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Primitive History of BMW:
BMW AG originated with three other manufacturing companies, Rapp Motorenwerke and
BayerischeFlugzeugwerke (BFw) in Bavaria, and Fahrzeugfabrik Eisenach in Thuringia. Aircraft
engine manufacturer Rapp Motorenwerke became BayerischeMotorenwerke in 1916. The engine
manufacturer, which built proprietary industrial engines after World War I, was then bought by
the owner of BFw who then merged BFw into BMW and moved the engine works onto BFw's
premises. BFw's motorcycle sideline was improved upon by BMW and became an integral part
of their business.
BMW became an automobile manufacturer in 1929 when it purchased Fahrzeugfabrik Eisenach,
which, at the time, built Austin Sevens under license under the Dixi marque. BMW's team of
engineers progressively developed their cars from small Seven-based cars into six-cylinder
luxury cars and, in 1936, began production of the BMW 328 sports car. Aircraft engines,
motorcycles, and automobiles would be BMW's main products until World War II. During the
war, against the wishes of its director Franz Josef Popp, BMW concentrated on aircraft engine
production, with motorcycles as a side line and automobile manufacture stopped altogether.
BMW towers and museum, Munich, Germany
After the war, BMW survived by making pots, pans, and bicycles until 1948, when it restarted
motorcycle production. Meanwhile, BMW's factory in Eisenach fell in the Soviet occupation
zone and the Soviets restarted production of pre-war BMW motorcycles and automobiles there.
This continued until 1955, after which they concentrated on cars based on pre-war DKW
designs. BMW began building cars in Bavaria in 1952 with the BMW 501 luxury saloon. Sales
of their luxury saloons were too small to be profitable, so BMW supplemented this with building
Isettas under license. Slow sales of luxury cars and small profit margins from micro cars caused
the BMW board to consider selling the operation to Daimler-Benz. However, Herbert Quandt
was convinced to purchase a controlling interest in BMW and to invest in its future.
Quant’s investment, along with profits from the BMW 700, brought about the BMW New Class
and BMW New Six. These new products, along with the absorption of Hans Glas GmbH, gave
BMW a sure footing on which to expand. BMW grew in strength, eventually acquiring the Rover
Group (most of which was later divested), and the license to build automobiles under the Rolls-
Royce marquee.
Present location:
BMW announced in 1992 that it would build a 1,150-acre (4.7 km2) manufacturing facility in
Spartanburg County, South Carolina, United States to strengthen its international production
system. The plant opened in 1994. The $2.2 billion plant, which employs 8,800, is one of the
company’s global five-plant production networks.
In addition to the South Carolina manufacturing facility, BMW's North American companies
include sales, marketing, design, and financial services operations in the United States, Mexico
and Canada, as well as throughout Latin America.
The automaker announced in 2014 an additional $1 billion investment in the facility that will
make Spartanburg, South Carolina BMW's largest US factory, with an annual capacity of
450,000 units when including the X7.There were 364,000 vehicles produced in 2014, of which
70% were exported to 140 countries. The plant is second only to the plant in Dingolfingz
Germany in BMW vehicle production.
A nearby dry inland port, 200 miles from the port of Charleston, handles many of the plant's
needs for cargo and finished vehicles. In 2015, 250,000 new cars were sent by rail from BMW
Spartanburg to Charleston port. Some air freight is also used.
Reasons for changing production location outside of Germany:
The selection of the plant site involved many factors that had to be analyzed prior to its
construction. BMW considered the labor climate in each country, geographical requirements and
constraints, and its relations with the governments of the countries in which the prospective sites
were located. In terms of the labor climate, a technologically capable workforce was needed due
to the complex nature of the automotive manufacturing process. Because the cost to train a single
worker in automotive industry is between $10000 and $20000, this factor was especially critical.
Additionally, BMW decided that if the plant were located in the United States, it should be in a
“right-to-work” state to satisfy American unions. Geographical factors had to be examined
because thousands f automobile parts needed to be delivered from both domestic and foreign
suppliers. In order to keep the supply chain cost down, it was decided that the new location
should have ample highway / interstate excess and be reasonably close to a port from which both
supplies and finished automobiles could be easily transported. Another considerations way to
easy access to an airport for BMWs executives travelling back and forth to its headquarters in
Germany. The final location factor was government related. BMW wanted to move to a locating
that was “business friendly” in terms f making concessions on issues such as infrastructural
improvements, tax abatements, and employees screening and education programs. The overall
goal was to make the relationship between BMW and the local community as mutually beneficial
as possible through coordinated improvement effort.
After a three and half year search process that’s stringently evaluated the ten viable options
across these location factors. BMW finally decided to build a new 2 million square foot
production facility in Spartanburg, South Carolina. The final decision was made based on a good
match between the aforementioned selection criteria and the environment in Spartanburg. South
Carolina lawmakers proved flexible and open as to how the state would address the needs set
forth by BMW. South Carolina may not have scored the highest on each decision criteria but
taken as a whole the Spartanburg location was best for BMW and proved to be a good one.
BMW signed agreement in 1999 with Avtotor to produce cars in Kaliningrad, Russia. Factory
has been assembling 3 and 5 -series cars.
Starting from October 2004, BMWs intended for the Chinese market are produced in Shenyang,
China. BMW has established a joint venture with Chinese manufacturer Brilliance to build
BMW 3 Series and 5 Series that have been modified for the needs of local markets.
The BMW X3 was manufactured in Graz, Austria between 2004 and 2007 by Magna Steyr with
mainly German components. The X3 production will be moved to the Spartanburg plant due in
part to high production and transportation costs of what was meant to be the "more affordable"
SUV. North American pricing, after said costs, were nearly on par with the larger, American-
built X5.
In 2005, BMW Group built a new manufacturing facility in Egypt. This plant builds 3 Series, 5
Series, 7 Series, and X3 vehicles for the African and Middle East markets.
BMW opened its first assembly plant in Chennai, India in March 2007 to assemble 3-series and
5-series vehicles. The 20 Million Euro plant aims to produce 1,700 cars per year in, unveiled on
January 2, 2003, and officially launched at the Detroit Auto Show on January 5, 2003. The
model, priced around US$330,000, has experienced record sales worldwide of 796 Phantoms
sold in 2005. Rolls-Royce Motor Cars, BMW's subsidiary manufacturing Rolls-Royces, has
since launched the Rolls-Royce Ghost.BMW is an automobile and motorcycle manufacturer
based in Munich, Germany. The company sells BMW, Rolls-Royce and Mini cars and BMW
Motorrad and Husqvarna motorcycles. In 2012, Forbes announced BMW as the most reputable
business in the world.
