Syed Jafri ID. No.
Dated- 26/11/07 (IBM)
Analytical Report On Global Strategy
Varun Jain Varun Jain
I.D. No.-20267351 I.D. No.-20267351
Dated.26/11/07 MSc (IBM)
Abstract Introduction Steps in International Market Retraining Forces Main Drivers for Change in Organisation Entry Strategies BMW to Begin Indian Operations In 20007 PESTEL Analysis Posters Five Forces Tools Raw Material Cost Bothers BMW In India Conclusion Recommendation Bibliography Appendices 3 3 4 4 5 6 6 7 9 10 10 10 11 12 14
.Syed Jafri Student ID. No.
BMW is playing to win. In 1917. or they go all out. This is when BMW’s brand recognition for engineering excellence took off and took hold across Europe. BMW motorcycle sales were 15 million Reichsmarks ($3.4 million). the 'Bayerishe Motoren Werke GmbH' was created from it. The report includes various strategies adopted by BMW to compete in the market and beat their competitors.
Steps in International Market
. Germany in 1916 as the 'Bayerische Flugzeugwerke AG' (BFW). place some big bets. Will Rodgers. BMW won more than 100 motorcycle races that year and boasted first-place finished by 1928.Syed Jafri Student ID. which help the organization in maximizing their profits and increase in demand of their products. the emblem signifies a global company that annually produces hundreds of thousands of engines. The Company concentrated initially on the development and production of aircraft engines and. BMW was founded in Munich. BMW was falling a part.” The history of the Bavarian Motor Works is a history of innovation. Besides this it also indicates the various tools to analyse the new market and entry strategies adopted by BMW to enter into international market. The motorcycle product line includes nine bikes. and this was finally converted into a joint stock company in 1918.
The seemingly relentless growth in the car industry. co-founder of SHR Perceptual Management says “Carmakers are running up against a very tough choice.6 million). up by 77 percent in just three years. on motorcycles. By 1928. with revenues at 27 million Reischsmarks ($6. The Company's success story as an automobile manufacturer began in 1928 with the acquisition of the Eisenach vehicle factory. only few companies have shown the significant growth and BMW is one of them. It was true that. These achievements are visible in the BMW emblem. from 1923 onwards. dedication and determination. like GM and Toyota. either they protect their market share and play not to lose. symbolizing a rotating airplane propeller from BMW's early years as an aircraft engine manufacturer. The report indicates the different links between changing market concentration and company strategies. Today.-20257651
Dated. BMW future looked bright. motorcycles.26/11/07 MSc (IBM)
The objective of this report is to give an introduction on BMW’s organization and the aim is to highlight the various strategies. In 1925.Benz. and cars. and play to win. No. due to the post-war strike. Bankruptcy became visible as the company was hanging itself to disintegrate into the arms of Daimler.
new policies on environmental were issued for the car manufactured due to the issue of global warming and emission of carbon. Beside this. They were keen towards their management policies. resulting in low profit margins. they also change their strategies and base them accordingly to the new changes. Avoiding heavy import duties and attracting subsidies from government lead BMW group to assemble their very small plant at South Africa. It helps them
. because of this manufacturers have to cut down there prices in the market. 5.
Dated. There fore BMW had to change their engine specification which led them more pressure.Syed Jafri Student ID. techniques. 6 and 7 Series. They decided to put more efforts on the luxury and comfort. developing third generation technology for their machines (hybrid technique). 15-16)
In the journey of success. Some times their strategies are based on the future i. This was all due to the foreign competition in world market. low profit margins. environmental impact. Thus it results in adoption of adaptation strategy.26/11/07 MSc (IBM)
The major reason for this strategy change was to avoid possible trade restrictions and exchange rate fluctuations. (For more information please see appendices pp. Due to the globalisation the competition between the cars manufacturers become very tough in different car segments. ecological problems and financial status. No. This led BMW to redesign their engine technology and make it friendlier to the environment. With this uniqueness in there strategies they succeeded in their trades and target the maximum sales. BMW had faced many restraining forces like competition. which separates them from the other competitors. They produce five lines of cars: 1. by locating their production site in foreign markets.-20257651 The main reason behind the success of BMW was their changing management strategies from time to time. In 1992 they set up another plant in South California. BMW laid out their policy for the production of luxury cars only. 3. In addition BMW managed to overtake its rivals by signing joint ventures with various companies. In its early age BMW was almost bankrupt due to the strikes in Germany because of World War II and was ready to fall in the hands of Daimler. BMW set adaptation strategy for breeding programmes and finding recommendation for various objectives. production etc.e. In early1980s at the time of global boom. Whenever they find any changes in the economy.
