Luca Buffolano : "BMW vs VOLKSWAGEN: TWO LEADING AUTOMAKER COMPANIES IN COMPARISON"

Student: Luca Buffolano
Course of Study: Economia e Commercio
Seconda Università degli Studi di Napoli
Department of Economics
ID: A09000779
Class: Business English
Date: 01/07/2014

BMW vs VOLKSWAGEN:
TWO LEADING AUTOMAKER COMPANIES IN COMPARISON
Luca Buffolano

ABSTRACT
The purpose of this study is to analyze various aspects of the market of
these two great companies in order to compare their fundamental aspects;
in particular I'm going to explain the differences within their range, the in-ternal
and external strategies they adopt, which market segments they co-ver,
their competitive advantage and their marketing mix. I will analyze
this data through the available documents and sources in order to outline
the characteristic and distinctive features that characterize these two ma-jor
car companies.
In the first part of my paper, I will include literature reviewing of relevant
marketing theories before I analyze these; subsequently, on the base of the
literature review, I will expose my analysis and demonstrate my research;
finally, after analyzing the various aspects of the marketing of these com-panies,
I will comment all this on the conclusions of my work, in order to
make more evident the results of my research.
Key Words: BMW Group; Volkwagen Group; Compare; Analyze.

INTRODUCTION
The automotive market is clearly growing. By now, thanks to acquisitions
by large groups of small brands, there has been a polarization in this area
where there are no more small brands in competition with each other, but
a few large groups that compete to be able to cover multiple market
segments as possible. Therefore, I felt it appropriate to compare the two
giants in the global automotive market: the BMW Group and the
Volkswagen group wich, having acquired the direction (total or near-total)
of other companies of this sector, they are allowed to possess a wide and
varied range of vehicles that implies a considerable diversification of
products.
We all always live in the belief of believing German engineering as a
hallmark (in spite of the internal combustion engine is not a German
invention, but an Italian invention*); therefore, because of this belief,
these two great brands stand out in the automotive sector.
*See Barsanti and Matteucci on this URL http://www.barsantiematteucci.it/inglese/documentiStorici.html

A BRIEF HISTORY OF THE COMPANIES
● Specialized in the production of automobiles, BMW Group is globally
considered one of the most successful companies in the world. The group
is composed by three main different brands, MINI, BMW and Rolls
Royce, which are aimed respectively to different target markets. BMW
continues to be one of the best players in the luxury automobile sector,
growing despite the European markets’ crisis; as a matter of fact, BMW
sales including Rolls Royce and MINI reached 191,269 units in March
2013 surpassing the result of 2012 of 5,528 units (Rushlane, 2013).
● Volkswagen group is a automotive conglomerate consisting of several
brands of vehicles for a range of customer groups at a range of prices. It is
one of the top automotive manufacturer’s in the world and is the top
automotive manufacturer in Europe (Volkswagen, 2011a). Volkswagen
Group sells passenger cars under the Audi, Bentley, Bugatti, Lamborghini,
Porsche, SEAT, Škoda and Volkswagen marques; motorcycles under the
Ducati brand; and commercial vehicles under the MAN, Scania, Neoplan
and Volkswagen Commercial Vehicles marques (Volkswagen AG 2009, p.
106.)

LITERATURE REVIEWS
● Competitive Advantage: Michael Porter defines competitive
advantage as the set of attributes that make a company more attractive
and, indeed, more competitive than his competitors. More specifically,
Michael Porter has defined two ways you can achieve a competitive
advantage: the possibility of being able to charge lower prices and
product differentiation. In his view, research and sustenance of
competitive advantage is critical to the success of a company (Porter,
Michael E. (1985). Competitive Advantage.). So I will put the
emphasis on the differences in the competitive advantage of these two
industrial groups thanks to the information I am in possession.
● Market Strategy: very often we are accustomed to believe
established the concept of strategy; some quotes by Michael Porter
(important theorist in economics and professor at Harvard Business
School where he directs the Institute for Strategy and
Competitiveness) can make the idea a bit clearer: "The essence of
strategy is choosing what not to do." and also "Strategy is about
making choices, trade-offs, it's about deliberately choosing to be
different." (Porter, M.E. (1996) "What is Strategy", Harvard Business