Factors affecting the location of a business:
The location of a business is the place where it is situated. There are a number of factors that
need to be considered in choosing a location for a business. One of the earliest decisions any
entrepreneur has to make is where to locate his or her business. In order to do this, he or she has
to make a careful assessment of costs. The ideal location would be one where costs are
minimized. The entrepreneur would need to look at the benefits which each area had to offer as
well as any government help which might be available.
Chart: The main factors affecting location
Factors influencing
location
Market
Raw
materials
Transport cost
Cheap land
Labor
Safety
Waste
disposal
Government
The main factors affecting location are:
Market
The nearness of the market and the cost of delivering the goods are likely to be important factors.
Raw materials
If the raw materials are bulky and expensive to transport it will clearly be in the entrepreneur's
interest to locate near to them.
Transport costs
The two major influences are the pull of the market and the pull of the raw materials and these
are determined by whether or not the industry is bulk-increasing or bulk-decreasing.
Land
Land costs vary considerably nationally and some firms, e.g. wholesalers, might need a large
square-footage. They might, therefore, be influenced by the cheaper rents and property prices
found in some areas.
Labor
The availability of labor might well attract firms to an area, particularly if that labor force has the
skills they require.
Safety
Some industries have to locate their premises well away from high density population levels and
their choice of location is limited.
Waste disposal
Certain industries produce considerable waste and the costs associated with the disposal of this
might affect their location.
Government
Government provides special assistance to areas of high unemployment. This takes place within
the UK, and is also a feature of wider European Union regional policy.
BMW designs its own cars
Towards the end of 1930, BMW attempted to introduce a new front axle with independent wheel
suspension for both their models, the BMW 'Dixi' 3/15 DA4 and BMW 'Wartburg' DA3, but this
resulted in accidents with the prototypes because of construction faults.
Six-cylinder cars
In 1933, BMW introduced the 303. Larger and more conventional than the AM-series 3/20, the
303 used BMW's new M78 engine, making it the first BMW automobile to use a straight-six
engine. The 303 was also the first BMW to use the "kidney grille" that would become a
characteristic of BMW styling. The 303 formed the basis for the four-cylinder 309 and the
larger-engine 315 and 319, while the 303 chassis supported the 315/1 and 319/1 roadsters and the
restyled 329.
The 303 platform was supplemented and later supplanted by the 326, a larger car with a more
rigid frame. Introduced in 1936, the 326 was BMW's first four-door sedan.A shortened version
of the 326 frame was used in the 320, which replaced the 303-framed 329, in the 321, which
replaced the 320, and in the 327coup.
The 328 replaced the 315/1 and 319/1 roadsters in 1936. Unlike the 303-based 315/1 and 319/1,
the 328 had a purpose-built frame. While the 315/1 and 319/1 had M78 engines in a higher state
of tune than in the respective 315 and 319 sedans, the 328's M328 engine had a specially-
designed hemispheric cylinder head and other modifications that brought its power to 80 PS
(59 kW).
From its introduction at the Eifelrennen race at the Nürburgring in 1936, where Ernst Henne
drove it to win the 2.0 liter class, to the overall victory of Fritz Huschke von Hanstein at the 1940
Brescia Grand Prix during World War II, the 328 was a legendary performer, with more than 100
class wins in 1937 alone.
An extended version of the 326's frame was used in the 335, a luxury car with the 3.5 liter M335
engine. The 335 was built from 1939 to 1941.
The analysis of BMW manufacturing crisis in Germany and reasons
for changing manufacturing location outside of Germany-
First crisis for BMW AG – WWI aftermath:
Winter 1918 factory closure
In order to enable companies to resume civil production as rapidly as possible, a central
demobilization office was set up as soon as the war was over, and branches opened right across
Germany. The Commissioner for Demobilization with responsibility for Bavaria ordered the
closure of BMW’s Munich plant with effect from 6 December 1918.
Return of Castiglione and merger with BFw
On 20 May 1922, Castiglione bought the BMW name and engine-building business from Knorr-
Bremse for 75 million reichsmarks. The remainder of the company became a subsidiary of
Knorr-Bremse and was renamed SüddeutscheBremse AG.
Castiglione did not purchase BMW's premises in his transaction with Knorr-Bremse. Instead, he
merged his BayerischeFlugzeugwerke (BFw) into BMW and established BMW's factory and
headquarters at BFw's premises. BMW was moved into the same buildings of Gustav Otto's
former Otto-Flugzeugwerke on LerchenauerStrasse 76. BMW's headquarters have been at that
address ever since.
Second crisis for BMW AG – WWII aftermath:
BMW AG was heavily bombed towards the end of the war, reducing most of the company's
production facilities to rubble. In fact, by the end of the war, the Munich plant was completely
destroyed.BMW sites in eastern Germany (Eisenach-Dürrerhof, Wandlitz-Basdorf and
Zühlsdorf) were seized by the Soviets.
After the war the Munich factory took some time to restart production in any volume. BMW was
banned from manufacturing motor vehicles by the Allies. During this ban, BMW used basic
secondhand and salvaged equipment to make pots and pans, later expanding to other kitchen
supplies and bicycles. Permission to manufacture motorcycles was granted to BMW by United
States authorities in 1947, and production of the R24 began in 1948.
In the east, the company's factory at Eisenach was taken over by the Soviet Awtowelo group.
Production of the R35 motorcycle was restarted in 1945,with the 321 automobile following late
that year. A mildly revised 327 entered production in 1948, followed by the 326-based 340 in
1949. These were sold under the BMW name with the BMW logo affixed to them. To protect its
trademarks, BMW AG legally severed its Eisenach branch from the company.
Third crisis for BMW AG – a company for sale:
By 1959, BMW was in debt and losing money. The Isetta was selling well but with small profit
margins. Their 501-based luxury sedans were not selling well enough to be profitable and were
becoming increasingly outdated. Their 503 coup and 507 roadster were too expensive to be
profitable Their 600, a four-seater based on the Isetta, was selling poorly. The motorcycle market
imploded in the mid-1950s with increased affluence turning Germans away from motorcycles
and toward cars. BMW had sold their Allach plant to MAN in 1954.American Motors and the
Rootes Group had both tried to acquire BMW.
