CASE STUDY OF BMW, ROLLS ROYCE
AND MINI marketing function and the opportunity to
Bayerische Motoren Werke, better known as
BMW, is a German automobile manufacturing
company that was founded 1916. During
World War 1, BMW was contracted to
develop engines for planes. In 1923, BMW
added motorcycles to their list of
manufactured items and eventually
expanded into what they are today. BMW
also owns and produces Mini automobiles
and is the parent company of Rolls-Royce
Cars. They are known for their vehicle’s
streamlined design, luxury, and
performance. In 1994, BMW became the first
European manufacturer to build a factory in
the South Carolina, United States of America.
In the field of exportation, governments help
corporations that have a vested interest in
the community and those that help stimulate
the economy, whether it is local or national.
In the 15 or so years that the United States
has been manufacturing BMWs, they have
exported more than 1 million units. A record
like this could not have been possible
without the help of government aid. The
United States uses several forms of
government aid. Export loans and grants are
just two forms of this. Although similar in
that both help fund a business venture,
export grants are renewable and enable
exporters to upgrade their facilities, bring
products to new markets and hire new
employees without having to repay the
government subsidy. There are also grants
that are interest free that need only be
repaid if the venture is successful (Workman,
2009). Loans are generally easier to receive
and are low-interest. The government also
co-signs on the debt associated with the
loan. Many states have even developed
international offices in major markets to
provide assistance in making contacts in
foreign markets, providing various services.
Of these services, the offices assist trade
leads with foreign buyers, trade missions,
promotional service, and qualifications of
potential buyers, agents, or distributors.
There are two ways of exporting: direct and
indirect. Direct exporting is the most popular
option for big companies to develop their
international marketing strategies. It also
gives the company greater control over the
earn more profits. Where they use
distributaries to sell their product and BMW
use direct exporting way by distributaries for
example BMW distributor in UAE is ABMC.
Moreover, BMW today have 22 factories in
12 countries one of these countries is
USA.BMW made a huge step by building a
factory in the USA in South Carolina where
they produce all models of X5 and Z4 to USA
customers and export to the rest of the
world.
One of the reasons why BMW chose to build
a factory in the united state because USA is
the largest market for cars in the world so
they build a factory closer to their customers
to avoid export and import taxes.
Other reason is due to the international trade
conditions the US dollar value is less than
before by comparing it to the euro or any
other currencies and so because of that USA
is more competitive and provide a better
value to its BMW cars and that because now
exporting from the USA factory is cheaper
than other BMW factories.
Moreover, it’s a fact that labor in developing
countries is cheaper and it’s attracts a lot of
companies to build their factories there, but
in developed countries such USA they will
find more professionals and skilled people
who are expertise in producing luxury cars
and because of that United State attracted
BMW management to build their factory
there.
BMW had chosen Syncreon to deal with their
CKD and SKD export from USA factory.
Generally CKD (completely knocked down) is
exporting vehicles from the region country to
other countries by the sea and by using CKD
and SKD they cut some of the taxes and
government give subside to help giving jobs
in the factory. On the other hand, SKD (semi
knocked down) is the same as CKD but not
complete vehicle just parts and in BMW case
is the engine and other parts of the car they
use in X5 and Z4 series. Syncreon helps
BMW with packing, warehousing and
inventory plus exporting.
Further to the topic, in the USA there’s a low
called U.S. Department of Commerce which
helps promoting their export companies
online in the Export Yellow Page which is
sent to trade centers, embassies and
consulates worldwide.
The Make-Buy decision is determination of
whether it is more advantageous to make a
particular item-in house, or to buy it from a
supplier. The choice involves both qualitative
(such as quality control) and quantitative
(such as relative cost) factors.
We will be analyzing what are some of the
factors that affect a company’s make-buy
and locations decisions, in our case the BMW
(Bavarian Motor Works) company. In this
company, in 1984, between 50 and 75% of
the property of the firm was in the hands of
the Quandt family who also held a very
active position in the supervisory board of
BMW; the remainder of the firm was owned
by a group of European banks and
employees of the firm. The owners of BMW
were very much involved in the management
of the firm (in their long-run decisions) but,
at the same time, they delegate short run
decisions such as marketing plans to the
subsidiaries. As Jenster et al. (1990, p. 142)
point out: “Although the parent company,
BMW in Munich, established broad
guidelines, the subsidiaries are responsible
for developing their own strategic objectives
and marketing plans within their regions.”
Selecting a location for production is a
complicated decision. The various locations
to be considered have to be evaluated
according to a large number of different
criteria, and the individual evaluations must
subsequently be summarised to form an
overall evaluation of each alternative. The
best alternative is then selected on the basis
of this overall evaluation.