Review, Nov/Dec 1996.). These aphorisms, adapted to the study I am
going to lead, give an idea of what is meant by "different strategies"
because it is above all this that I am going to define through the analysis
of these two major groups.
● Marketing Mix: the marketing mix, as the word suggests, indicates the
mix of marketing decision-making levers that companies employ to
achieve their goals. Jerome McCarthy (Basic Marketing(1964))
formulated about this the model of the four p's which stand for: product
(the product placed on the market by the company), price (the price at
which the product is offered), place (distribution channels) and
promotion (the way you advertise and promote the product). The
marketing mix will be particularly useful for my analysis, through it I
can demonstrate the fundamental differences between the two groups of
car manufacturers. It also will compare the various product ranges that
these companies offer, highlighting the differences of their marketing
mix.
On this particular subject I will put emphasis in my analysis studying
the automotive segments covered and the differences in their range: the
European Commission has cataloged, using a "Automotive Glossary",
the groups in which the cars are divided, identifying these six segments

1. A Segment or "mini cars": includes very small cars, mainly citycars;
2. B Segment or "small cars": includes small cars;
3. C Segment or "medium cars": includes medium sedans;
4. D Segment or "large cars": includes sedans medium-large;
5. E Segment or "executive cars": includes large sedans;
6. F Segment or "luxury cars": includes luxury large sedans;
(European Commission (2009), “Automotive Glossary - Automotive
Segments” Available on this URL:
http://ec.europa.eu/enterprise/sectors/automotive/files/projects/report_fta_in
dia_asean_en.pdf; page 9)
Thanks to this catalog, I will compare (model to model) which segments
each company covers with his own range, adding some considerations with
regard to "green energy" which shows different positions by companies.

RESEARCH METHODOLOGY
Especially with the help of academic sources and the data on companies
found (available online), I can analyze their strategies, their marketing mix,
their competitive advantage and which automotive segments (according to
the European Commission) they cover thanks to their range (including in
the range even the companies under their control).
Fortunately, the two companies do not hesitate to publish reports on their
financial and commercial developments, this brings the opportunity to be
able to access a lot of information that may be necessary to my analysis.
The information found on the network and the analyzes already carried out
by other scholars, allow me to be able to accomplish very specific analysis.
Moreover, through the official websites of these companies, I have
identified and cataloged the entire ranges of products according to the
model of the European Commission mentioned before.
Understand and catalog the range of products can be crucial in order to
develop a good analysis of the marketing mix and, at the same time, also a
good competitor analysis showing the segments that these companies have

in common.
The SWOT Analysis will be used as a marketing tool to highlight some
aspects of the companies.
1. COMPETITIVE ADVANTAGE
The competitive advantage of the two groups is mainly in product
differentiation (as already mentioned earlier, the two groups, thanks to the
acquisition of all or part of small brands, have a very wide range).
This could be seen as a point in common, but, as I shall show later in the
"Marketing Mix", there are many differences in the choices of production
and of range.
● As declared by the BMW Group: “[...]To meet these challenges we
formulated our Strategy Number ONE, which aligns the BMW Group with
two targets: to be profitable and to enhance long-term value in times of
change. And this applies to technological, structural as well as cultural
aspects of our company. Since 2007, we have been implementing various
initiatives in keeping with the strategy’s four pillars: Growth, Shaping the