At BMW's annual general meeting on 9 December 1959, Dr. Hans Feith, chairman of BMW's
supervisory board, proposed a merger with Daimler-Benz. The dealers and small shareholders
opposed this suggestion and rallied around a counter-proposal by Dr. Friedrich Mathern, which
gained enough support to stop the merger. At that time, the Quandt Group, led by half-brothers
Herbert and HaraldQuandt, had recently increased their holdings in BMW and had become their
largest shareholder. By the end of November 1960, the Quandts owned two-thirds of BMW's
stock between them.
By this time BMW had launched the 700, a small car with an air-cooled, rear-mounted 697 cc
boxer engine derived from the engine powering the R67 motorcycle. It was available as a 2-door
sedan and as a coupe, both versions having been designed by Giovanni Michelotti. There was
also a more powerful RS model for racing.
At the Frankfurt Motor Show in 1961, BMW launched the 1500,Thismodern specification
further cemented BMW's reputation for sporting cars. It was the first BMW to officially feature
the "Hofmeister kink", the rear window line that has been the hallmark of all BMWs since then.
A compact sedan with front disc brakes and four-wheel independent suspension.
The "New Class" 1500 was developed into 1600 and 1800 models. In 1966, the two-door version
of the 1600 was launched, along with a convertible in 1967. These models began the '02' series,
of which the 2002 was the best known, and which was continued until 1976 when it was replaced
by the BMW 3 Series. By 1963, with the company back on its feet, BMW offered dividends to
its shareholders for the first time since World War II.
Three approaches to car manufacture
By the end of the 1940s BMW had returned to motorcycle manufacture but still had not restarted
automobile manufacture. Kurt Donath, technical director of BMW and general manager of the
Milbertshofen factory, solicited manufacturers, including Ford and Simca, to produce their
vehicles under licence. In particular, Donath was looking to produce old models under licence,
so that he could buy tooling along with the licence.
While Donath was trying to find a car to build under licence, chief engineer Alfred Böning
developed a prototype for a small economy car powered by a motorcycle engine. Called the
BMW 331, the prototype used a 600 cc motorcycle engine, a four-speed gearbox, and a live rear
axle. The body was designed by Peter Schimanowski and resembled a BMW 327 in miniature.
The BMW 331 was proposed for production to the management, where it was vetoed by sales
director HannsGrewenig. Grewenig, a banker and former Opel plant manager, believed that
BMW's small production capacity was best suited to luxury cars with high profit margins, similar
to the cars BMW made just before the war. To this end, he had Böning and his team design the
501.
When the 501 was introduced in 1951, its cost of approximately DM15,000 was about four times
the average German's earnings. It was also much heavier than expected and underpowered with a
development of BMW's pre-war two litre six. Delays in receiving and setting up equipment
caused production of the 501 to be delayed until late 1952, with body construction, originally
expected to be done in-house, being done by KarosserieBaur in Stuttgart for more than a year.
In 1954, the 501 was given an improved, more powerful version of its six-cylinder engine and
split into two models, the 501A at basically the same trim level and a price reduction of
DM1,000, and a discontented 501B at a further price reduction of DM1,000 below the 501A's
price. In addition, the 502, basically a 501 with an even higher trim level and a 2.6 L aluminum
V8 engine designed by Boning and Fiedler,] was introduced to lead BMW's luxury sedan range.
The expanded line for 1954 doubled the sales of BMW's luxury cars.
Influenced by the public response to the introduction of Mercedes-Benz's 300SL and 190SL
show cars at the International Motor Sports Auto Show in New York in February 1954, the
management of BMW approved Growing’s proposal to build a sports car based on the 502.
Preliminary design sketches were seen by U.S. importer Max Hoffman, who suggested to
industrial designer Albrecht von Goertz that he should submit design proposals to BMW's
management as an alternative. Based on these proposals, BMW contracted the design of the
sports car and a four-seat grand tourer to von Goertz in November 1954. The 507 roadster was
introduced at the Waldorf-Astoria Hotel in New York in the summer of 1955, while the 503
four-seater was introduced in September of that year at the Frankfurt Motor Show.
Hoffman told BMW that he would order 2000 507s if he could sell them for US$5,000 each.
When the selling price was given as about twice that, and higher than the 300SL, he withdrew
his offer. 412 units of the 503 and 253 of the 507 were built during their production runs from
1956 (May for the 503, November for the 507) to March 1959.
Motorcycles were BMW's largest money earner at the time, and their sales had peaked in 1954.
Germans were turning away from mopeds and motorcycles toward light automobiles such as the
Messerschmitt and the Goggomobil. Eberhard Wolff, BMW's head of automotive development,
saw the IsoRivoltaIsettabubble car at the 1954 Geneva Motor Show and suggested to his
managers the possibility of building the Isetta under licence. BMW entered talks with IsoRivolta
and bought both a licence to manufacture the Isetta and all the tooling needed to manufacture its
body. Production of BMW's version of the Isetta began in 1955; more than ten thousand Isettas
were sold that year. BMW made more than a hundred thousand Isettas by the end of 1958, and a
total of 161,728 by the end of production in 1962.
BMW knew that it needed a four-seat family car to keep up with the rising wealth and
expectations of the German people, but it could not access funding to develop a new car for this
market. They therefore developed the 600, a four-seat car based on the Isetta. The 600 used the
front suspension, the front seats, and the front-mounted door from the Isetta, but used a new,
longer ladder frame with a longer, four-seat body, a rear-mounted 0.6 L flat-twin motorcycle
engine, and a full-width rear track. The 600's rear suspension was BMW's first use of the semi-
trailing arm system that would be used on their sedans and coupes until the 1990s. Released in
1957, the 600 could not compete against the larger, more powerful Volkswagen Beetle.
Production ended in 1959 after fewer than 35,000 were built.
SWOT analysis of BMW Company:
Strengths:
1. Brand reputation. BMW brand is the third most valuable automotive industry brand in
the world valued at $29 billion. In 2012, Forbes has also listed BMW as the most
reputable business in the world.
2. Environment friendly vehicles. The company tries to develop environment friendly cars
by making them more efficient. It offers nearly 20 models that emit CO2 as low as
140g/km. To make BMW cars more environment friendly firm’s engineers develop new
types of fuels, such as hydrogen, too.