Dated. in addition the cost of transportation of the good is significantly reduced. People are more likely to wards the cars that harm less to the environment and BMW is first to produce hydrogen car. However. Change in Technology: Development in modern techniques continues production of electric.
Main Drivers for Changes in Organisation
Competition: At the time of competition. hybrid and fuel cell motors. the organization requires to operate with maximum efficiency. Main aim behind this is to reduce the fixed cost per vehicle. especially for the city. and the development of market-oriented measures such as improvements in the level of consumer information. BMW has gained higher margins and customers. European consumers were also looking for great fuel efficiency. Through these attractive specifications. No.
. Production and recycling legislation have an impact both on vehicle technologies and on construction. Legislation: Legislation is one of the major drivers of the industry. Cheap Labour: Car manufactures always look for the cheap labour to cut down there manufacturing costs. Another trend has outcome i. BMW acquire the economy by maximizing the volume and standardizing the parts across there model ranges.e. This requires vehicles that are more efficient and lower weights. by the growing popularity of diesel engines. onboard electronics and telecommunication system.Syed Jafri Student ID. sometimes objective was focused on the future production. Thus BMW also choose the countries where they could cut down their manufacturing costs.26/11/07 MSc (IBM)
in getting various analytical approaches and provides different results. This results in high investment capacity and continuing trend towards mergers. joint ventures. Increase demand: BMW adopted the niche marketing strategy in global marketing because the market for niche vehicles was growing or was more in demand.
while in the sprinkler mode product is introduce in several countries market simultaneously with in a limited period.
BMW to Begin Indian Operations In 2007
. which sets the objectives.Syed Jafri Student ID. Under the “waterfall” scenario. firms may choose various entry modes. The other advantage is that the expansion can take place in an orderly manner.26/11/07 MSc (IBM)
Entry strategy for international markets is a complete plan. It goes well with the cultural distance and learning patterns. In seeking to serve and penetrate foreign market. No. and planning that helps company in international business operations over a future period long enough to achieve their goals in world markets.-20257651
Dated. goals. the product or services was gradually move into overseas markets. the product gradually moved out to culturally close markets. Foreign market has always been one of the significant fields of opportunity and switching costs. capital. Waterfall strategy was the preferred choice made by the BMW. which helps to capitalize on the skills developed and it is relatively less demanding in terms of resource requirements. Some of the typical modes of foreign market entry are as following: Exporting (direct and indirect) Licensing Joint Ventures Wholly owned subsidiaries Equity and non-equity modes The entry strategy of companies typically follows one or two alternative patterns. and the same managers can be used for different countries. After success in the home market.
Premier Automobiles and Telco. The production and sales subsidiary will be owned 100 per cent by BMW Group. deciding on pricing and product strategy as well as marketing and after sales. Reviewing their international strategies BMW group has decided to make an entry into India. the tasks of the subsidiary will also include developing the dealer organization. and one Indo-Japanese venture.26/11/07 MSc (IBM)
BMW’s main aim is to produce high quality products. Economical Factor:
. Maruti already in the passenger car market. The Government of India's new automobile policy announced in June 1993 attracted a large number of automobile companies there. BMW group has shown GDP growth rate is around 8 percent and that is a very good basis to start an automobile business in India. In addition to operating the assembly plant and importing BMW cars. With this strategy BMW group can also hold the China’s market.Syed Jafri Student ID. This is an important step for company’s expansion in Asia. Another reason why BMW have decided to take the plunge in India rather than China is due to its foreign investment policy. China would provide a much more hostile environment for BMW to start a new set up. This favourable duty structure will put BMW at a relative advantage and the company can expect to entice the Indian buyer who will be able to buy the premium brand car at a much lower price.-20257651
Dated. According to the policy heavy subsidies would be provided to the automobile manufacturers.000 vehicles per year and it would be expected to be double within 4-5 years. Maruti is by far the biggest player with about 70% of the market share. Hindustan Motors. The luxury car market in India is estimated around 10.