Future, Profitability and Access to Technologies and Customers.”
(BMWGroup, “Company Portrait. Strategy” (2013). Available on this
URL:
http://www.bmwgroup.com/e/0_0_www_bmwgroup_com/unternehmen/unternehmensprofil/).
Regarding the "Strategy Number One", the BMW Group has given further
clarification: the "Strategy Number One" has four missions:
1. "Generate Growth" with new target groups and new products / services
2. "Shaping the future"
3. "Profitability"
4. "Access to new technologies/ customers" with ecologic products and
new accessories which make the customers appreciate more the individual
mobility.
(BMWGroup, “THE FUTURE OF SUSTAINABLE MOBILITY.
LEADING (E)-MOBILITY INTO A NEW ERA.” (2013). Available on this
URL:
http://www.bmwgroup.com/d/0_0_www_bmwgroup_com/investor_relatio
ns/_pdf/20130610_The_Future_Of_Sustainable_Mobility_Sattig_FINAL.
PDF)
This information, in addition to demonstrating clearly a marketing
strategy, show how the competitive advantage chosen by BMW Group is

primarily focused on R&D (Research & Development), which has the
ultimate goal of being able to ensure growth and innovation compared to
its competitors in the sector.
● Even the Volkswagen Group has carried out its own strategy called
"Strategy 2018" by stating: “Our activities are primarily oriented on
setting new ecological standards in the areas of vehicles, drivetrains and
lightweight construction. […] In addition, we want to continually expand
the Volkswagen Group’s customer base by further increasing satisfaction
among our existing customers and acquiring new, satisfied customers
around the world, particularly in the growth markets.”. (Volkswagenag:
“Strategy. Group Strategy 2018”(2013). Available on this URL:
http://www.volkswagenag.com/content/vwcorp/content/en/the_group/strategy.).T
he Volkswagen group has shown in his analysis of strategic plans to
focus its competitive advantage on the research and development with
the ultimate goal of expanding its "green" range thanks to new
technology and trying, at the same time, to cover new consumer
segments.

2. MARKET STRATEGY
As mentioned in the previous section, market strategies have been spelled
out by the two automotive groups:
● The BMW Group's “Strategy Number One” mainly focuses on R & D,
which represents the main competitive advantage of this company, and
the search for new target consumers. Research & Development of the
BMW Group shows its effects particularly in some vehicles: MINI E,
BMW ActiveE, BMW i3 and BMW i8 (and in some Hybrid Vehicles
that I will analyze in the "Marketing Mix"). These particular vehicles
are powered entirely by electricity; electric motors represent the future
of mobility as they allow considerable savings and a particular attention
to environment. Obviously, the possibility to build vehicles 100%
"green", allows you to be able to attract new market segments
represented by consumers who can appreciate the extreme innovation
and, at the same time, pay attention to environmental problems.
● The Volkswagen Group's “Strategy 2018” focuses, instead, on the
objectives of the market that the group intends to achieve. In fact, the

name of the strategy intends to put as objective that: “Volkswagen aims to be
the most attractive employer in the automotive industry by 2018. […]
Volkswagen intends to deploy intelligent innovations and technologies to
become a world leader in customer satisfaction and quality. We see high
customer satisfaction as one of the key requirements for the Company’s
long-term success.” (Volkswagenag: “Strategy. Group Strategy
2018”(2013). Available on this URL:
http://www.volkswagenag.com/content/vwcorp/content/en/the_group/strategy.bin.). Thus, the Volkswagen Group focuses its strategy on improving its position
in the automotive industry and intends to do it through innovation that
would be able to allow a greater advantage over competitors. The
Volkswagen group, thanks to the many brands that counts, focuses its
strategy also on the extreme differentiation of product that brings the group
to cover a variety of market segments.
It must be said that, with regard to innovation, the Volkswagen Group has
placed as an alternative to traditional petrol fuel, the methane fuel. The
methane fuel is a good alternative (in fact, allows lower cost and lower
environmental damage), but it must be said that, compared to the innovation
of the BMW group, it is not concentrated on a real and advantageous
alternative proposal.

