BA Degree Management Strategy - BMW Group - Case Study Example

BA degree Management strategy Contents Introduction 3 Discussion 3 Evaluation of Business strategy using Porters Generic Strategies framework 3 Resources and capabilities underlying the value chain 5 Suitability, acceptability and feasibility of BMW Mini 9 Conclusion 10 References 11 Introduction BMW Group is one of the most successful automobile manufacturing countries in the world. The company is specialized in the manufacture and sales of automobiles. The BMW Group is strongly established in the worldwide automobile market with more than 25 manufacturing facilities in 12 countries and a robust distribution network which supplies BMW vehicles in 140 countries across the globe. BMW Group comprises of three major brands which are BMW, Rolls Royce and Mini. The three brands of the group are aimed at capturing different segments of the automobile market. BMW is one of the strongest brand names in the segment of luxury automobiles. The BMW Mini specializes in the manufacture of a wide range of small cars. Some of the models of BMW Mini brand are the Mini Hatch, Convertible, Roadster, Coup , Clubman, Pace and Countryman. The BMW Mini is an automotive marquee which accounts for almost one sixth of the total sales of BMW Group in the market of the United States. The Mini vehicles are famous in the car rallying segment which forms a major segment for the sale of the mini vehicles. The BMW Mini has been a success story for the automobile group with sky high sales of 301526 Mini vehicles sold in different countries of the world in 2012. Discussion Evaluation of Business strategy using Porters Generic Strategies framework The Porter’s generic strategies are used to analyse the strategies used by a company to establish and maintain competitive advantage in a market. The generic strategies can be based on three different concepts of cost leadership strategy, differentiation strategy and segmentation or focus strategy. The cost leadership strategy is based on targeting the price sensitive customer group in the market. The focus or segmentation strategy involves the segmentation of the market according to the category of the customers. Then, the company may choose to operate in a narrow focused segment of the market or consider a broad scope of the market for positioning its products or services. A combination of the differentiation and focus strategies may be implemented to successfully establish a brand in a red ocean market (Moore, 2007, p.180).The differentiation strategy is based on offering differentiated products and services to the customers. The differentiation strategy is usually the most useful strategy used in the niche marketing category. (Source: Humphrey and Oeter, 2004, p.514) The BMW group extensively used the differentiation strategy at the time of the interdiction of BMW Mini in the automobile market of the United States. The company followed up the introduction of BMW Mini in the US with the launch of various models of the Mini brand in different countries of the world. These launches involved the use of a combination of differentiation strategy with a focus strategy. The BMW mini is targeted at the niche or premium group of customers. BMW has always implemented the niche market strategies in positioning their products (Coulter, 2008, p.143). The aim of BMW in using the differentiation strategy was to establish the BMW Mini on the basis of the core competencies of the automobile manufacturer which are technology, exclusivity, performance and quality. The BMW Mini was introduced at a time when there was almost no competition in the small cars segment. The existing models in the small vehicles segment did not match up to the high quality and technology used in the BMW Mini. This enabled the company to successfully use the differentiation strategy and launch the BMW mini at a high price due to the high end technology, quality and established brand name of BMW (Muhlbacher, Leihs and Dahringer, 2006, pp.45-50). The success of BMW Mini is credited to the strategic marketing of the brand and the use of the inherent resources and capabilities of the BMW Group (Thompson, 2001, p.54). The main differentiation factors of the BMW Mini models are based on the feel of a retro car being improved upon and redesigned to operate successfully in the modern world. The use of bright colours makes the Mini vehicles stand out among other cars running on the road. The product differentiation and the perception of the customers about the brand were the main factors of differentiation capitalized upon by BMW in launching the Mini vehicles. Resources and capabilities underlying the value chain The value chain of an automobile industry is a complex and critical concept. A value chain encompasses the primary activities and the supporting processes that are performed by a company in designing, manufacturing, delivering and supporting its products in the market. The value chain of BMW ensures that a high value is created for the brand as well as the group through effective internal processes and supporting activates inherent to the value chain. (Source: Cravens and Piercy, 2012, p.12) The business activities of BMW according to the value chain which support the success of BMW Mini are described as follows: Primary Activities Inbound logistics: The inbound logistics of BMW include the sourcing of the raw materials, and purchase of parts for use in the production of the automobiles (Strydom, 1999, p.150). The procurement of materials in BMW is done through a well-established global supply chain network. Operations: BMW has taken up the approach of make from the make versus buy option available in the automobile sector. The global operations of BMW aim at cooperation in different phases of the business process, security, innovation, price credibility and value creation for the customers through the use of latest technology and high quality sourcing materials as well as robust manufacturing processes and capabilities in the production houses (Macmillan and Tampoe, 2000, pp.78-80). The group uses global sourcing for procurement and employs the green technologies to maintain sustainability of the business in the background of the evolving rules of the automobile sector (Johnson, Scholes and Whittington, 2011, p.154). BMW employs an effective risk management process in which risks are identified and monitored through internal and external audit