Political Factor: The current government of Congress Party has provided stability to the country. BMW’s long-term goal is to make Asia its stronghold and the entry into the Indian market with locally made models is an important step towards this end. by offering different products for different countries. The political setting in India and in other independent states is increasingly being recognized as a critical factor in the achievement of continued economic growth. No. There are three existing Indian companies.
8 17.6 Public sector 8. The economy has achieved a high GDP growth of 8.26/11/07 MSc (IBM)
During the last few years there has been significant growth in Indian economy.html)
Annual growth rate of industrial production: Mid-1990s boom and the present boom Mining & quarrying 1994-95 1995-96 9. religious. No.8
7.7 7.1 14. Social Factors: Many changes took place terms of social factors.rupe-india.org/39/boom.2 4.9 5. The community in India is much aware due to improvement in the social.
Private corporate and public sector investment as % of GDP Private corporate 1994-95 1995-96 2003-04 7.1
Table shows the developments done by the Indian Economy in two boom periods.rupe-india. economic and demographic factors. The growth rate of capital goods and consumer durables had been in double digits since September 2003. Education has played an important role for uplift of social factors.1 9.4
7.Syed Jafri Student ID.1 6.5 10.6 5.1
Electricity 8. The economy rate of savings and investment has increased sharply.8 9.culture.4
(Source: http://www.5 8.9
(Source: http://www.4 9.1 13
2003-04 2004-05 Apr-Dec
5.5% in 2003-2005 and it is estimated to have growth of another 7% by 2005.0
5.0 8. Technological Factors:
.3 Combined pvt corp & pub sec 15.-20257651
The Government has show the confidence that they would be able to control the rate of inflation and have ruled out bringing legislation to provide various opportunities in different sectors. led to an improvement in technological terms. Ecological Factors: Environmental stress is increasing.-20257651
Dated. Model indicates high competition in Indian market because of various global competitors.
Porters Five Forces
Power of Buyers
Posters five forces model explain the different restraining forces to be faced by BMW in opening their markets in India. No.26/11/07 MSc (IBM)
Modernization in the different sectors of Indian economy. BMW already had its established Brand name all over
.Syed Jafri Student ID. due to both unsustainable consumption and production patterns but India has shown significant changes in pollution-reducing infrastructure and urban environmental policy and that’s the policy of BMW group. The economy of country shows the high power of buyers because of many options. agricultural sector or services sector they all are modernize with new techniques and technology. Today either it’s an industrial sector. Legislation Factors: Several efforts are make by the Indian government during the progress period to ensure the welfare of the common Indian.
The impact of university-industry linkage can be easily seen in the form of technological innovation and regional competitiveness in economic growth. Therefore. so that they could reduce add on costs. it is very important to study its mobility and development and India is one of the uplifting countries which have shown significant changes in term of human capital development and mobility. At last. University-industry linkages: The link between the university and industry has helped a lot to the German auto industry I late 1970’s and 1980’s. On the other hand with moderate indication. Human capital development and mobility: To enter in a country. If we see the year 2006.
Clusters: BMW gives regional competitiveness by establishing a stable cluster.Syed Jafri Student ID. (For more information please see appendices pp. BMW decided to standardize their products under different region.-20257651
Dated. roughly more than 150 million euros ($200 million). and it will still be an issue in my opinion for the next two to three years. Therefore Indian economy has a great potential to enter. Clusters means stable connection with suppliers and services.
