BMW Final

BMW factory in China
Efficiency & Ability to React Quickly
“The ability to react quickly and increase or decrease production for various markets was a major factor for BMW
North America in turning the recession year 2008 into the highest production volume year ever in its history.”
In the past five years, the plant had lowered energy
consumption by 48%, halved water consumption, reduced CO2
emissions by 44%, and waste output by 65%.16

& Economy
“…rising public debt levels in the USA, alongside ongoing unsolved structural problems on the US
employment and property markets also pose a risk to global economic growth in the current year, despite
any temporary signs of the situation stabilising.”
“Signs are emerging in China – currently the mainstay of global economic growth – of a
significant increase in bad debts within the banking system, for which the property
boom of recent years is partly to blame.”

More History:
BMW: Redefining Premium Brand Identity (2012)

Key History:
Herbert Quandt acquires a 47% share of BMW, saves BMW through a
restructure which allows the company to exploit its capabilities for
producing high-performance saloon cars. A new segment in the car
market emerges, and has since been BMW’s model to success.

Key History:
• Introduces “Ultimate
Driving Machine”
slogan in 1975
• First European
carmaker to recognize
Asian opportunities

Key History:
• Dr Bernd Pischetsrieder, Chairman of the Board purchases Rover
Group for 1.7 billion euros in January 1994– including the MINI
and Land Rover brands
• 1998, Pischetsrieder purchases Rolls-Royce brand from Vickers for
40 million euros
• Estimated 700 million euros in losses, profit expected to be
generated in 2002 at the earliest

• Joachim Milberg takes over as
BMW’s new CEO in February
1998
• Concentrate only on premium
market segment
• “In 2000, BMW sold Rover at
a loss of €3.2 billion however
it was able to recoup €2.9
billion by selling the Land
Rover brand to Ford. BMW
kept the MINI brand as part of
its strategy to enter the
compact car market. The
disposal of Rover and the
appointment of Milberg as
the new CEO signalled a new
era for BMW. “

Milberg’s strategy:
Concentrating only on the premium segments of the automobile
market.
Creating a demanding product and market offensive in the premium
segments, ensuring
that the brand is represented in all relevant parts of the market.
The appropriate expansion of the production and sales network.
The agility of the overall company with quick reactions and
innovations.
Cooperation and networks using external resources through strategic
partnerships rather
than mergers.
A new style of leadership and guidance oriented.
Profitable growth.
“The sale of Rover and Milberg’s premium brand strategy brought about
an increase in profits of more than 400% in 2002 compared to 1999,
despite the economic downturn in both Germany and the US”

• Helmut Panke succeeds Milberg as BMW’s new
CEO in 2002
• Panke’s vision was to build on Milberg’s
premium brand strategy which was ‘always
premium’
• January 2004, BMW appointed separate brand
managers for each of the three brands, whilst
marketing functions were to be centralized
under one leadership.
• In November 2002, BMW opened the Brand
Academy to promote brand orientation
amongst its staff on the brilliance and
fascination of the three premium brands. The
academy was unique and the only one of its
kind in the automobile industry. The Brand
Academy aimed to educate BMW’s staff and
partners to better understand the different
identities of the brands and identify the
features that distinguished these brands from
their competitors.
• In May 2004, BMW entered the Chinese
market through its joint venture with Brilliance
China Automotive Holdings Limited.

3. What are the different brand positioning strategies of BMW's main competitors? [You may
analyze slogans, advertisements, company homepage, etc.] In particular, carry out a detailed
comparison between BMW and Audi.

http://www.interbrand.com/en/best-global-brands/2012/BMW

Film Product Placement BMW Brand Academy
BMW Performance Driving
School

Competitors
BMW Audi

Audi.com

Audi - brand management driven success Michael Renz, Head of Central Marketing AUDI AG

Fair Competition: BMW vs Audi, WIPO-US
BMW AUDI
“Sheer driving pleasure Advantage through Technology
Joy of driving Truth in Engineering
The Ultimate Driving Machine Truth in Motion
Cultural insight Green Police

2. How is the US new car distribution system different from that of Korea or Europe or any other
country that you are from? Is the impatience factor driven more by actual customer characteristics
or by the characteristics of the distribution system?

4. How is the purchase for a specific model type (e.g., compact car, minivan etc.) affected by the
family life cycle (single, married w/ young children, married w/ teenage children, empty nest,
retired seniors)? Towards which segment is the X3 targeted to?
The Family Life Cycle
• Individuals and families tend to go through a “life cycle”.
The simple life cycle goes from:
 Young single
 Newly married, no kids
 Young couple,
Kids < 6(Full Nest I)
 Young couple,
Kids >6 (Full Nest II)
 Older married with dependent
children (Full Nest III)
 Older married couples, no children
living with them, still working
(Empty Nest I)
 Older married couples, no children
living with them, retired
(Empty Nest II)

What is the Family Life Cycle (FLC)
Changes Over Life Cycle
Financial situation
Brands considered
Interests
Primary decision maker
The family life cycle concept attempts to explain
consumer behavior patterns of individuals as they
age, marry, have children, retire-- and their
discretionary income variations over their life span