processes. Outbound Logistics: The outbound activities of BMW area strong wherein the company sells its products through flagship stores in major countries as well as through electronic commerce. BMW Group also distributes its vehicles through distributors and channel partners in different countries across the world where they don’t have their own stores (Humphrey, Lecler and Salerno, 2000, pp.312-314). Digital marketing is widely used in the company for promoting and selling its vehicles to a wide range of global consumers. Marketing and Sales: The marketing and sales services of the company are innovative. For example, for the launch of the BMW Mini, the company promoted the brand by creating colourful airport lounges in the United States which displayed the models of Mini. This ensured high visibility and promotion of the new models to be launched by BMW. Service: BMW provides excellent services to the customers by assisting them from the pre sales phase to the after sales phase. The company was one of the first automobile manufacturers to establish the system of warranty for the automobile parts (Mullin, 2002, p.32). Also, BMW employs easy ordering and return facilities. The company also assists the customers immediately in case of any manufacturing defects or breakdowns. Quick and efficient services are provided for the buyers which is important in the niche market segment (Sinclair–Hunt, 2005, pp.122-124). Supporting Activities: Procurement: BMW has an established group of suppliers. The company maintains a strong supply network in which major emphasis is given on the procurement of high quality parts from reliable suppliers; BMW sources its materials from suppliers in the United States, Mexico and Canada. BMW has built on an established network of suppliers by adding new suppliers to the network while maintain the old suppliers. This indicates that the company operates with an efficient and reliable group of suppliers which ensures that the production process of the company is carried out in a smooth and timely manner (Pride and Ferrell, 2011, p.116). The deadlines for the production and launch of BMW automobiles ate always met with due to the robust supply network of the company who deliver the parts to the manufacturing houses in time. Technology: BMW is a leading name in the automobile industry on the aspects of using high end technology in its business and manufacturing processes. The company is an early adopter of technological innovation and has already implemented robust information systems in the production processes. The major information systems used by BMW in their manufacturing facilities are Application Service provider (ASP), Electronic business solutions, Extensible Mark-up language (XML) and latest Enterprise Resource Planning systems like SAP. Human Resource Management: BMW Group employs more than 70,000 people in the 24 manufacturing sites operated in 12 different countries. BMW ensures that proper training is given to the personnel working in the manufacturing houses so that a low level of errors and high level of efficiency can be attained in the production facilities (Sison and Pfeffer, 2008, pp.214-215). Infrastructure: BMW has a high volume production capacity in its manufacturing factories in 12 countries across the world. The company has high end manufacturing capabilities, physical, human and financial resources to support the manufacture, marketing, distribution and sales of the different models under its three brands in the market (Lynch, 2008, p.180). Suitability, acceptability and feasibility of BMW Mini The capabilities and resources of BMW group have accounted for the tremendous success of the BMW Mini in the global automobile market. The high level of investment of BMW in the research and development processes, the agility in responding to the changing demand conditions in the automobile markets, the implementation of long term strategic thinking and maintaining social and ecological responsibility are some of the key factors that have boosted the success of BMW Mini along with the other brands under the group (Kourdi, 2009, p.90). The BMW Group has been renowned for manufacturing and selling high performing automobile through a high profile brand name which specifically caters to the niche market in the global automobile industry. The Mini brand is a strategically important brand for BMW Group. Therefore, the company has invested its physical as well as financial resources to successfully promote and establish the Mini models in the market (Paternie, 2002, p.44). The Mini models are suitable for the premium customers who prefer to stand out from the crowd. These vehicles aim at tapping in the emotional factors and mind-sets of the customers in the automobile segment. The customers in the small car segment are attracted to high performance cars and are more concerned about quality and technology than pricing aspects (Simms and Trott, 2006, p.190). The combination of feel and look of retro cars combined with the high performance of the cars and the established positive brand perception of BMW makes the BMW Mini an important brand for the company. The Mini models have generated high sales from their introduction in the United States market. The company has also tasted success in the global distribution of the BMW Mini brand cars. The new Mini cars are also highly successful with more than 30,000 cars sold in the first year of its introduction in the market of United Kingdom alone (BMW GROUP, 2014, p.2). The models of Mini are often sold out as soon as they are launched and many times pre booking and waiting lists have to be created by the dealers of the BMW Mini cars. Conclusion The differentiation strategy of the BMW Mini was aimed at creating value for the brand and adding value to the BMW group and the brand undoubtedly succeeded in doing so within a small time of its introduction in the automobile market. The strategic management of the company has been the key driver of the success of the BMW Mini cars in the home market as well as in the global automobile market. The production of the BMW Mini range of vehicles is expected to be increased by 15-20% by 2015 to meet the accelerating demand levels in the global markets. This indicates that the BMW Mini has been a highly successful brand for the company. References BMW GROUP. 2014. Manufacturing, building a better BMW, supplier network. [Online]. 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