BMW COMPANY MARKETING ANALYSIS
BMW COMPANY MARKETING ANALYSIS
BMW Group is one of the well-known car producing companies on a world-wide level. It is also the parent company of Mini and Rolls-Royce. The company is a merging of two original German companies. As in the 7th of March 1916, Flug maschinen fabric Gustav ottomergedinto Bayerische Flugzeug-Werk AG (BFW) to give the Bayerische Motororen Werk (BMW). –(History,2015)
The CEO of the BMW Group is Harald Krueger. He joined the group in 1992, he has been the chairman of the Board of Management since May 2015.
BMW in numbers (2015 statistics):
-Over 120,000 employees with more than 110,000 in the automotive segment.
-30 locations of productions in more than 10 countries.
-More than 2 Millions cars delivered to consumers (For BMW, MINI and Rolls-Royce) .
– 92 Billion Euros of revenue.
(BMW Key Figures, 2015)
– Executive summary.
– The car industry market.
– The main competitors.
– The distribution channels.
– The external environment.
– A market-entry opportunity.
This is a secondary research done by a group of students which focuses generally on the car industry and specifically on the BMW company.
The following report gives information about different sides of the research. The automotive industry market is discussed in numbers in matter of vehicles registered in the last year and the total worth of the supplier market, as well as the segmentation and the future projections. After that comes the analysis of the main competitors, their market share and focus. The distribution channels, their market share and focus are outlined next. Then there is an investigation about the impact of the external environment in form of PESTEL analysis. And finally according to it, a market-entry opportunity is being administered.
Even though the very first gasoline engine car was a three-wheeled one which was developed by the father of the modern car Karl Benz in 1885-1886, the car industry saw the light after the development of the famous Ford’s four-wheeled car in 1896 and the integration of the eight-cylinder V8 engine in 1932 that was a hit and promoted efficient usage of the vehicles. Since then, the market knew new entrants and a variety of models had been launched. The industry knew plenty of revolutions as it has always been inter-linked with the technical and technological development.
The market size of the automotive industry can be measured by the number of the new passenger registrations, this expression refers to number of newly (first-time) registered passenger cars (private cars) or vehicles (commercial cars) registered to the authorities.
The total international new passenger vehicle registrations for this year were 60 million units.
China has the highest number of registrations with 21 million units registered, and after it comes Europe with 14 million units registered.
The leader brand when it comes to sales is Toyota with 6.23 million units sold in 2016.
The automotive supplier market size for 2015 has an estimated worth of 620 billion Euros.
The main segments of the car industry are:
-Efficient transportation: This first segment is targeting the people who purchase a car for the simple reason that they need transportation. They do not look for specific features or brand image, but they care about getting a good value for the low price they paid.
-Family needs: The people who have children. They need a relatively large car with a number of features such as drink holders or entertainments units. The main important factors for this segment are safety and comfort.
-Social status: This segment represents the people who like to demonstrate their success or their social class by possessing luxury products.
-Eco-friendly: The people with a sense of responsibility towards the environment and climate tend to minimize their contribution to ecological issues by using hybrid or electric cars.
-Higher-quality: These are the passionate about the technical part of the vehicle, this type of consumers are always planning to pay more in order to get the latest features.
-Off-roaders: people looking for vehicles for a specific usage. Generally, they use it in difficult or complex driving situations.
-(Market segmentation example for cars,2016)
From these segments, we can assume that the segmentation variables used in this industry are :
-Demographic segmentation: number of family members, revenue…
-Psychographic segmentation: social class, lifestyle…
-Usage (behavioral factor): transportation, specific roads…
The target market:
The brand is targeting the upper class consumers who can afford purchasing the product and who are looking for comfort and luxury.
The typical BMW consumer is a middle-aged adult, who is successful in his career or business, and has values of superiority, uniqueness, and quality.
The benefits that the consumer gets from this purchase are the performance and image.
BMW has positioned itself as a reliable brand that offers higher-quality luxury cars and as a symbol of performance and exclusivity.
-(Marketing Strategy of BMW-BMW marketing strategy, 2016)
Projections of the car industry:
Starting from 2017, plenty of automotive industry leaders are planning on producing self-driving cars that are fully autonomous, making the near future a “driverless future”.
The following brands are some of them:
-Volkswagen: Johann Jungwerth, the company’s head of Digitalization Strategy expects that the very first self-driving cars will enter the market by 2019 without actually mentioning whether these vehicles are VW ones.
-Ford and General Motors: Experts of the industry working for these companies expect self-driving cars to enter the market by 2020.
-Toyota: The first autonomous car of this brand by 2020.
-Audi: next generation Audi A8 will be fully autonomous by 2017.