High raw materials cost bothers BMW India
High raw material costs remain an issue for BMW. No. Cluster is based on the competitiveness of the region and the competitiveness of the industry. 18-19)
. it lies in the developing industrial sale. there can be well relationship maintain with the suppliers. high raw material prices was costing the BMW Group more than what they expected. Beside this if we talk about the industrial life cycle pattern. the risk of substitute is high due to possibility of imitation and other brands in same segments.26/11/07 MSc (IBM)
the global market therefore it shows the high potential entrance in the economy.
The distribution network should be good and encouraging suppliers in terms of ability and values to consumer and to make possible for home producers to export. Some special programmes should be started to support the initial development and network operation should be established. BMW should concentrate more on their Niche marketing strategy. for the first time ever. Sales have grown steadily in recent years and in 1992. and is well placed to profit from anticipated legislation about the recycling of the cars. Perhaps the major problem facing the company is large-scale Japanese competition in the luxury car market. Mercedes-Benz for 560. where efficient and low-cost production has been achieved with the appropriate international business strategies. A major change in strategy is the decision to establish the production facilities outside Germany and this may have far-reaching consequences. investors.26/11/07 MSc (IBM)
BMW have progressed a long way since it was on the point of bankruptcy in 1959. No.
. that is growing fast enough.000 against 538. The key to capitalizing on a niche market is to find or develop a market niche that has customers who are accessible. BMW is a firm that has grasped the opportunities made available by customer and government concern about the environment.000.-20257651
Dated. but the indications are that they intend to meet it head-on. entirely integrated manufacturing facility.
BMW have to improve their performance in investment capital for a region by developing detectable business angles.Syed Jafri Student ID. are expected to be greater than those of its archrival. and that is not owned by one established vendor already. There should be a proper coordination and development among the international cluster of BMW group. banks and venture capitals. In the car industry. the move away from the highly vertically integrated operation began in the early 1950s and BMW is one of the good examples of a modern.
com/ehost/detail?vid=1&hid=105&sid=c6a2ee82-3bb3-46178e42-2a78e32972f8%40sessionmgr107 http://services.asp?NewsID=1087782 http://www.164393.26/11/07 MSc (IBM)
.cms http://www2.Syed Jafri Student ID.com/ehost/results?vid=2&hid=18&sid=fcc5faa1-3e6b-4a538bf9-5b3b87389ffa%40sessionmgr7 http://web.htm http://www.autoindia.-20257651
Dated.html http://www. No.com/ehost/detail?vid=1&hid=102&sid=7937321d-598c436a-9c5f-e96c4c88447b%40sessionmgr107 http://web.dnaindia.ebscohost.ebscohost.com/report.com/ehost/detail?vid=1&hid=102&sid=7937321d-598c436a-9c5f-e96c4c88447b%40sessionmgr107 http://web. http://economictimes.com/News/News_By_Industry/Auto/High_raw_m aterials_costs_bothers_BMW_India/articleshow/1828478.ebscohost.oxfordjournals.html482 automobiles in Asia.com/article/tnBasicIndustries-SP/idUSBOM15560920070329 http://web.com/ehost/detail?vid=1&hid=105&sid=2195e9b6-e849-449ab1e8-50bf8f70b6ca%40sessionmgr104 http://web.1.dw-world.com/News/auto-news-india577.ebscohost.ebscohost.com/2004/20040905/biz.de/southasia/germany-india/1.indiatimes.tribuneindia.reuters.
Dated. Robin Wensley Strategy and Management. Ursprung Research in International Marketing.org. by Subhash C.com/kansascity/stories/2001/12/03/daily6.uk/~archives/ Driven. by Günther G.. No.26/11/07 MSc (IBM)
http://www.Syed Jafri Student ID.htm http://en.org/wiki/Bmw http://www.wikipedia. by Edgar James http://www. by David Kileypg Rival Capitalists.00. Hart International Environmental Economics. by Emil Schalk Global Strategy.uk/ http://www.uk/bmwuk/owner/service_useful/recycling/0. Schulze.bmw.bmweducation. Heinrich W. Weitz.bmwworld.html http://fastcompany.1312dhta HR0cDo vL3d3dy5iYXllcmlzY2hlYm13Lm5ld2RvbG4ubmV0.co.html
.co.html http://bmw-club. by Jeffrey A.bizjournals.com/bmw/history/index. by Howard Thomas Principles of Strategy. Jain Marketing.com/magazine/62/bmw. by Barton A.