2.1 SWOT ANALYSIS
To better understand the market strategies and correlating this topic with the
“Competitive Advantage” mentioned before, I consider it appropriate to
make a SWOT analysis on the BMW Group and on the Volkswagen Group.
The SWOT Analysis highlights four main aspects of a company (Strengths,
Weaknesses, Opportunities and Threats). The analysis can affect the internal
environment (analyzing strengths and weaknesses) and external environment
(analyzing opportunities and threats). The fundamental objective of this
analysis is to identify the positive characteristics of a company, where a
company needs to improve, but also capture the trends in the industry (from
which a company can extract opportunities) and external forces that may
cause threats or opportunities, this is possible just by looking ahead of time
and by focusing on future events.
|2.1.1| BMW Group SWOT Analysis
1. Strengths:
The strengths of BMW Group concern, as mentioned several times, product

differentiation and innovation extreme thanks to investments in Research &
Development. In addition there are a good brand reputation of brands that the
group owns: in fact, the MINI brand was founded in 1959 and with its
characteristic vehicles is considered a historic brand; the Rolls-Royce brand
was founded in 1906 and with its luxury vehicles has always been considered
as the luxury car for excellence; the BMW brand (founder of the BMW
Group) was founded in 1917 with its sedans and luxury cars has always been
regarded as a hallmark and excellence brand. Thus, the BMW Group with the
brands that owns it is considered a mark of quality.
2. Weaknesses:
The weaknesses of this group reside in the rigidity of prices. In fact, possess
high quality brands causes a lack of major market segments; the BMW
Group owns the brands with prices that are too high and do not have cars
accessible to everyone.
3. Opportunities:
As cause of weakness highlighted, is spontaneous to assume that a good
opportunity for the BMW Group is to produce vehicles more affordable or
buy a brand that can cover market segments for them absent.

4. Threats:
The main threat is the intense competition in the automotive market. We
all know by now that there are no more small groups competing each other
individually, but there are few car manufacturers that have many internal
companies. A so intense competition, especially due to the lack of certain
categories of vehicles, could result in the loss of a large market share for
the BMW Group.
|2.1.2| Volkswagen Group SWOT Analysis
1. Strengths:
Also with regard to the Volkswagen Group, the main strength is inherent in
the large product differentiation. In fact, the Volkswagen Group owns
companies that produce cars of medium / low quality (Seat, Skoda Auto
and commercial vehicles), cars of medium / high quality (Volkswagen and
Audi) and high-quality / luxury cars (Lamborghini, Porsche, Bentley and
Bugatti). This high differentiation allows the Volkswagen Group to sell
vehicles of all kinds of high quality and with all kinds of features: from
city cars to luxury cars. So the main strength of Volkswagen Group is to
own a strong brand portfolio.

2. Weaknesses:
A big weakness for the Volkswagen Group is represented by the fact of not
having produced cars with alternative fuel to petrol, in addition to CNG
powered engines that are long on the market but that does not represent a
valid alternative, except for the following hybrid vehicles produced by
Audi: Audi A3 Sportback e-tron (which is still a concept car) and Audi A3
Sportback g-tron (which will be soon on sale).
3. Opportunities:
A great opportunity for the Volkswagen Group is represented by the search
for new supplies for their engines. In fact, the Volkswagen Group has not
entered the market of electric cars and neither has produced several hybrid
cars. Therefore, increasing investment in Research & Development could
produce cars of this sector.
4. Threats:
As mentioned above, not entering in the sector of “green” cars can cause a
threat to the Volkswagen Group that could lose a large slice of the market in
the case in which this sector will grow considerably.

3. MARKETING MIX
With the help of the automotive glossary made by the European
Commission, I am going to analyze which categories every single brand
of the two groups covers. The list of the automotive segments, already
mentioned previously, is the following:
1. A Segment or "mini cars": includes very small cars, mainly citycars;
2. B Segment or "small cars": includes small cars;
3. C Segment or "medium cars": includes medium sedans;
4. D Segment or "large cars": includes sedans medium-large;
5. E Segment or "executive cars": includes large sedans;
6. F Segment or "luxury cars": includes luxury large sedans;
(European Commission (2009), “Automotive Glossary - Automotive
Segments” Available on this URL:
http://ec.europa.eu/enterprise/sectors/automotive/files/projects/report_fta_
india_asean_en.pdf; page 9).
I decided to add the segment "Green" to show further differences between
the two automotive groups.
Through this glossary I proceed with my analysis.