-BMW: Autonomous iNext will be launched in 2021.
The list can go further, as the whole industry is being directed into producing and launching cars that match this “era of technology”.
-(Driverless car market watch,2016)
Another projection is the 2030 Automotive Revolution. This projection integrates 4 technology-driven trends: diverse mobility, autonomous driving, electrification and connectivity.
The methodology behind this revolution includes:
-Researches on the future of mobility in collaboration with Stanford University.
-A larger research covering all aspects of the industry with existing firms, new entrants to the market and start-ups.
-Interviews and deep discussions with more than 30 experts around the globe.
-A quantitative market model that covers developments on a macroeconomic level and the rest of the trends.
-(Automotive revolution-perspective towards 2030,2016)
BMW has also developed many projects for the near future.
Most of its plans are focused on the “i” series which are the brand’s electric cars.
The most important one is iNext. In their annual shareholders meeting in 2016, BMW’s CEO Harald Krueger said that by 2021 a new model of the vehicles will be available. This new model is an electric and autonomous one.
It is also rumored that a new i8 will be launched in 2018.
The company is also projecting to produce vehicles of the i3 series with a new design and better battery performance in 2017. (Krueger, 2016).
The main competitors of BMW worldly as reveal the latest studies are: Audi, Mercedes, Porsche and Lexus.
According to the website MarketingMixx.com: “The automobile industry is considered to be the most interesting yet complex business sectors globally”. The competition between luxury models such as BMW, Mercedes and Audi is fierce. Each brand has its own position in the car industry and all are competing to have more and outrun the other brands.
In the most recent studies, it was found that BMW’s direct competitors are Mercedes-Benz, Audi, Porsche and Lexus. In 2015, BMW held 5,4% in the car industry market in the US, while Mercedes-Benz occupied 17,7% of the market share, as it is a global automobile manufacturer that’s been founded in 1926 by Karl Benz and Gottlieb Daimler in Stuttgart (in Germany).
At the time, Audi had a percentage of 9,6% of the market. Audi is a German automobile manufacturer as well, it was founded in Zwickau in 1910 by August Horch and then in 1969 the new merged company Audi was born.
Lexus makes 16,4% of the market of the car industry. Lexus is a division of the Japanese well-known brand Toyota that’s been founded in 1989 in Nagoya by Eiji Toyoda.
And lastly Porsche, it takes up 2,5% of the market share. Porsche is a German automobile manufacturer owned by Volkswagen AG founded in Stuttgart in 1931 by Ferdinand Porsche.
And the 48,4% left is occupied by other luxurious cars’ brands.
In 2015, BMW’s revenue was of 92.175 Billion Euros. It had more than 120 thousands employees. And the number of the vehicles sold was nearly 2 Millions and half a million. The profit was more than 6 Billion Euros. Though, Mercedes-Benz’s revenue was estimated to be approximately 84 Billion Euros. While the number of employees in the company was 99000, and a number of 1.8 Million cars has been sold. However, Audi’s revenue was a bit more than 58 Billion Euros. The number of employees working for this company was +84 thousands. And the number of cars sold was 2 Millions. They made a profit of 4 Billion Euros. The Japanese car company Lexus’s revenue was near 20 Billion Dollars. The number of employees of Toyata was more than 300,000. And the number of cars sold was +650,000. In the meanwhile, Porsche’s revenue was 21 Billion Euros. The number of employees was 24,000. The number of cars sold was 225 thousands. The annual profit was a little bit more than 2 Billion Euros.
With all this competition that’s been going on, each company finds its way to reach the top. Therefore, these luxury brands have a goal they focus on. For BMW, according to CEO Harald Krueger (2016), their main focus is to create more electric cars and add self-driving features faster than rivals to minimize the big threats to its status as the world’s biggest maker of luxury vehicles. He also aims at maintaining pretax profit margins at a minimum of 10 percent by 2020. They also predicted that they’ll have another year of record sales and high revenue and profit, and will continue to grow while being prepared for the risks.
As for Mercedes-Benz, their main goal is to strengthen the business, and that is by producing more luxury models. So by the end of 2020 they will have produced 30 new car models. And to grow globally, they will focus on improving their position especially in Asia as Daimler claims that in the upcoming years the demand for high-quality cars will be important there. And to lead in technology as it intends to use green technology, to focus on safety, autonomous driving and connectivity. And lastly to drive ahead with digitalization that’s had a great impact on this industry.
While Audi’s focus is also digitalization, as they’re willing to completely integrate digitalized process by 2025,to achieve superior user experience, substantial contribution to profit by digital and mobility services, upscaling myAudi platform and Audi connect as standard equipment. They also focus on sustainability as they claim that sustainable products and services are the future viability, and urbanization, by working together with cities from all around the world.