Stage Situation Buy
Young Single (a) Few financial burdens,
(b) Recreation orientated,
(c) Experiment with personal financial
management
basic kitchen equipment,
basic furniture,
cars
Young Couple (a) Better off financially than they will
be in the near future
(b) High levels of purchase of homes
and consumer durable goods
(c) Establish patterns of personal
financial management and control
cars,
fringes,
cookers,
life assurance,
durable furniture
Full Nest I (a) Home purchasing at peak
(c) Dissatisfied with financial position
and amount of money saved
(d) Reliance on credit finance, credit
cards, overdrafts etc.
(e) Child dominated household
necessities - washers,
dryers, baby food and
clothes, toys, books

Stage Situation Buy
Full Nest II (a) Financial position better,
(b) Some wives return to work,
(c) Child dominated household,
necessities - foods, cleaning
material, clothes, sports gear
etc.
Full Nest III (a) Financial position still better,
(b) More wives work,
(c)Expenditure to support children's
further/higher education
new, more tasteful furniture,
non-necessary appliances
Empty Nest I (a) More satisfied with financial position
and money saved,
(b) Interested in travel, recreation, self-
education
luxuries, home improvements
Empty Nest II (a) Significant cut in income,
(b) Concern with level of savings and
pension,
(c) Assist children
medical appliances or medical
care, products which aid
health, sleep and digestion,
hobbies and pastimes

 Number of people (children and
adults) in the family,
 Ages of family members
 Number of employed adults
What are the critical consumption
factors when purchasing a vehicle?

X3 Consumer Target
• Young couple & Full Nest I
• Need a SUV with space but don’t need a large one with young children
• Looking for a SUV but Price-sensitive
• Empty Nest I & Women back to work
• Downsize their SUV with no children living with them
• Have money to afford luxury

6. Why is local manufacturing a source of differential advantage for an automaker? [Almost all the
major import brands in the US have local manufacturing facilities. For example, Hyundai and Kia
have their plants in Alabama and Georgia, USA, respectively, and Toyota's plant is in Kentucky, USA]
Advantage for Local Manufacturing
• Assembly line was completely integrated to shorten the
delivery time of car
Improvement in delivery time
• With local production, the car price of imported brand may be
as low as the local brand
Exempt from customs duty
• Logistics cost advantage
• government incentives, regional interest rates, wages and
trade agreements
Cost advantage

1. What would be benefits of the mass customization in automobiles for (a) the consumer (b) the
manufacturer (c ) and the dealer?
• Mass customization was commonly known as
“using flexible processes and organizational
structures to produce varied and individually
customized products and services at the price
of standardized mass-produced alternatives.”

“By capturing this lost or locked-up capital and by reducing discounts offered
to move inventory, carmakers could realize total savings (reckoned by capital
spent) of $65 billion to $80 billion a year. Nissan motor, for one, has
estimated that this could amount to a savings of up to $3600 a vehicle”
The False Promise of Mass Customization

• Ability to find what they want without paying exorbitant
premium prices
Consumer
• Customize products at lowest costs, reduced overheads,
produced higher margins
• Less inventory with dealer
Manufacturer
• More profit, don’t need to offer discounts to sell cars
Dealer

Cracking the Code of Mass Customization (2009)

• “The fundamental message is
that a company should
“customize its mass
customization strategy” based
on the requirements of its
customer base, the state of its
competition and the technology
available.”
• “After all, what is hard to
develop will be difficult to copy,
and as such the capabilities can
be a powerful source of
sustainable competitive
advantage.”

• “The alternative does so by
connecting customers, either
over the Internet or in a dealer’s
showroom, to the vast, albeit
far-flung, array of cars already in
existence, including vehicles on
dealer’s lots, in transit, on the
assembly line, and scheduled for
production. In this way,
customers are likely to find a
vehicle with the color and the
options they most want.
Automakers would not have to
build to order; rather, they
would enhance the customer’s
ability to locate to order (a term
coined by Forrester Research).

The False Promise of Mass Customization

5. Would you recommend that mass customization program be expanded to other BMW models?
[Back up your answer]
Failure cases in Mass Customization:
BMW, Ford Motor, GM
Limited forward integration:
Prohibition of direct car selling
Interest conflicts between car dealers and
manufacturers
Weak connection between
carmakers and customers:
No active platform to communicate with
customers
Many required
operational changes:
Achieve Strategic manufacturing flexibility
(from batch to module system,
redundancy involved, more floor space)
High cost of mass customization:
Customer price sensitivity
Labor union opposition to the external
assembly of modules
Not successful!

Success Case of MC: BMW X3 Model

“Your X3 on the Assembly Line”

X5 Full-size SUVs
2014 X4
X5 Full-size SUVs 2014 X4
Production 1999~ 2014~
Class Mid-size CUV Compact crossover SUV(like BMW X3)
Assembly • Spartanburg, South Carolina, USA
• Mexico at the BMW de México Toluca plant.
Spartanburg, South Carolina, USA
Others Online customization available The latest addition to BMW’s X Series

BMW Final

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