We can summarize this scheme by identifying the segments covered by brand
and not by individual model.
So it was shown that:
● BMW Group covers the following segments: B, C, D (BMW and MINI), E
(BMW), F (BMW and Rolls Royce) and “Green” (BMW and MINI).

● Volkswagen Group cover the following segments: A (Volkswagen, Seat and
Skoda Auto), B, C (Volkswagen, Audi, Seat and Skoda Auto); D (Volkswagen,
Audi, Skoda Auto and Porsche), E (Volkswagen, Seat, Skoda Auto, Audi and
Porsche), F (Audi, Bentley, Bugatti, Lamborghini and Porsche) and “Green”
(Audi).
The product range of these automakers are linking to these URLs:
1. https://www.bmw.it/it/index.html
2. http://www.mini.it/
3. http://it.volkswagen.com/it.html
4. http://www.rolls-roycemotorcars.com/
5. http://www.bentleymotors.com/
6. http://www.bugatti.com/en/home.html
7. http://www.seat-italia.it/content/it/brand/it.html
8. http://www.skoda-auto.it/
9. http://www.audi.it/it/brand/it.html
10. http://www.lamborghini.com/it/home/
11. http://www.porsche.com/italy/

CONCLUSION
My analysis revealed many characteristics of the market of these two
companies and now I will analyze the conclusions that they have shown,
discussing every aspect of my research:
Regarding Competitive Advantage and Strategy, the two companies
have shown to focus on values as similar as different:
● The BMW Group has shown particular interest in innovation extreme,
as shown in his "Strategy Number One", of its products by investing
heavily on creating technologically advanced products in order to
attract, at the same time, new groups of consumers;
● The Volkswagen Group has shown as objective, on which focuses its
"Strategy 2018" and its Competitive Advantage, the global growth
that can obscure the competitors, making it a leader in the market,
theorizing that this may attract new targets of consumers.
This reveals that, despite the goals appear similar, the two companies
behave differently in this respect: the BMW Group has implemented its

strategy with obvious results (as we will see later), while the Volkswagen
Group remained however stuck in its positions not particularly trying to
invest on a product innovation, but preferring global expansion and good
results of the market and not presenting a novelty on its products.
The SWOT Analysis has highlighted many aspects of these two
companies, showing that:
● The BMW Group's R&D represents its biggest strength just as its good
brand reputation, but the company has been shown to have a price
rigidity that causes the loss of a large share of the market accounted for
by those who can not sustain these prices and has also that this can be
seen as an opportunity if the company could be able to resolve this
problem, in fact this company is threatened by the presence of brands
that sell products at much lower prices and this causes an intense
competition.
● Volkswagen Group on one hand has shown as its main strength its
unrivaled product differentiation, but on the other hand has revealed a
strong issue with regard to the innovation of its engines which, at the
same time, causes threats, weaknesses and an opportunities (if the
company decide to face this area).

The analysis of the "Marketing Mix" and the "Range Analysis" have
shown that the BMW Group is not able to cover the "Segment A"
because, as I mentioned previously, it does not offer consumers the
chance to buy an economic car as a city car, nevertheless, the company
demonstrates to have several cars in the segment "Green"; while, as
regards the Volkswagen Group, it was shown that the product
differentiation is evident, in fact, the company is able to cover each
segment with its own brands, although, as previously mentioned, shows
itself little efficient in the segment "Green", in which only has two cars
that are "concept cars" and so are not yet on sale, but simple prototypes.
As far as competitors is concerned, the BMW has always faced the
competition of the compatriots manufacturers such as: Mercedes, Audi,
and Porsche which benefit from a similar brand-reputation and price
range, but also from overseas brands brand such as Lexus and Toyota. It
is important to consider that BMW Group has two other brands in its
product range moving from the premium sector of MINI to the luxury one
of Rolls Royce, which would imply also a different range of competitors.
(Claudio Floritelli & Mark McPherson (2013). "BMW Marketing
Report").

