivalry among existing competitors: (i) (ii) (iii) (iv) (v) The competitors are roughly same in size and power. where the car is used as status symbol. for which China is a potential market. Second hand car market These can also be used as status symbols and offer better price -performance trade off to the industry product. The threat of substitutes: The substitutes can be (i) (ii) Bikes. The rivalry among the players is being fought intensely on price.
growing uncertainty about the future unavailability of fossil fuels. progressiveness and sophistication. 2011) Mercedes Benz Group strives to achieve higher sales in the following years.“We delight customers worldwide” (Audi. (Audi. the Company aims to create special. the Audi group has focused its core brand Audi on the challenges of future. 2013) 2. 2013) The Audi brand‟s products are compelling examples of the brand values sportiness. It strives to achieve above average growth as compared to the global automobile demand. The Company has defined various key technologies that will occupy a special role in the development of new vehicles. the company also redefined its long term strategy. 2) Audi Vision – “Audi – the premium brand “ (Audi. Mission . innovative vehicles is expressed in the brand essence “Vorsprung durch Technik. the brand with the four rings aims to evoke customer delight in many other ways. it strives to achieve a sustainable. profitable growth and expand it‟s activities to the growing customer base. It now gives more weight to new issues that have emerged as a result of heightened environmental awareness. 2011). positive experiences that customers will associate with the Audi brand. We define innovation The declared ambition of the Audi brand to offer its customers high-quality. These include modern sales concepts such as the showroom configurator. In the same year. To achieve this objective. It aims to become number one in premium-segment unit sales by the end of this decade. We create experiences To delight its customers time and time again. 2013) In adopting their strategy 2020. In addition to building technologically advanced vehicles.Operating Environment 1) Mercedes Benz Mercedes Benz sold a record number of vehicles and had record revenue/EBIT in 2011 (Daimler Annual Report . Objectives 1. which makes it quick and easy for visitors to an 9 . This is what the company promised to achieve a year before. Mercedes Benz attributed this to the strength of the brand and innovation products. The company in addition to this has also identified 4 strategic growth areas: Strengthening the core business in traditional markets Conquering new markets Extending leadership in environmentally friendly technologies Developing and implementing new mobility concepts (Daimler Annual Report .
manufacturing and corporate structures accordingly. Emphasis on performance with the safety and prowess of four wheel drive. equipment (such as night vision. Cons – Don‟t have most efficient vehicles. most forward looking vehicles on the market Luxurious interiors with high quality materials and beautiful design. (Audi. Pros –Always been a most recognizable name in the luxury auto market.) Interested in BMW‟s performance car market. Strives to be market leader by looking forward to alternate fuels. 2013) 3. Cons. (Audi. Pros – Able to grab some of BMW‟s market share while retaining their own identity. customers appreciate efficient dynamics initiative Cons – Reliability good on chassis and suspension. 2013) 4. Mercedes Benz Audi Relying heavily on history and prestige. Strives to market leader in terms of technology. Only Luxury car maker which targets widest age group Rationale for strategy Historically successful as the premier sports sedan manufacturer. Mainly a Chauffer driven Car. The highest quality. Pros and Cons Pros – Steady hold on performance sedan market. We live responsibility The Audi brand also expresses customer delight through a form of corporate responsibility that seeks to strike an appropriate balance between social or ecological requirements and economic success. History of high quality. We shape Audi The Audi brand continues steadily with its model initiative and expand its development.Audi dealership to create the Audi vehicle of their choice on large screens. reliable vehicles. threedimensional images. Have a wide variety of cars for different segments. Emphasis on Joy of driving. with their own four wheel drive and turbocharged performance engines 10 . auto parking etc.Not able to address unreliability of some of their components. because BMW uses lot gizmo and gadgets which sometimes get difficult to repair. Always first to embrace new technology. long lasting . (Audi. 2013) Firm Name BMW Strategy Highlights Performance Vehicles that are efficient and sustainable. with life-like.
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