BMW of North America: Dream It. Build It. Drive It.

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Course: Marketing Analysis & Strategy
Date: March 7, 2013

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HBR Case – "BMW of North America: Dream It. Build It. Drive It"

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BMW of North America: Dream It. Build It. Drive It.

  1. 1. BMW of North America:Dream It. Build It. Drive It.IM513  Marke+ng  Analysis  &  Strategy  –  KAIST  Business  School  Team  B  –  The  Outliers:  Sung  Taek  Cho,  Kun-­‐hee  Han,  Seung  Yun  Lee,    Na  Yoen  Nancy  Lew,  Anggriawan  Sugianto,  Sithandone  Prachansiri  
  2. 2. Outline  1 Problem2 Analysis3 Strategy4 Mass Customization5 Recommendation
  3. 3.    BMW  of  North  America:  Dream  It.  Build  It.  Drive  It.  Problem  
  4. 4. Problem  1.  What?   •  BMW  mass  customizaCon  has  been  a  successful  strategy  for  North  America   to  boost  the  X3  sales  (+457%  in  2011).   •  Joseph  Wierda  wonder  if  they  should  expand  this  strategy  to  new  models  or   exisCng  one  with  struggling  sales.   •  What  are  the  real  benefits  and  weakness  of  a  mass  customizaCon  strategy?  2.  Why?   •  BMW  is  now  the  leader  on  luxury  cars  segment  and  try  to  see  how  it  could   keep  this  posiCon?   •  New  models  are  planning  to  be  schedule.   •  Is  mass  customizaCon  the  only  element  that  could  explain  this  bump  in  sale?   •  Is  the  customer  more  sensiCve  to  waiCng  Cme  or  tailored  offer?  
  5. 5. Problem  3.  How?   •  Conduct  some  research  to  decide  which  strategy  to  adopt  for  future  models   in  terms  of  mass  customizaCon.   •  What  will  it  imply  in  terms  of  supply  chain  organizaCon  (move  the   producCon  to  US  or  import  cars?   •  How  to  manage  our  relaConship  in  the  future  with  car  dealers?      What  will  be  the  best  strategy  to  adopt  for  the  future?    More  mass  customiza+on  for  all  model  or  keeping  it  for  some  specifics  models?  
  6. 6.    BMW  of  North  America:  Dream  It.  Build  It.  Drive  It.  Analysis  
  7. 7. Overview  •  The  issue  of  the  market  was  market  growth  •  US  Economy  is  gradually  overcoming  its  deep  crisis    •  Consequently,  US  Car  market  is  also  on  the  recovery  a_er  2009   US  GPD  Growth  rate   Car  Unit  Sales  in  USA   mn   %,  yoy   Source  :  Bureau  of  Economic  Analysis,DB  Research,  2012   Source  :  Bureau  of  Economic  Analysis,DB  Research,  2012  
  8. 8. Customers  •  For  50  years,  Consumer’s  percepCon  of  Car  changed  •  Consumers  are  more  focusing  on  “PragmaCsm”  these  days  •  For  the  real  usage,  not  for  showing  off,  as  they  need  and  want   Pragma+sm   Luxury/   Large   Key   U+lity   word   Fuel   Efficiency   Performance   1960-­‐1972   1973-­‐1983   1984-­‐1995   1996-­‐2007   2008~   Golden   Growing   Before   A_er   Oil  Shock   Age   Period   Crisis   Crisis   Source  :  hhp://Kari.hyundai.com,  2012  
  9. 9. Company  •  BMW  is  in  the  1st  posiCon  in  the  US  luxury  car  market  unCl  now  •  2011  vs.  2012,  Sales  of  Small  sedans/CUVs  Increased  in  BMW   TOP3  Luxury  Cars  in  US   Sales  changes  in  BMW   unit  1,000  unit   Change  in   Aributes   -­‐2012.09   -­‐2011.09   %   BMW  1  Series   168,426   129,041   30.5%   199   ?   220   BMW  3  Series   286,622   288,077   -­‐0.5%   BMW  5  Series   263,738   250,666   5.3   Sedans     245   ?   225   BMW  6  Series   16,607   5,314   -­‐   BMW  7  Series   43,794   48,842   -­‐10.3   229   248   ?   BMW  X1   10,2519   94,294   8.7%   BMW  X3   107,833   83,754   28.7%   2010   2011   2012-­‐now   BMW  X5   76,725   75,055   2.2%   CUVs     BMW  X6   31,497   31,357   0.4%   LEXUS   BENZ   BMW   Source  :  BMW  2012  3Q  report   Sedans     CUVs   Source  :  hhp://Online.wsj.com,  Modified   :  all  asserted  their  posi+ons  as    :  made  a  strong  contribu+on  to  the   leaders  in  their  relevant  segments   overall  success  of  the  brand   except  3  series  