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APPENDICES VARIOUS OTHER FACTORS THAT INSPIRE BMW IN BECOMING INTERNATIONAL ORGANISATION
Low labour cost in other part of the world as compared to Germany.000 3 Series cars a year. Africa and the Middle East. The need of protection of the foreign market against the appreciation of the Deutschmark. The plant now exports over 50.Syed Jafri Student ID. Today. It employs about 4. Japan.700 people and manufactures over 500 vehicles daily. The Spartanburg plant is open six days a week. the plant manufactures the BMW X5 and BMW Z4 Roadster. Availability of tax benefits and subsidiaries by the government.
. In the mid-1990s. Low cost inputs available in other part of the world. with over 70 percent of its output destined for export. South Carolina plant in 1994. mostly to the USA. Australia. South Africa plant now manufactures cars. No.-20257651
Dated. BMW's Rosslyn.
Production outside Germany
BMW started producing automobiles at its Spartanburg. BMW invested R1 billion to make Rosslyn a world-class facility. Under capacity of BMW’s German production units. After a period of local assembly. producing automobiles approximately 110 hours a week.
Dated. No. BMW has established a joint venture with Chinese manufacturer Brilliance to build BMW 3 Series and 5 Series vehicles for the local market.26/11/07 MSc (IBM)
Starting from October 2003. combining thoughtful engineering. BMWs are produced in Shenyang.Syed Jafri Student ID. speed and handling. BMW had already established a pattern. originality.bmwgroup. BMW vehicles are unique. BMW world wide locations
(Source: www. No other automobile company has been as consistent as BMW in delivering top-notch motoring to driving enthusiasts. craftsmanship. of expanding a product series through a wide range of engine derivative. The vehicle has long been the essence of luxury and sporty driving. which its customers loved.
The first BMW Isetta appeared in April. BMW re-engineered much of the car. Although the major elements of the Italian design remained intact. Glas: In 1962. In 1942 the production was stop due to the World War II. of which 62. In 1933 BMW started to develop bigger cars with 6-cylinder engines. The first car of which was the BMW303.864 were produced. decided it would license certain essential trademarks (the Rolls-Royce name and logo) not to VW but to BMW. A lot of customers decided to buy this car and the company could draw a lots of profit and became a very prosperous car manufacturer. BMW and Glas poduce one of the succesful model which was BMW 1500. so much so that none of the parts between a BMW Isetta Moto Coupe and an Iso Isetta are interchangeable. (Marke "Dixi") from the Gothaer Waggonfabrik. Rolls-Royce Motors: In the early 1990s. BMW 327 and the elegant sports coupe BMW 328.G. However Rolls-Royce Plc the aero-engine maker.-20257651
Dated. It became the birthplace of car manufacturing by BMW.Syed Jafri Student ID. Later successors were the BMW 313. BMW 319. Owned by BMW: 1898 Riley 16
. Ford had acquired an option of first refusal to buy the Rover brand as a result of its purchase of Land Rover from BMW in 2000. before the infamous de-merger in 2000. No. with whom it had recently had joint business ventures. In 1998 Rolls-Royce Motor Cars is a BMW subsidiary responsible for the manufacture of the Rolls-Royce Phantom. Because of this success the production capacity in the plant in Munich was exhausted very soon and the management decided to buy the Glas GmbH in Dingolfing. Later on BMW factory in Eisenach started manufacturing motorcycles and aircraft engines. Isetta: BMW made the Isetta its own by overtaking the company. Rover: The 1994 takeover by BMW saw the development of the Rover 75. BMW and Rolls-Royce Motors began a joint venture that would see the new Rolls-Royce Silver Seraph and Bentley Arnage adopt BMW engines.26/11/07 MSc (IBM)
BMWs joint venture and over taking achievements
Automobilwerk Eisenach: In November 1928 BMW acquired the Fahrzeugfabrik Eisenach A. 1955.