3. Quality products. BMW is valued on its engineering capabilities, skilled workforce and
quality products. BMW recalls their cars less often and at lower numbers than most of its
competitors do.
4. Highly skilled workforce. Quality cars require premium materials and skilled workforce
and BMW employs only the most skilled workers to produce its vehicles. BMW sets up
its assembly plants at the countries, such as USA and Germany, where there is only the
most skilled vehicle assemblers.
5. Corporate Social Responsibility (CSR). BMW is strongly committed to the
environment protection, employee and community well-being and sustainability
programs. The company invests large sums in employee health management, programs
promoting balanced work life, sustainability requirements for its suppliers and producing
zero waste at its plants.
6. Strong brand presence in China. Over the last few years, BMW has seen strong sales
growth in China, the largest automotive market in the world. In 2012, BMW sold 326,444
vehicles there.
Weaknesses:
1. High cost structure. Producing quality cars and hiring skilled workforce results in high
costs for the business. BMW cost structure is higher than of its biggest competitors such
as Toyota, GM and Volkswagen.
2. Weak brand portfolio. BMW Group manufactures and sells only 3 brands: BMW, MINI
and Rolls-Royce. Although these brands perform well in their segments, they are unable
to serve larger market needs. Therefore, BMW has to introduce more brands to its
portfolio to meet diverse consumer needs.
3. High prices. BMW manufactures luxury cars that require best quality materials, skilled
workforce and a great brand image. All this results at a higher car prices that are often
considered as too pricey compared to other car prices.
4. Too few acquisitions and strategic partnerships. 90% of BMW growth is organic and
only 10% is from acquisitions. Without acquisitions, the company finds it hard to grow
even with exclusive engineering capabilities. Thus, if the company wants to grow
significantly, it has to acquire more brands and enter into more strategic partnerships.
Opportunities:
1. Increasing fuel prices. Increasing fuel prices open up large markets for BMW hybrid
and hydrogen cars as consumers shift towards cheaper fuel types.
2. Positive attitude towards “green” vehicles. Today consumers are more aware of the
negative effects (air pollution) caused by cars fueled by petrol and diesel. Large
quantities of CO2 emissions intensify greenhouse effect and negatively impact the life on
earth. Thus, consumers are more likely to buy new hybrid and hydrogen fueled cars that
emit less or no CO2 at all.
3. Expand brand portfolio. In order to grow at a higher rate, BMW should expand its
brand portfolio to meet more needs and to satisfy larger consumer market. The company
could introduce new models that aren’t currently included in its range.
4. New emission standards. A new wave for stricter regulations on vehicle emission
standards would positively affect BMW position in automotive industry. The firm
produces one the most ecological vehicles and has introduced hydrogen fuels that emit
zero CO2. New vehicle emission regulations would mean 0 additional investment for
BMW while its competitors would have to invest large sums of money to comply with
regulations and lose a share of profits.
Threats
1. Intense competition. BMW faces increasing competition from its direct competitors and
now tends to compete on price rather than differentiation. Moreover, the markets for
luxury cars are saturated in the developed economies, thus intensifying competition.
2. Rising raw material prices. Rising prices for raw metals will lift the costs for auto
manufacturers and result in squeezed profits.
3. Decreasing fuel prices. Due to increasing extraction of shale gas, future fuel prices
should drop and make electric, hybrid and hydrogen cars less attractive. This creates huge
losses for BMW most ambitious projects, hydrogen fueled and electric cars.
4. Growing euro exchange rate. BMW earns part of its profits outside the euro zone.
Exchange rate fluctuations threaten BMW profits if the euro will start appreciating
against other currencies.
Reasons for which BMW is so successful brand
Luxury car maker? Why is it selling the most and sweeping all the awards?
Here's why: What does BMW stand for? We all know that they make ultimate driving machines
and concentrate on giving their drivers pleasure when piloting their products on the roads.
Therefore we do not expect BMW to build a truck or a van like what Mercedes is doing. Quality
and reliability are also strong points behind BMW success today.
They believe in excellence in everything they do: service, product quality, customer
relationships.
Another reason for their success is their independence in the business world. They are the only
significant luxury car maker which is independent and is free to take the necessary steps to
ensure they reach their goals; whereas Mercedes Benz is part of the Daimler Chrysler
organization and I believe is forced to use parts from Mitsubishi, Chrysler, Jeep in order to safe
costs and also to degrade their own product quality to try to make Daimler Chrysler profitable.
Audi also suffers from this trap where VW owns this brand and sharing of parts with cheaper
cars BMW in order to try to safe costs is also hindering its success.
In a design point of view, marketing the products is BMW's strong point. The 1, 3, 5, 6, 7 Series
are all different and they each carry a different character, whereas Audi car designs are all
similar, especially the front and Mercedes is even worse. Product variation cannot be under-
estimated.
BMW spends around 25% of their profits into Research and development and it is because of
BMW that put so much of their innovations and improvements into their products that they
manage to attract the public's recognition and approvals, which in turn increases its success.
In a design point of view, there has been many criticisms regarding the direction that BMW is
going. But are these criticisms justified? They surely did not go wrong if more and more buyers
are choosing BMW over any other cars.
In conclusion, a company must know what the public wants and must maintain a keen interest in
the relationship with their customers and value their thoughts. That's why BMW is where it is
today, so far ahead of the others.
The key success factors thus of BMW can be summarized as
 Business model of BMW
 Technology
 Brand image
 Sustainability
Recommendation and Conclusion:
BMW Company is one of the leading manufacturing companies in the world. It has become so
because of its location facilities. It could have identified the location facilities and applied those
facilities in the company. It has become so rich only because of changing the location from
Germany to Spartanburg County, South Carolina, United States. The same company is earning
more profit than before for cheap labor, proximity to customer, proximity to supplier and
environmental facilities etc. So we can say that every company should consider the location
factor when starting a business like the BMW Company. Product quality is an inevitable and
distinguishing factor for customer satisfaction. The brand is identified by its product
excellence and cost of ownership. BMW has a status of being number Uno when it
comes to quality, and thus it is one of the critical success factors for BMW. Though the cost of
the product i.e. BMW automobiles is high it evidently justifies this through its product quality.