  10. 10. Product     BMW  X3   Customiza0on  Service   Posi%oning   Posi%oning  •  Mid  size  Premium  CUV  segment   •  Fulfill  specific  needs  of  each  consumer   with  high  quality  customizaCon   Compe%tor  •  Vs.  Audi  Q5   Compe%tor  •  Vs.  Benz  GLK   •  Vs.  Private  Tuning  shops   •  Vs.  Other  luxury  brand  Customizing   Service   Character  of  Targets       Character  of  Targets  •  Household  w/  children  –  spacious  •  AcCve  lifestyle  –  outdoor  acCviCes   •  Self-­‐Expressional  •  ProacCve  in  expressing  themselves   •  AcCve  lifestyle  •  Younger,  ambiCous,  progressive   •  High  self-­‐esteem  •  Freedom,  youthful  spirit,   •  Freedom  and  independence   independence     Source  :  BMWeducaCon.com  
  11. 11. Compe+tors   •  CompeCtors  in  same  category  are  not  differenCated  enough   •  Even  targets  are  not  same,  but  the  only  differenCaCon  is  their  brand   Compe+tors  Comparison  Aributes   BMW  X3   AUDI  Q5   BENZ  GLK   Safety   Luxury  Compact   Upscale  Midsize   Luxury  Compact  Category   SUVs   Cars   SUVs   Price   Household     Couple  or  family   Target   Affluent  Mom   w/  children     w/o  children   Performance   $38,850  -­‐   $37,850  -­‐   $37,090  -­‐   Price   $43,950   $68,900   $39,090   Mass   Design  Customiz-­‐ YES  /  2wk   NO   YES  /  8wk   a+on   Benz   Audi   BMW  
  12. 12.    BMW  of  North  America:  Dream  It.  Build  It.  Drive  It.  Strategy  
  13. 13.  Targe+ng  1.  The  people  who  are  NEW  to  the  luxury  market.  2.  People  in  their  20s,  30s  or  40s  who  are  stepping  out  of   domes+c  and  non-­‐premium  SUVs.  3.  Young  families  who  need  SUV  with  space  but  not  large  size.  4.  People  who  have  money  and  can  afford  luxury  cars.  
  14. 14. Posi+oning   Brand  posi+oning 1.  Connect  the  dots  by   extending  BMW’s  high   quality  reputaCon.   2.  Emphasize  the   “Not  individual   Thema+c  posi+oning superiority  of  BMW  in   branding  but   comparison  to  its  ü  Appeal  to  the  consumers  by   brand  extension”   compeCtors. using  senCmental  brand   themes  such  as  quality  Cme   with  family,  memories  or   love   Enjoy  your  luxury   “Acceptable   Price  posi+oningü  PPL  in  Family  movies  or  TV   of  BMW  with   shows.     price” whole  Family   1.  AhracCve  Style  and  ü  Emphasize  the  fact  that   Superior  Quality  for   safety  of  your  family  comes   Acceptable  Price   first   2.  RealizaCon  of  fuel   efficiency  and  low   maintenance  cost  
  15. 15. Consumer  value   Cost  to  sa+sfy  •  Luxurious  high-­‐class  design     Price  differenCaCon  •    •  Mass  customiza+on   PromoConal  price  in  auto  show  •     Marketing MixCommunica+on   Convenience  to  buy  •  Online  rela+onship   Extra  services  in  auto  dealer  •    •  EmoConal-­‐touch  communicaCon   Premium  freebies  •    
  16. 16.    BMW  of  North  America:  Dream  It.  Build  It.  Drive  It.  Mass  Customiza+on  
  17. 17. Mass  Customiza+on  •  Mass  customizaCon  allows  firms  to  produce  only  things  their  customers  want  or   produce  a_er  they  have  orders  in  hand.    •  General  Advantages   •  Lower  inventory  levels  &  Eliminate  of  material  waste  :  ProducCon    to  orders,  not  produce  to  stock   •  Increase  cash  flow  :  Lower  inventories,  prepayment   •  Shorten  Cme  of  responsiveness  :  accumulaCve  Cme  from  receiving  orders  to  delivering   •  Customer  sa+sfac+on  :  Maximized  market  share  &  sales  •  Approaches  To  Mass  CustomizaCon     •  Collabora+ve  customizers  :  these  organizaCons  establish  a  dialogue  to  help  customers  arCculate  their   needs  and  then  develop  customized  outputs  to  meet  these  needs  (Levi’s,  Nike,  Dell)  ß  BMW   •  Adap+ve  customizers:    customers  buy  a  standard  product  but  they  can  modify  it  by  themselves  based   on  their  needs  (Microso_  :  Add  more  funcCon  a_er  purchase)   •  Cosme+c  customizers:    these  companies  produce  a  standard  product  but  present  it  differently  to   different  customers  (  Wal-­‐Mart,  7-­‐Eleven  :Planters  packages  it  peanuts  and  mixed  nuts  in  a  variety  of   containers  on  the  basis  of  specific  needs  of  its  retailing  customers  )   •  Transparent  customizers:  These  companies  provide  custom  products  without  the  customers  knowing   that  a  product  has  been  customized  for  them.  (  Amazon.com  :  book    recommendaCons  )  