One of the factors includes market access,
Green Innovation management has opened
up new markets to companies around the
globe. Green Innovation Management could
be defined as the process to identify,
implement and monitor new ideas that
improve company’s environmental
performance while enhancing its
competitiveness. Identification includes not
only the understanding of environmental
demands (shortage of resources, new
environmental legislations, public pressure,
etc), but also customer’s requirements and
acceptance of environmentally-friendly
products, competitors’ actions, amongst
other factors that need to be considered in
the innovation of processes or products.
Implementation refers to the development of
the idea in the market. And finally,
monitoring is the activity that should
feedback the company about its green
innovation in order to enhance the learning
of innovating in sustainable way.
The automotive industry is one of the
industries that have visibly suffered a strong
demand for higher environmental
performance. This industry have enjoyed
years as the main source of employment and
economic growth and still have a strong
political influence; nevertheless, today it is
being pointed out as one of the major
contributors to air pollution in urban centres.
Indeed, the benefits of cars are clear: they
provide a door-to-door transportation
system, the means to gaining access to life’s
necessities and employment, and a source of
pleasure and social status. However, despite
these benefits there are environmental
burdens as well: local air pollution,
greenhouse gas emissions, road congestion,
noise, mortality and morbidity from
accidents, and loss of open space to roads,
car parks and urban sprawl (Vergragt, 2006).
Thus, companies in the sector have been
trying different strategies to overcome these
challenges. For instance, BMW (Bavarian
Motor Work) this German car company
innovated by implementing a multi-
millionaire landfill gas-project for its
production site in Spartanburg (USA), ending
up in various environmental and economic
gains.
When globalizing its operations to USA in
order to be closer to its largest consumer
market, BMW decided to bring the state-of-
art technology building one of the most
advanced car manufacturing facilities
worldwide. The plant in Spartanburg (USA)
was regarded by its innovation in the paint
shop using water-borne systems. This fact
already provided enormous benefits
regarding the company’s environmental
improvements, once the paint shop is the
major source of environmental impacts
amongst the car manufacturing processes.
The use of water-borne systems reduced
substantially the amount of solvents used in
the processes, therefore, minimizing the
emissions of harmful substances to paint the
cars.
Furthermore, as the global economy shifts,
global companies must rebalance, Since the
beginning of the year, BMW sales in China
have nearly doubled to 114,000 vehicles,
making it BMW’s third-largest market.
Meanwhile sales in the two larger markets,
U.S. and Germany, have increased just 5% to
a total of about 330,000 cars after falling
sharply from pre-recession levels. That is
precisely the kind of pattern that rebalances’
have been hoping for.
China is now BMW’s largest market for its
largest and most profitable sedans. Bernstein
Research estimates that 50% of BMW’s
operating profits come from China; BMW
says that the profit number is a “lower two-
digit number.”
“It’s kind of a windfall,” says Mr. Eichiner,
BMW’s 55-year-old CFO, in his Munich office.
“But our strategy isn’t to rely on that
development. If you do, you lose your focus
in the U.S. and Europe.” (Eichiner)
Overall, consumer spending makes up just
40% of China’s gross domestic product,
compared to 70% in the U.S. and 56% in
Germany, and Chinese households save
more than 25% of their disposable income.
In addition, there is the political risk of doing
business in an autocratic government whose
policies can change suddenly. Mr. Eichiner
says he is especially concerned Beijing may
want to give domestic small-car producers a
boost by crippling imports of BMWs and
other larger vehicles through fuel-efficiency
regulations or taxes.
While government policies-exchange rates,
interest rates, taxes, trade barriers-play a
role, rebalancing depends critically on
decisions made in corporate boardrooms.
Another factor in determining a company’s
make-buy and location decisions is foreign
exchange rates. BMW this year is almost fully
hedged against adverse exchange rate
fluctuations and expects an earnings
contribution from currency effects in the low
hundreds of millions of Euros in 2010.
Expanding your company’s borders to offer
products to countries around the world can
be a very lucrative endeavor. However as
much as it is lucrative, it is also
cumbersome. Each country has its own rules
and regulations for doing business and most
countries around the world have different
currencies. For import and export
companies, foreign exchange volatility is one
of the most difficult and frustrating aspect of
doing business internationally. It fluctuates
constantly and can either increase profits or
result in losses.
Foreign exchange risk is difficult to control
even large companies can get so focused on
their regular business activity that they
forget to hedge their currency exposure.
Take BMW, one of the world’s largest car
manufacturers for example. In 2003, the
Euro rallied 20 percent from a low of 1.04 to
a high of 1.25 against the US dollar. The
company did very well and revenues
increased 4.2 percent, however, according to
their annual report, the weakness of the US
dollar against other currencies caused their
total year’s profit including the effects of
currency to turn into losses, their revenue for
2003 was down by 2.1 percent.
A company as large as BMW turned profits
into losses just because they did not hedge
currency risk properly, which makes it even
more important for small companies, where
every dollar that is earned or lost is even
more important to hedge against currency
risk.