The experience of BMW in the industry also is a critical success factor for BMW. With its years
of experience it has developed a brand identity for its products and very integrated and
sophisticated supply chain that ensures its products are delivered at the right time and right place.
References:
www.bmweducation.co.uk/companyhistory
www.bmw.com
www.wikipidea.com
www.bmwgroup.com
www.bmw.co.uk/models
www.brandchannel.com/featuresprofile.asp?prid=171
www.youtube.com/user/BMW
www.scribd.com/document
www.ukessays.com
Krajewski, Ritzman and Malhotra; Operations Management 8th
edition.
www.just-auto.com

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Assignment on bmw

  • 1. Primitive History of BMW: BMW AG originated with three other manufacturing companies, Rapp Motorenwerke and BayerischeFlugzeugwerke (BFw) in Bavaria, and Fahrzeugfabrik Eisenach in Thuringia. Aircraft engine manufacturer Rapp Motorenwerke became BayerischeMotorenwerke in 1916. The engine manufacturer, which built proprietary industrial engines after World War I, was then bought by the owner of BFw who then merged BFw into BMW and moved the engine works onto BFw's premises. BFw's motorcycle sideline was improved upon by BMW and became an integral part of their business. BMW became an automobile manufacturer in 1929 when it purchased Fahrzeugfabrik Eisenach, which, at the time, built Austin Sevens under license under the Dixi marque. BMW's team of engineers progressively developed their cars from small Seven-based cars into six-cylinder luxury cars and, in 1936, began production of the BMW 328 sports car. Aircraft engines, motorcycles, and automobiles would be BMW's main products until World War II. During the war, against the wishes of its director Franz Josef Popp, BMW concentrated on aircraft engine production, with motorcycles as a side line and automobile manufacture stopped altogether. BMW towers and museum, Munich, Germany After the war, BMW survived by making pots, pans, and bicycles until 1948, when it restarted motorcycle production. Meanwhile, BMW's factory in Eisenach fell in the Soviet occupation zone and the Soviets restarted production of pre-war BMW motorcycles and automobiles there. This continued until 1955, after which they concentrated on cars based on pre-war DKW designs. BMW began building cars in Bavaria in 1952 with the BMW 501 luxury saloon. Sales of their luxury saloons were too small to be profitable, so BMW supplemented this with building Isettas under license. Slow sales of luxury cars and small profit margins from micro cars caused the BMW board to consider selling the operation to Daimler-Benz. However, Herbert Quandt was convinced to purchase a controlling interest in BMW and to invest in its future. Quant’s investment, along with profits from the BMW 700, brought about the BMW New Class and BMW New Six. These new products, along with the absorption of Hans Glas GmbH, gave BMW a sure footing on which to expand. BMW grew in strength, eventually acquiring the Rover Group (most of which was later divested), and the license to build automobiles under the Rolls- Royce marquee.
  • 2. Present location: BMW announced in 1992 that it would build a 1,150-acre (4.7 km2) manufacturing facility in Spartanburg County, South Carolina, United States to strengthen its international production system. The plant opened in 1994. The $2.2 billion plant, which employs 8,800, is one of the company’s global five-plant production networks. In addition to the South Carolina manufacturing facility, BMW's North American companies include sales, marketing, design, and financial services operations in the United States, Mexico and Canada, as well as throughout Latin America. The automaker announced in 2014 an additional $1 billion investment in the facility that will make Spartanburg, South Carolina BMW's largest US factory, with an annual capacity of 450,000 units when including the X7.There were 364,000 vehicles produced in 2014, of which 70% were exported to 140 countries. The plant is second only to the plant in Dingolfingz Germany in BMW vehicle production. A nearby dry inland port, 200 miles from the port of Charleston, handles many of the plant's needs for cargo and finished vehicles. In 2015, 250,000 new cars were sent by rail from BMW Spartanburg to Charleston port. Some air freight is also used.
  • 3. Reasons for changing production location outside of Germany: The selection of the plant site involved many factors that had to be analyzed prior to its construction. BMW considered the labor climate in each country, geographical requirements and constraints, and its relations with the governments of the countries in which the prospective sites were located. In terms of the labor climate, a technologically capable workforce was needed due to the complex nature of the automotive manufacturing process. Because the cost to train a single worker in automotive industry is between $10000 and $20000, this factor was especially critical. Additionally, BMW decided that if the plant were located in the United States, it should be in a “right-to-work” state to satisfy American unions. Geographical factors had to be examined because thousands f automobile parts needed to be delivered from both domestic and foreign suppliers. In order to keep the supply chain cost down, it was decided that the new location should have ample highway / interstate excess and be reasonably close to a port from which both supplies and finished automobiles could be easily transported. Another considerations way to easy access to an airport for BMWs executives travelling back and forth to its headquarters in Germany. The final location factor was government related. BMW wanted to move to a locating that was “business friendly” in terms f making concessions on issues such as infrastructural improvements, tax abatements, and employees screening and education programs. The overall goal was to make the relationship between BMW and the local community as mutually beneficial as possible through coordinated improvement effort. After a three and half year search process that’s stringently evaluated the ten viable options across these location factors. BMW finally decided to build a new 2 million square foot production facility in Spartanburg, South Carolina. The final decision was made based on a good match between the aforementioned selection criteria and the environment in Spartanburg. South Carolina lawmakers proved flexible and open as to how the state would address the needs set forth by BMW. South Carolina may not have scored the highest on each decision criteria but taken as a whole the Spartanburg location was best for BMW and proved to be a good one. BMW signed agreement in 1999 with Avtotor to produce cars in Kaliningrad, Russia. Factory has been assembling 3 and 5 -series cars. Starting from October 2004, BMWs intended for the Chinese market are produced in Shenyang, China. BMW has established a joint venture with Chinese manufacturer Brilliance to build BMW 3 Series and 5 Series that have been modified for the needs of local markets. The BMW X3 was manufactured in Graz, Austria between 2004 and 2007 by Magna Steyr with mainly German components. The X3 production will be moved to the Spartanburg plant due in part to high production and transportation costs of what was meant to be the "more affordable" SUV. North American pricing, after said costs, were nearly on par with the larger, American- built X5. In 2005, BMW Group built a new manufacturing facility in Egypt. This plant builds 3 Series, 5 Series, 7 Series, and X3 vehicles for the African and Middle East markets. BMW opened its first assembly plant in Chennai, India in March 2007 to assemble 3-series and 5-series vehicles. The 20 Million Euro plant aims to produce 1,700 cars per year in, unveiled on January 2, 2003, and officially launched at the Detroit Auto Show on January 5, 2003. The