  18. 18. Failure  case  of  The  automobile  industry  in  Mass   Customiza+on  Prac+ces  by  2008       Automobile  Industry Brands BMW,  GM,  ToyotaConclusion Almost  Failure 1.  Impossible  to  set  up  their  own  dealers        (ProhibiCon  of  most  US  states)   -­‐  Dealers  prefer  large  stock  to  show  variety  for  consumers  to  chose(opposite  of  mass   customizaCon)   -­‐  it  is  hard  for  carmakers  to  pursue  low  inventory  and  adapt  to  individual  demands  since  dealers     think    differently  from  auto  manufacturers     2.  Weak  connecCon  between  carmakers  and  customers   -­‐  Buyers  informaCon  does  not  go  directly  to  the  carmakers,  as  customers  rely  on  the  dealers   Reasons   3.  Require  many  operaConal  changes     4.  Modules  could  involve  increased  redundancy  and  within  the  supply  chain  compared  to  using   non-­‐modular  components     5.  Cost  of  mass  customizaCon  is  a  big    problem  carmakers  are  facing.  
  19. 19. Strategies  For  Mass  Customiza+on    •  Key  Success  Factors   •  Strategies   •  Modular  product  design   •  DifferenCaCon     •  Flexible    manufacturing    process   •  Lower  Cost     •  SophisCcated  order  management   •  Supplier  RelaConships  (Or  Alliance)   •  Integrated  informaCon  system   Outsourcing     •  Postponement  of  assembly   •  Forward  IntegraCon  DistribuCon  Network   Of  Customer  RelaConship  Developments     •   OrganizaCon  Structure   •  OpCmal  level  of  customizaCon   •  The  value  and  cost  of  customizaCon  has  the   following  relaConship  to  the  degree  of   customizaCon.  It  is  crucial  to  find  the  point   where  the  cost  is  minimized  and  the  value   maximized  for  opCmal  outcome.
  20. 20.    BMW  of  North  America:  Dream  It.  Build  It.  Drive  It.  Recommenda+on  
  21. 21. Conclusion  1.  Expand  the  mass  customizaCon  but  only  for  car   produce  in  US  for  now   Ø  Building  on  the  success  of  X3  strategy   Ø  Limit  the  mass  customizaCon  to  certain  products  to  see  if   it’s  a  really  relevant  strategy   Ø  Don’t  need  to  change  all  the  structure  of  our  worldwide   Supply  Chain  Management  2.  Build  our  differenCaCon  by  offering  a  deeper  Brand   Management  relaConship  with  the  our  customers  
  22. 22. Mass  Customiza+on  for  Limited  Products   Mass  CustomizaCon’s  wayLimited  to  US  Products   TradiConal  way Online   Order  what  customers  choose If  customer  want  to  buy  mass   customizaCon   Pass  through  the  dealer  with  small  margin BMW   Dealer   Customer   (factory)   Off-­‐line  shop  
  23. 23. Digital  Marke+ng  to  Influence  Buying  Decision  Process   In  late  2011,  more  than   70%  of  purchases  originated  from  online  research!   Need   InformaCon   EvaluaCon  of   Purchase   Post-­‐Purchase   RecogniCon   Search   AlternaCves   Decision   Behavior   Brand   Online   Online   Online   Loyalty   PosiConing   Presence   Engagement   Purchasing   Program  High  Performance,   Auto  CommuniCes   Mass   SEO,  Online  Ads   Online  Campaign  Luxurious,  Elegant   &  Reviewers   CustomizaCon  
  24. 24. Digital  Planning  for  Online  Rela+onship   Crea0ve  Adver0sing   Online  adverCsing:     •  PC  banner   •  Mobile  ad   Word-­‐Of-­‐Mouth  Marke0ng   •  Video  ad   •  Social  media  markeCng   •  Photo  &  video  compeCCon   AhenCon   •  Advertorial   •  Facebook  app  /  social  gaming   •  “Share  Your  Story”  compeCCon   Share   Interest   Digital  Campaign   •  EmoConal-­‐touch  markeCng   communicaCon   •  Direct  adverCsing:  lead  generaCon   •  Indirect  adverCsing:  automoCve   microsites  &  mobile  applicaCon  Mass  Customiza0on   Online   AcCon   Search   Strong  Online  Presence   BMW   •  Search  Engine  OpCmizaCon   Dealer   Customer   (factory)   •  InformaCve  BMW  homepage   •  Online  communiCes  engagement   •  AutomoCve  review  sites   Off-­‐line   Mass  CustomizaCon shop   ConvenConal  Way
  25. 25.    BMW  of  North  America:  Dream  It.  Build  It.  Drive  It.  Q&A  

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