The comments made by Claudio Floritelli & Mark McPherson get to the
point, but I would consider it appropriate to add that the BMW Group
sees as a great competitor also the Volkswagen Group; the Volkswagen
group also contains other brands, some of which are cited by the authors
just mentioned, as:
1. Audi (owned by the Volkswagen Group to 99.55%): Audi owns
Lamborghini entirely; moreover, Lamborghini owns Ducati entirely.
2. Bentley is 100% owned by the Volkswagen AG. It was purchased in
1998;
3. Bugatti is 100% owned by the Volkswagen AG. The Bugatti
Automobiles SAS was created after the purchase of the brand name
"Bugatti" in 1998;
4. Porsche is 100% owned by Volkswagen AG since 2012;
5. SEAT is 100% owned by Volkswagen AG since 1990;
6. Škoda Auto is owned by the group since 1991 (only since 2000, it is
100% owned).
It is of course included Volkswagen as the group's founder brand.
In addition, the Volkswagen group owns a majority stake of some brands
for large transport vehicles: Italdesign Giugiaro; MAN SE; Scania AB.
(Volkswagen (2014) “Our brands and services” Avilable on this URL:
http://www.volkswagengroup.it/en_Marchi.asp).

So in conclusion, it was shown that the BMW Group and the Volkswagen
Group, even if they may have similar goals and similar market and range
segments, they are very different from each other and I hope to have
demonstrated it by my analysis.

REFERENCES
(1) Rushlane.com (2013) Mercedes Benz, Audi and BMW global sales report for March 2013 | Rush Lane. [online]
Available at:
http://www.rushlane.com/mercedes-audi-bmw-sales-mar-2013-1273856.html
(2) Volkswagen AG 2009, p. 106 "Volkswagen Aktiengesellschaft Annual Report 2008" (PDF). volkswagenag.com.
Volkswagen Aktiengesellschaft. 12 March 2009. ISSN 0944-9817. 958.809.512.20. Archived from the original on 8
August 2012. Retrieved 8 August 2012.
(3) Porter, Michael E. (1985). Competitive Advantage.
(4) Porter, M.E. (1996) "What is Strategy", Harvard Business Review, Nov/Dec 1996.
(5) European Commission (2009), “Automotive Glossary - Automotive Segments” Available on this URL:
http://ec.europa.eu/enterprise/sectors/automotive/files/projects/report_fta_india_asean_en.pdf ; page 9
(6) BMWGroup, “Company Portrait. Strategy” (2013). Available on this URL:
http://www.bmwgroup.com/e/0_0_www_bmwgroup_com/unternehmen/unternehmensprofil/strategie/strategie.html
(7) BMWGroup, “THE FUTURE OF SUSTAINABLE MOBILITY. LEADING (E)-MOBILITY INTO A NEW ERA.” (2013).
Available on this URL:
http://www.bmwgroup.com/d/0_0_www_bmwgroup_com/investor_relations/_pdf/20130610_The_Future_Of_Sustainable_Mobility_Sattig_(8) Volkswagenag: “Strategy. Group Strategy 2018”(2013). Available on this URL:
http://www.volkswagenag.com/content/vwcorp/content/en/the_group/strategy.bin.html/pdfFile/strategy.pdf
(9) BMW range. https://www.bmw.it/it/index.html
(10) MINI range http://www.mini.it/

(11) Volkswagen Range http://it.volkswagen.com/it.html
(12) Rolls Royce Rangehttp://www.rolls-roycemotorcars.com/
(13) Bentley Range http://www.bentleymotors.com/
(14) Bugatti Rangehttp://www.bugatti.com/en/home.html
(15) Seat Rangehttp://www.seat-italia.it/content/it/brand/it.html
(16) Skoda Auto Rangehttp://www.skoda-auto.it/
(17) Audi Rangehttp://www.audi.it/it/brand/it.html
(18) Lamborghini Rangehttp://www.lamborghini.com/it/home/
(19) Porsche Range http://www.porsche.com/italy/
(20) Claudio Floritelli & Mark McPherson (2013). "BMW Marketing Report"

Luca Buffolano : "BMW vs VOLKSWAGEN: TWO LEADING AUTOMAKER COMPANIES IN COMPARISON"

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