Toyota’s (Lexus) main focus is customer and quality first. It is by providing good quality products, quality sales and services, and by the employee’s quality performance and work they can gain the customer’s trust. So everything revolves around quality according to Toyota and since Lexus is a part of the company, they obviously have the same philosophy.
When it comes to Porsche, their strategy for 2025, is to achieve value-generating growth, to make sustainable investments in creative technologies and innovative products. They also want Porsche to equal good quality. And to achieve that they have a great team, passionate employees and breath taking cars.
It is this competition between these companies that makes the car industry unpredictable and full of surprises. And that’s what makes it entertaining. But that is also the factor that pushes them to be more creative and grow stronger each year, and make more quality products and innovative technologies that helps make great vehicles.
BMW MAIN DISTRUBUTION CHANNELS:
The global production network of BMW group has the economy and the agility as priority. The group operates on international scale and is represented in 140 countries and more.
BMW has a number of distribution channels including franchiser, show rooms, most total sale’s part of BMW depends upon the self-sufficient distribution.
The model of distribution channel that BMW uses is very simple:
Producer ? Dealer ? Customer
The vital function of this distribution channel is to expand accessibility to the customers and append value through dealers whom are in charge of providing additional expenditures of promotional purposes on top of ad campaigns that BMW carries out.
Some appended values by dealers to BMW are for example handling delicate show-rooms to provide an impressive purchasing experience and offering all services of after-sales.
It was stated by retailers that the company has challenging experience with greater and small companies of vehicles to improve the sales. The retailers of MINI represents the group of BMW all over Canada, and the Southern Florida retailer called Vista BMW, was granted CPO that means ‘Certified Pre-Owned Dealer of the Year Award’.
The occasionally evaluated demand, has an impact on the development of distribution strategy, the purpose is to deliver exactly in ports where are based most of their customers, serving out to shorten the delays. Although, the optimization of the distribution system is the objective sought by the company, through its projects called ‘built for distribution’.
The department of material steering is in charge of the handling operations that cover all incoming transportations liaised in a frequent manner to BMW facilities and providers, as well as the buying divisions.
Outbound distribution has a plurality of configurations depending on the demand and location, using both on-site and off-site storage facilities. Delivery mechanisms that may include the chain distributors, can be through dealers (showrooms) or direct deliverance to client.
Value added networks and the external resources:
As for price, product, distribution or promotion in the inter/intra organizational skills, all decisions are mandatory. BMW market uses direct marketing canals to get into the target audience, in this distribution type, the marketers on BMW website work hard in order to facilitate the role, where contact is made directly with buyers to understand and know their needs, and match them with the product. It is an ideal strategy of communication that ensures the effective exchange of the information.
External resources of BMW involve with the agencies overseas that make a bond between production point and the sales point.
Conflict in distribution channel:
According to the information on the Auto Expert website (cite), the BMW logistic channel has a single conflict: the gray dealers that work across Russia. While the number of certified dealers in Russia has been experiencing constant growth, the number of gray dealers is still staggering. Experts believe that on the Russian market in general, gray dealers make up 20% for all the companies, not for BMW specifically. These gray dealers do not only work on the market in Russia, they function in numerous countries of the world.
What helps the gray dealers stay afloat on the market is their flexibility and quick adaptation to change, so they can fulfil customer requirements the instant they appear. Frequently, the new models come out in Russia even before the official executive release date.
This problem is not simple and maybe even not possible to solve. In Russia, gray dealers are legal. BMW naturally opposes unauthorised distribution, and for this reason they approach the situation in a cognitive manner without emotions.
The dealers, on the other hand, have strong emotions against gray dealers, as they are potentially losing customers with an ensuing decrease in profit. Nevertheless, the situation is legal and as a result, the conflict is not out in the open.
Two main factors contribute to the large customer base of gray dealers: the wide variety of services they offer, and their ability to adjust prices. Their specific segmentation includes:
Customers who have the means to pay more to avoid the waiting of three months for the vehicle to be delivered.
Customers who would like to save money. Paradoxically, vehicles delivered from the United States are cheaper by up to 20% compared to those shipped from Europe. The main reasons for this anomaly are due to the very low tax of cars, the cars are in majority bought from leasing companies, and they get customs clearance for the Russian market. All of these factors lead to lower prices.
Some of the negatives from the customers’ point of view involve the fact that gray dealers sell cars with fewer accessories and no guarantee. Then again, repair and maintenance on these cars can be provided by the official dealers as a service on expenses.