  • 4. model, priced around US$330,000, has experienced record sales worldwide of 796 Phantoms sold in 2005. Rolls-Royce Motor Cars, BMW's subsidiary manufacturing Rolls-Royces, has since launched the Rolls-Royce Ghost.BMW is an automobile and motorcycle manufacturer based in Munich, Germany. The company sells BMW, Rolls-Royce and Mini cars and BMW Motorrad and Husqvarna motorcycles. In 2012, Forbes announced BMW as the most reputable business in the world. Factors affecting the location of a business: The location of a business is the place where it is situated. There are a number of factors that need to be considered in choosing a location for a business. One of the earliest decisions any entrepreneur has to make is where to locate his or her business. In order to do this, he or she has to make a careful assessment of costs. The ideal location would be one where costs are minimized. The entrepreneur would need to look at the benefits which each area had to offer as well as any government help which might be available. Chart: The main factors affecting location Factors influencing location Market Raw materials Transport cost Cheap land Labor Safety Waste disposal Government
  • 5. The main factors affecting location are: Market The nearness of the market and the cost of delivering the goods are likely to be important factors. Raw materials If the raw materials are bulky and expensive to transport it will clearly be in the entrepreneur's interest to locate near to them. Transport costs The two major influences are the pull of the market and the pull of the raw materials and these are determined by whether or not the industry is bulk-increasing or bulk-decreasing. Land Land costs vary considerably nationally and some firms, e.g. wholesalers, might need a large square-footage. They might, therefore, be influenced by the cheaper rents and property prices found in some areas. Labor The availability of labor might well attract firms to an area, particularly if that labor force has the skills they require. Safety Some industries have to locate their premises well away from high density population levels and their choice of location is limited. Waste disposal Certain industries produce considerable waste and the costs associated with the disposal of this might affect their location. Government Government provides special assistance to areas of high unemployment. This takes place within the UK, and is also a feature of wider European Union regional policy.
  • 6. BMW designs its own cars Towards the end of 1930, BMW attempted to introduce a new front axle with independent wheel suspension for both their models, the BMW 'Dixi' 3/15 DA4 and BMW 'Wartburg' DA3, but this resulted in accidents with the prototypes because of construction faults. Six-cylinder cars In 1933, BMW introduced the 303. Larger and more conventional than the AM-series 3/20, the 303 used BMW's new M78 engine, making it the first BMW automobile to use a straight-six engine. The 303 was also the first BMW to use the "kidney grille" that would become a characteristic of BMW styling. The 303 formed the basis for the four-cylinder 309 and the larger-engine 315 and 319, while the 303 chassis supported the 315/1 and 319/1 roadsters and the restyled 329. The 303 platform was supplemented and later supplanted by the 326, a larger car with a more rigid frame. Introduced in 1936, the 326 was BMW's first four-door sedan.A shortened version of the 326 frame was used in the 320, which replaced the 303-framed 329, in the 321, which replaced the 320, and in the 327coup. The 328 replaced the 315/1 and 319/1 roadsters in 1936. Unlike the 303-based 315/1 and 319/1, the 328 had a purpose-built frame. While the 315/1 and 319/1 had M78 engines in a higher state of tune than in the respective 315 and 319 sedans, the 328's M328 engine had a specially- designed hemispheric cylinder head and other modifications that brought its power to 80 PS (59 kW).
  • 7. From its introduction at the Eifelrennen race at the Nürburgring in 1936, where Ernst Henne drove it to win the 2.0 liter class, to the overall victory of Fritz Huschke von Hanstein at the 1940 Brescia Grand Prix during World War II, the 328 was a legendary performer, with more than 100 class wins in 1937 alone. An extended version of the 326's frame was used in the 335, a luxury car with the 3.5 liter M335 engine. The 335 was built from 1939 to 1941. The analysis of BMW manufacturing crisis in Germany and reasons for changing manufacturing location outside of Germany- First crisis for BMW AG – WWI aftermath: Winter 1918 factory closure In order to enable companies to resume civil production as rapidly as possible, a central demobilization office was set up as soon as the war was over, and branches opened right across Germany. The Commissioner for Demobilization with responsibility for Bavaria ordered the closure of BMW’s Munich plant with effect from 6 December 1918. Return of Castiglione and merger with BFw On 20 May 1922, Castiglione bought the BMW name and engine-building business from Knorr- Bremse for 75 million reichsmarks. The remainder of the company became a subsidiary of Knorr-Bremse and was renamed SüddeutscheBremse AG. Castiglione did not purchase BMW's premises in his transaction with Knorr-Bremse. Instead, he merged his BayerischeFlugzeugwerke (BFw) into BMW and established BMW's factory and headquarters at BFw's premises. BMW was moved into the same buildings of Gustav Otto's former Otto-Flugzeugwerke on LerchenauerStrasse 76. BMW's headquarters have been at that address ever since. Second crisis for BMW AG – WWII aftermath: BMW AG was heavily bombed towards the end of the war, reducing most of the company's production facilities to rubble. In fact, by the end of the war, the Munich plant was completely destroyed.BMW sites in eastern Germany (Eisenach-Dürrerhof, Wandlitz-Basdorf and Zühlsdorf) were seized by the Soviets.
