Bmw Strategic Analysis

Table of Contents

Introduction 1

1. Value Chain Analysis 2

1.1 Primary Activities 3

1.2 Supporting Activities 7

2. External Analysis 11

2.1 Porter's Diamond 11

2.2 Five Forces Framework 14

3. SWOT 17

4. Conclusion 21

Bibliography III

Introduction

"Sheer driving pleasure" is what BMW remarks as the major attribute of itself, "sheer driving pleasure" is what BMW puts as it's home country slogan, but in what extend is it a pleasure to drive, or better run this multinational company in the aggressive automotive market? To answer this question and give a future outlook on what could be the strategic driving direction not only for its cars, shall be the emphasis of this report. Within this paper, one of the most successful car manufacturers shall be analysed in detail in order to explain its current market situation and to value its strategy.

First, a general introduction to BMW will be given, while several analysing tools are used in the second and main part of this study. Here the value chain model is used to give details about inner-company matters and serves as our internal analysis. Due to the size of this paper and overwhelming information for the external part, the authors decided to emphasize on the examination of BMW's two major markets, Germany and the United States. Together these two make up for almost half of BMW's total car sales and therefore represent the most important strategic positions.

For the external analysis of Germany, the home market, Porters Diamond is used, while the five forces framework is applied to the U.S. market analysis. The results of the conducted observations are compared and summarized in a final SWOT analysis, where upon the concluding future outlook for BMW will be based. Although the BMW Group also comprises financial services, software products and motorbikes besides the car production, only the latter is of importance for the strategic analyses given in this paper, since the automotive branch is responsible for 82 percent of the annual turnover.

In the beginning, the company and its history shall be introduced briefly: BMW is one of the leading European car makers of prestige automobiles, including the brands BMW, MINI and Rolls Royce. Established during the First World War, BMW manufactured aero-engines and remained leader in their production until 1945.

Having survived the Second World War, BMW concentrated on the automobile production, introducing a wide range of cars. Faced with financial difficulties and the threat of bankruptcy in 1959, this illustrated a lack of focus regarding the company's strategy and planning.

It was for the new main shareholder Herbert Quandt, who visioned the company's strength of building powerful motors, to lead BMW to its historical turning point in 1961 when it launched the new model BMW 1500. Soon the brand was established as for leading engineering excellence, an attribute it still holds these days, adding brand characteristics such as power, reliability, luxurity, advanced technology and premium prices.

The target customer of BMW is the young, affluent professional, the company's slogan "the ultimate driving machine" is dedicated to attract this peer group and it represents BMW's strategic position.

By the year 2003 BMW had more than 104,000 employees, and was responsible for three third of the group's sales. Its' plants in Germany, United States, United Kingdom, Africa and China have a remarkable flexibility, and the cheap production costs resulted in even higher profits. When BMW overtook Lexus in 2003 numerically, it sold more than 277,000 cars, of which MINI, the 3-series and the 5-series are the most successful models.

Nevertheless, BMW is still positioned somewhere between a niche and a major market player, pushing hard on the American and Asian market to reach its ambitious and demanding goal: to be number one in the premium car market.

1. Value Chain Analysis

The following extract will outline how BMW derives value from its major business processes concerning all value chain activities. We have chosen the value chain analysis because it describes all major activities within and around an organisation. This analysis will be limited to some certain main aspects because of the company's high complexity. The outcomes will help to understand the strategic position of the organisation.

Inbound logistics, operations, outbound logistics, marketing & sales and services are primary activities of the value chain and will therefore be discussed first. Supporting activities such as procurement, technology development, human resource management and firm infrastructure refer to all of the primary activities and will be discussed independently.

1.1 Primary Activities

Inbound logistics

A specific German characteristic of its supplier system is the so called "Automotive Cluster." "A cluster is a concentration of institutions and companies in a particular branch of industry within a particular area." Companies can highly benefit from this factor through sharing competences, short delivery times and close co-operations. These are major influences on BMW's inbound logistics, meaning that most of its aspects, like storing and distributing, are outsourced to their suppliers.

Two major clusters of BMW are Leipzig and the so called "Automobildreieck" (automotive triangular) which includes the cities Dingolfing/Landshut - Regensburg - Ingolstadt. According to a research of the IWD (Cologne) about 20.7% of all social insurance registered employees work for the automotive sector in the "Automobildreieck."

The newly built plant in Leipzig builds block for the automotive and supply industries, the academic world and administration in East Germany. The organisation "Automotive Cluster Eastern Germany" evolved from these circumstances. To make such networks work, a lot of activities and projects must be planned and coordinated.

A few facts of the logistic system in Leipzig reveal this complexity:

The production methods