As far as marketing is concerned, BMW benefits from the gray dealers, as they reach customers who are unable to buy from authorised dealers due to cost. In this manner, interest in the brand and the off-take level is maintained.
The delivery time of less than three months is BMW’s most theoretical competitive advantage. This advantage is achieved through its optimised distribution and logistics strategy. In comparison, main competitors including Mercedes, Volkswagen, and Jaguar deliver cars in the time frame of six to ten months. BMW achieves such short delivery times as a result of several strategies:
-Localised production: BMW manufacturing plants are set up in geographically strategic locations with the aim of keeping delivery time to minimum.
-Excellent and frictionless customer service: Orders are accepted at high velocity thanks to the well-formed structure of customer service.
-Outsourcing transportation: Transportation is provided by Logwin, a Luxembourg company that provides comprehensive worldwide solutions for logistics and transportation. Logwin offers expertise in product distribution within a minimum time frame.
Another advantage involves the possibility for the customer to make a choice from various accessories for any BMW model, which is the exclusive vehicle manufacturer offering this choice option in the premium segment.
Additionally, BMW has been offering the service of car delivery to the customer’s location for over five years, whereas for example Mercedes has been offering this service for only six months.
THE PESTEL ANALYSIS OF THE AUTOMOBILE INDUSTRY:
The purpose of this PESTEL analysis is to reveal the macro environmental factors that have an impact on the automobile industry like any other business field in the world such as political , economical , social , Technological , environmental, and legal components .
The automobile industry began in 1890s thanks to the enormous technological change in the production of engines and road wagons. In 1900s, France was the only manufacturer and exporter within the automobile industry at that time, because of the uncertainty of other countries to emerge in this field. Thanks to the significant changes that occurred in the technological components of the automobile industry, allowing not only to the upper class to be able to own a car for each household but also affordable for the middle class as well. Other countries came into view; such as Germany and the United States of America.
In the 21st century, an efficient vehicle worth its services have become the main ground on which the automobile industry is relying on.
-The automobile industry is considered as the one of the important revenue generating sources for a government, which has an impact on the worldwide ability to sustain competitiveness.
-Some developing countries became more demanding of cars however their political instability made the manufacturers avoid to provide capital in those countries regardless of their demand.
-The automobile industry is facing large political challenges to emerge into larger markets.
-The automobile industry is significantly sensitive when it comes to drastic economic changes; it influences the sales and precisely in the developing countries.
-In the developed countries; markets have higher sales since the purchasing power is high as well.
-The automobile industry depends on the purchasing power of a customer; if they increase the price of their goods and start presenting low cost cars; it is simply because they won’t be able to target a large costumer range.
-At first the automobile industry was created for the upper class, but now it becomes a necessity need of every one.
-Vehicle customer’s preferences is changing which demands a high innovation to keep people’s wants and needs respected and valued.
-Developed countries are now aware that vehicles have a negative impact on their health and on the environment; so their swaying into healthy and eco-friendly alternatives.
-Some automobiles are having a hard time keeping up with the enormous continuous changes in technology within the automobile industry.
-Costumers are following the trends expecting higher efficiency, featuring the latest technology which makes it a hard challenge to face.
-Costumers are now conscious of the latest technological trends through the web world, which makes it slightly difficult for the manufacturers to follow the trends.
-The automobile industry is well known for its environmental damage; with the increase of awareness about this issue.
-Eco-friendly vehicles has become a center of the manufactures focus; since the government’s main concern is pollution control.
-Safety is the focus of the law market in the 21st century; as a result to that different countries are regulating different rules and regulations.
-Different laws, restrict rising prices on which makes it extremely impossible to invest and emerge into those countries.
-The legal aspect of the automobile industry in general is facing an enormous challenge and this is related mainly to automobile sectors which makes it challenging to keep up with the rapid innovation of this industry.
MARKET ENTRY OPPORTUNITIES:
The purchasing power of the potential consumers in developing countries has been increasing in a significant way in the last few years. The demand of luxurious cars among the people that are part of the upper class in these countries is increasing as well. This means that BMW can benefit from these aspects to enter the fertile market. They can increase their operations there by opening new showrooms and do more promotion. They can also produce new models specifically for this new target market that are relatively cheaper than their current portfolio to suit more their purchase power.
The previous pieces of information show how interesting a market study can be. The car industry is an interesting domain that has been operating since the beginning of the last century. BMW is definitely one of the best brands in this industry and as previously highlighted, it is well managed and uses marketing at its finest. Even though the competition is tough, BMW knew how to position itself successfully in people’s mind and made itself a famous and unique luxurious cars’ brand.
The marketing strategies and researches is what made it succeed the way it did the best. This company is surely one of the best references for hard-work and excellence.
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