  • 8. After the war the Munich factory took some time to restart production in any volume. BMW was banned from manufacturing motor vehicles by the Allies. During this ban, BMW used basic secondhand and salvaged equipment to make pots and pans, later expanding to other kitchen supplies and bicycles. Permission to manufacture motorcycles was granted to BMW by United States authorities in 1947, and production of the R24 began in 1948. In the east, the company's factory at Eisenach was taken over by the Soviet Awtowelo group. Production of the R35 motorcycle was restarted in 1945,with the 321 automobile following late that year. A mildly revised 327 entered production in 1948, followed by the 326-based 340 in 1949. These were sold under the BMW name with the BMW logo affixed to them. To protect its trademarks, BMW AG legally severed its Eisenach branch from the company. Third crisis for BMW AG – a company for sale: By 1959, BMW was in debt and losing money. The Isetta was selling well but with small profit margins. Their 501-based luxury sedans were not selling well enough to be profitable and were becoming increasingly outdated. Their 503 coup and 507 roadster were too expensive to be profitable Their 600, a four-seater based on the Isetta, was selling poorly. The motorcycle market imploded in the mid-1950s with increased affluence turning Germans away from motorcycles and toward cars. BMW had sold their Allach plant to MAN in 1954.American Motors and the Rootes Group had both tried to acquire BMW. At BMW's annual general meeting on 9 December 1959, Dr. Hans Feith, chairman of BMW's supervisory board, proposed a merger with Daimler-Benz. The dealers and small shareholders opposed this suggestion and rallied around a counter-proposal by Dr. Friedrich Mathern, which gained enough support to stop the merger. At that time, the Quandt Group, led by half-brothers Herbert and HaraldQuandt, had recently increased their holdings in BMW and had become their largest shareholder. By the end of November 1960, the Quandts owned two-thirds of BMW's stock between them. By this time BMW had launched the 700, a small car with an air-cooled, rear-mounted 697 cc boxer engine derived from the engine powering the R67 motorcycle. It was available as a 2-door sedan and as a coupe, both versions having been designed by Giovanni Michelotti. There was also a more powerful RS model for racing. At the Frankfurt Motor Show in 1961, BMW launched the 1500,Thismodern specification further cemented BMW's reputation for sporting cars. It was the first BMW to officially feature the "Hofmeister kink", the rear window line that has been the hallmark of all BMWs since then. A compact sedan with front disc brakes and four-wheel independent suspension. The "New Class" 1500 was developed into 1600 and 1800 models. In 1966, the two-door version of the 1600 was launched, along with a convertible in 1967. These models began the '02' series, of which the 2002 was the best known, and which was continued until 1976 when it was replaced
  • 9. by the BMW 3 Series. By 1963, with the company back on its feet, BMW offered dividends to its shareholders for the first time since World War II. Three approaches to car manufacture By the end of the 1940s BMW had returned to motorcycle manufacture but still had not restarted automobile manufacture. Kurt Donath, technical director of BMW and general manager of the Milbertshofen factory, solicited manufacturers, including Ford and Simca, to produce their vehicles under licence. In particular, Donath was looking to produce old models under licence, so that he could buy tooling along with the licence. While Donath was trying to find a car to build under licence, chief engineer Alfred Böning developed a prototype for a small economy car powered by a motorcycle engine. Called the BMW 331, the prototype used a 600 cc motorcycle engine, a four-speed gearbox, and a live rear axle. The body was designed by Peter Schimanowski and resembled a BMW 327 in miniature. The BMW 331 was proposed for production to the management, where it was vetoed by sales director HannsGrewenig. Grewenig, a banker and former Opel plant manager, believed that BMW's small production capacity was best suited to luxury cars with high profit margins, similar to the cars BMW made just before the war. To this end, he had Böning and his team design the 501. When the 501 was introduced in 1951, its cost of approximately DM15,000 was about four times the average German's earnings. It was also much heavier than expected and underpowered with a development of BMW's pre-war two litre six. Delays in receiving and setting up equipment caused production of the 501 to be delayed until late 1952, with body construction, originally expected to be done in-house, being done by KarosserieBaur in Stuttgart for more than a year. In 1954, the 501 was given an improved, more powerful version of its six-cylinder engine and split into two models, the 501A at basically the same trim level and a price reduction of DM1,000, and a discontented 501B at a further price reduction of DM1,000 below the 501A's price. In addition, the 502, basically a 501 with an even higher trim level and a 2.6 L aluminum V8 engine designed by Boning and Fiedler,] was introduced to lead BMW's luxury sedan range. The expanded line for 1954 doubled the sales of BMW's luxury cars. Influenced by the public response to the introduction of Mercedes-Benz's 300SL and 190SL show cars at the International Motor Sports Auto Show in New York in February 1954, the management of BMW approved Growing’s proposal to build a sports car based on the 502. Preliminary design sketches were seen by U.S. importer Max Hoffman, who suggested to industrial designer Albrecht von Goertz that he should submit design proposals to BMW's management as an alternative. Based on these proposals, BMW contracted the design of the sports car and a four-seat grand tourer to von Goertz in November 1954. The 507 roadster was introduced at the Waldorf-Astoria Hotel in New York in the summer of 1955, while the 503 four-seater was introduced in September of that year at the Frankfurt Motor Show.
  • 10. Hoffman told BMW that he would order 2000 507s if he could sell them for US$5,000 each. When the selling price was given as about twice that, and higher than the 300SL, he withdrew his offer. 412 units of the 503 and 253 of the 507 were built during their production runs from 1956 (May for the 503, November for the 507) to March 1959. Motorcycles were BMW's largest money earner at the time, and their sales had peaked in 1954. Germans were turning away from mopeds and motorcycles toward light automobiles such as the Messerschmitt and the Goggomobil. Eberhard Wolff, BMW's head of automotive development, saw the IsoRivoltaIsettabubble car at the 1954 Geneva Motor Show and suggested to his managers the possibility of building the Isetta under licence. BMW entered talks with IsoRivolta and bought both a licence to manufacture the Isetta and all the tooling needed to manufacture its body. Production of BMW's version of the Isetta began in 1955; more than ten thousand Isettas were sold that year. BMW made more than a hundred thousand Isettas by the end of 1958, and a total of 161,728 by the end of production in 1962. BMW knew that it needed a four-seat family car to keep up with the rising wealth and expectations of the German people, but it could not access funding to develop a new car for this market. They therefore developed the 600, a four-seat car based on the Isetta. The 600 used the front suspension, the front seats, and the front-mounted door from the Isetta, but used a new, longer ladder frame with a longer, four-seat body, a rear-mounted 0.6 L flat-twin motorcycle engine, and a full-width rear track. The 600's rear suspension was BMW's first use of the semi- trailing arm system that would be used on their sedans and coupes until the 1990s. Released in 1957, the 600 could not compete against the larger, more powerful Volkswagen Beetle. Production ended in 1959 after fewer than 35,000 were built. SWOT analysis of BMW Company: Strengths: 1. Brand reputation. BMW brand is the third most valuable automotive industry brand in the world valued at $29 billion. In 2012, Forbes has also listed BMW as the most reputable business in the world. 2. Environment friendly vehicles. The company tries to develop environment friendly cars by making them more efficient. It offers nearly 20 models that emit CO2 as low as 140g/km. To make BMW cars more environment friendly firm’s engineers develop new types of fuels, such as hydrogen, too. 3. Quality products. BMW is valued on its engineering capabilities, skilled workforce and quality products. BMW recalls their cars less often and at lower numbers than most of its competitors do. 4. Highly skilled workforce. Quality cars require premium materials and skilled workforce and BMW employs only the most skilled workers to produce its vehicles. BMW sets up