This saves resources and introduces closed-loop recycling process.20 per cent in weight of the total mass of plastic materials used. All cars utilize engine and transmission components supplied by BMW.the motorcycle brand owned is by Triumph motorcycles 1936 Autovia created by Riley as a luxary car brand 1959 Mini originally used as a sub-brand on the Morris versions of the car Mini: MINI is the name of a Cowley. It cut down the additional prices and save costs. By applying designs on recycling concept they are also trying to reduce the wastage and utilize the various parts from the shredded cars in there yards. Reducing Wastes and Pollution Strategy: BMW thinks of tomorrow.-20257651
Dated. Goal Oriented:
. No. It is sometimes called 'The BMW MINI' or 'The New MINI'. The company was founded in 1985. The foundation for the environmental friendly recycling of vehicles is laid during the production of each vehicle. recycled materials can account for 15 .26/11/07 MSc (IBM)
1903 Standard as a part of Triumph Motor Company 1919 Dawson the genesis brand of Triumph Motor Company 1923 Triumph as a car brand. England-based subsidiary of BMW as well as that of a car produced by that subsidiary since April 2001.Syed Jafri Student ID. Wiesmann: Wiesmann is an automobile manufacturer in Germany. Thus BMW designs there cars on recycling concepts. who creates vehicles based on BMW cars. today.
Reducing Price Strategy by Recycling: To reduce the cost and maximize there profits BMW ensures that its vehicles can be efficiently recycled. Alpine: A Motor Manufacturer in its own right. With this step they are not only reducing their wastes but also reducing the pollution factors.
This is the one of the best aspects that inspires every individual in the BMW group. Recognising where our strengths lie and making the best use of every opportunity. Financial services: As per the current scenario financial services are the key factor for success in today's world. but is continuously expanding. asset management. BMW Group is committed to the highest in quality for all its products and services. These goals help and play a vital role in decision-making process. Their playing field is not limited. Quality: From research and development to sales and marketing. BMW has established an extensive product portfolio.-20257651
Dated. dealer financing and company car pools.26/11/07 MSc (IBM)
BMW had laid its goal by keeping every new challenge in mind that they can face in the coming future. Identify the potential and encourage growth. The company's extraordinary success is proof of this strategy's correctness. Follow a clear strategy. No. They had provided the services like: financing and leasing. Therefore they also benefit in this context from the fact that market segments are permanently on the move.
Elements of Entry Strategy
Product Target market Choice of an entry mode to go in the target country Timing of entry
. Customization: In today’s world we can see fundamental trend towards customization. which supplies expert information and advice for situations and questions relating to the finance sector. With this BMW takes opportunity to go on expanding and grow further.Syed Jafri Student ID.
and high levels of latent unsatisfied demand with customers starved of world class options promise enormous opportunities. No.
. For instance.5bn in India. and product modifications required for relatively poor road conditions and high levels of heat and dust. DaimlerChrysler plans new plant in India. Manufacturing practices will have to change considerably to come closer to lean production. rising per capita income. sales are expected to raise anywhere between 850.26/11/07 MSc (IBM)
Problem Faced By BMW
Some of the entry barriers faced by automobile companies in India are relatively high levels of import duties. and whether there is room for so many players. Suzuki and Nissan to invest US$1. There are many other issues (competitors) in the same country. The supplier industry also faces enormous challenges to keep pace with rapid growth. a rapidly growing middle class. a nascent ancillary industry. These issues will become clear as the future unfolds.000 to 1.. Naza requests more land for new plant.000 passenger cars in 199697. which are as follows: Hyundai to set up R&D center by 2008 in India. It is also possible that some companies will increasingly use India as a base for exporting vehicles to other countries.7 million vehicles by the year 2000.-20257651 Size of investment Marketing plan to penetrate the target market
Dated. Production of Tata's Pune plant by end of 2007. It is not certain how exactly demand will grow and on what factors it will depend. Audi investigates local assembly unit. Mahindra plans Rs10bn capital investment. from current sales of around 300.Syed Jafri Student ID. On the other hand.