  • 11. its assembly plants at the countries, such as USA and Germany, where there is only the most skilled vehicle assemblers. 5. Corporate Social Responsibility (CSR). BMW is strongly committed to the environment protection, employee and community well-being and sustainability programs. The company invests large sums in employee health management, programs promoting balanced work life, sustainability requirements for its suppliers and producing zero waste at its plants. 6. Strong brand presence in China. Over the last few years, BMW has seen strong sales growth in China, the largest automotive market in the world. In 2012, BMW sold 326,444 vehicles there. Weaknesses: 1. High cost structure. Producing quality cars and hiring skilled workforce results in high costs for the business. BMW cost structure is higher than of its biggest competitors such as Toyota, GM and Volkswagen. 2. Weak brand portfolio. BMW Group manufactures and sells only 3 brands: BMW, MINI and Rolls-Royce. Although these brands perform well in their segments, they are unable to serve larger market needs. Therefore, BMW has to introduce more brands to its portfolio to meet diverse consumer needs. 3. High prices. BMW manufactures luxury cars that require best quality materials, skilled workforce and a great brand image. All this results at a higher car prices that are often considered as too pricey compared to other car prices. 4. Too few acquisitions and strategic partnerships. 90% of BMW growth is organic and only 10% is from acquisitions. Without acquisitions, the company finds it hard to grow even with exclusive engineering capabilities. Thus, if the company wants to grow significantly, it has to acquire more brands and enter into more strategic partnerships. Opportunities: 1. Increasing fuel prices. Increasing fuel prices open up large markets for BMW hybrid and hydrogen cars as consumers shift towards cheaper fuel types. 2. Positive attitude towards “green” vehicles. Today consumers are more aware of the negative effects (air pollution) caused by cars fueled by petrol and diesel. Large quantities of CO2 emissions intensify greenhouse effect and negatively impact the life on earth. Thus, consumers are more likely to buy new hybrid and hydrogen fueled cars that emit less or no CO2 at all. 3. Expand brand portfolio. In order to grow at a higher rate, BMW should expand its brand portfolio to meet more needs and to satisfy larger consumer market. The company could introduce new models that aren’t currently included in its range. 4. New emission standards. A new wave for stricter regulations on vehicle emission standards would positively affect BMW position in automotive industry. The firm produces one the most ecological vehicles and has introduced hydrogen fuels that emit zero CO2. New vehicle emission regulations would mean 0 additional investment for BMW while its competitors would have to invest large sums of money to comply with regulations and lose a share of profits.
  • 12. Threats 1. Intense competition. BMW faces increasing competition from its direct competitors and now tends to compete on price rather than differentiation. Moreover, the markets for luxury cars are saturated in the developed economies, thus intensifying competition. 2. Rising raw material prices. Rising prices for raw metals will lift the costs for auto manufacturers and result in squeezed profits. 3. Decreasing fuel prices. Due to increasing extraction of shale gas, future fuel prices should drop and make electric, hybrid and hydrogen cars less attractive. This creates huge losses for BMW most ambitious projects, hydrogen fueled and electric cars. 4. Growing euro exchange rate. BMW earns part of its profits outside the euro zone. Exchange rate fluctuations threaten BMW profits if the euro will start appreciating against other currencies. Reasons for which BMW is so successful brand Luxury car maker? Why is it selling the most and sweeping all the awards? Here's why: What does BMW stand for? We all know that they make ultimate driving machines and concentrate on giving their drivers pleasure when piloting their products on the roads. Therefore we do not expect BMW to build a truck or a van like what Mercedes is doing. Quality and reliability are also strong points behind BMW success today. They believe in excellence in everything they do: service, product quality, customer relationships. Another reason for their success is their independence in the business world. They are the only significant luxury car maker which is independent and is free to take the necessary steps to ensure they reach their goals; whereas Mercedes Benz is part of the Daimler Chrysler organization and I believe is forced to use parts from Mitsubishi, Chrysler, Jeep in order to safe costs and also to degrade their own product quality to try to make Daimler Chrysler profitable. Audi also suffers from this trap where VW owns this brand and sharing of parts with cheaper cars BMW in order to try to safe costs is also hindering its success. In a design point of view, marketing the products is BMW's strong point. The 1, 3, 5, 6, 7 Series are all different and they each carry a different character, whereas Audi car designs are all similar, especially the front and Mercedes is even worse. Product variation cannot be under- estimated. BMW spends around 25% of their profits into Research and development and it is because of BMW that put so much of their innovations and improvements into their products that they manage to attract the public's recognition and approvals, which in turn increases its success.
  • 13. In a design point of view, there has been many criticisms regarding the direction that BMW is going. But are these criticisms justified? They surely did not go wrong if more and more buyers are choosing BMW over any other cars. In conclusion, a company must know what the public wants and must maintain a keen interest in the relationship with their customers and value their thoughts. That's why BMW is where it is today, so far ahead of the others. The key success factors thus of BMW can be summarized as  Business model of BMW  Technology  Brand image  Sustainability Recommendation and Conclusion: BMW Company is one of the leading manufacturing companies in the world. It has become so because of its location facilities. It could have identified the location facilities and applied those facilities in the company. It has become so rich only because of changing the location from Germany to Spartanburg County, South Carolina, United States. The same company is earning more profit than before for cheap labor, proximity to customer, proximity to supplier and environmental facilities etc. So we can say that every company should consider the location factor when starting a business like the BMW Company. Product quality is an inevitable and distinguishing factor for customer satisfaction. The brand is identified by its product excellence and cost of ownership. BMW has a status of being number Uno when it comes to quality, and thus it is one of the critical success factors for BMW. Though the cost of the product i.e. BMW automobiles is high it evidently justifies this through its product quality. The experience of BMW in the industry also is a critical success factor for BMW. With its years of experience it has developed a brand identity for its products and very integrated and sophisticated supply chain that ensures its products are delivered at the right time and right place.