The BMW Group has positioned itself amongst the 10 largest car manufactures globally
The BMW Group was established in 1917 and has managed to position itself amongst the 10 largest car manufacturers globally. Initially, the firm’s core operations entailed designing and production of aircraft engines.
Over the past few years, the firm has undergone significant growth. The growth has arisen from implementation of Strategy Number One which was formulated in 2007. The strategy is aimed at attaining two main goals which include;
- To boost the firm’s long-term value growth.
- To attain a high level of profitability and returns.
The firm is guided by a clear mission as stated below;
- To become the world’s leader in provision of premium services and products in order to enhance individual mobility.
The firm’s operations are guided by a number of core values which have been the cornerstone of its success. These values include;
- Responsible action
- Long-term thinking
- Environmental protection
- Social and ecological sustainability
The firm’s corporate governance strategy is aimed at enhancing its ability to attain the set goals, objectives and values. The BMW Group has incorporated a comprehensive corporate governance strategy that is comprised of a set of principles, systems and processes.
The firm’s corporate governance strategy is aimed at enhancing its ability to attain the set goals, objectives, and values. Moreover, the firm intends to maximize shareholders’ wealth through corporate governance.
The Group is cognizant of the fact that its success will be dependent on the effectiveness with which its operations are managed. As a result, the firm’s management team is constituted of two main organs which include;
- The Board of Management
- The Supervisory Board
The two boards are constituted of experienced individuals who ensure that effective decisions are made. A high level of trust is ensured between the Board of Management and the Supervisory Board. As a result, the degree of collaboration is improved significantly.
Additionally, the BMW Group has formulated its code of operation on the basis of the German Corporate Governance Code. This has enabled the firm to effectively address the shareholders and other stakeholders’ needs.
Currently, sustainability is one of the most important aspects that firms should consider in their quest to remain competitive. Elmaraghy (34) is of the opinion that adherence to sustainable development determines an organization’s long-term success.
Elmaraghy (35) cites three main aspects that contribute towards sustainable development. They include; environmental sustainability, economic sustainability and social sustainability.
The firm’s commitment towards economic sustainability is evidenced by incorporation of a value-added supply chain
The BMW Group appreciates the importance of developing sustainability in its quest to attain long-term and profitable growth. One of the sustainability issues that the firm focuses on is environmental sustainability.
Environmental sustainability is concerned with improving and safeguarding human welfare for example by conserving the environment within they operate. In the course of its operation, the BMW Group is committed towards environmental sustainability by ensuring gentle and efficient resource utilization.
Adoption of product diversification strategy is motivated by the need to generate profitable growth.
According to Elmaraghy (35), a firm attains social sustainability by respecting the needs of the society which it operates. In line with social sustainability, the BMW Group appreciates the fact that there are risks associated with failure to adhere to social sustainability.
Such risks may result in loss of reputation and hence the firm’s long-term survival. The BMW Group has developed a strong relationship with the society within which it operates.
The BMW Group encourages its employees to be involved in social activities. In 2012, the firm awarded some of its employees for their commitment to the society (Tricker 12).
This aspect of sustainability involves developing a firm’s long term economic viability and profitability. The firm’s commitment towards attainment of economic sustainability is evidenced by incorporation n of value-added supply chain.
In 2012, the BMW Group was ranked 2nd on the basis of the Dow Jones Sustainability Index.
The firm has incorporated a comprehensive financial services portfolio. In the course of its operation, the BMW Group appreciates the fact that the market is characterized by varying product and service tastes and preferences. Consequently, the firm has integrated the concept of product diversification.
Adoption of this strategy is also motivated by the need to generate profitable growth. The firm specializes in production of premium car and motorcycle brands. Some of the premium car and motorcycle brands that the firm produces include;
- BMW Motorrad
- Rolls-Royce Motor Cars.
The BMW Group top premium brands include Rolls-Royce, Mini and BMW. On the other hand the two main motorcycle brands include Husqvarna and BMW (BMW Group 1)
The firm’s motivation to generate profitable growth is one of the factors that drive the firm to expand its product range and to strengthen in global market position.
The firm’s production processes are guided by innovation, high performance and engineering excellence. The Group’s products are ranked amongst the best automobile brands in the world.
The BMW Group is focused towards profit maximization. Consequently, it has incorporated a comprehensive financial services portfolio. The financial service portfolio developed by the firm is based on appreciation of the fact that financial services constitute an essential component in the success of the mobile world.
The BMW Group Financial Services is composed of a number of services which mainly relate to provision of financial information. The Group provides financial services in approximately 50 countries globally.
- Multi-brand financing
- Asset management
- Dealer financing
- Company car pools
In The BMW Group is cognizant of the global changes that are currently being experienced. One of the elements that the group appreciates relates to mobility. Demand for new individual mobility solutions within the society has increased significantly.
However, the global economy has become very volatile as evidenced by increased economic uncertainty thus affecting the group’s operation.
One of the ways through which the firm intends to achieve profit growth is by investing in continuous product improvement. Despite these challenges, the BMW Group is committed towards attainment of its goals and objectives. One of the ways through which the BMW Group intends to achieve this is by investing in continuous product improvement.
The product improvement process is conducted on the basis of three main product aspects which include technological, cultural and structural aspects.
In its product development process, the firm ensures that its products and services appeal the target customers. The Group achieves this by offering superb products that are characterized by;
- A high level of aesthetic appeal
- Innovative and modern technology
- High quality
- Dynamic performance
The BMW Group considers human capital as one of the cornerstones in its future success. The BMW Group considers human capital as the most important factors in its future success. Consequently, the firm has developed a comprehensive employee development policy.
The policy is aimed at developing a dedicated and motivated workforce. In 2012, the firm increased the number of apprentices by 10%. Additionally, more than 1,376 young individuals were signed into the firm’s one year training program.
This increased the number of employees on the apprenticeship program to 4,266.The firm spent approximately €280 million on professional and vocational training. The training program is aimed at developing the firm’s competitive edge in an environment that is characterized by technological change.
By investing in human capital development, the BMW Group is able to maintain its competitiveness with regard to technological excellence and innovation.
For example, the firm’s research and development team is able to incorporate the consumers taste and preferences when designing their new automobile models (Deschamps 54).
Earnings and performance
Increment in sales
The BMW Group has managed to sustain its profit growth over the past few years. However, 2012 was the most successful financial year in the firm’s history. During this year, the firm’s sales for BMW, Rolls-Royce and Mini premium brands increased to 1,845,186 units, which represent a 10.6% increment compared to 2011.
The sales increment has enabled the firm to continue at the helm of the premium brand market segment. By adhering to Strategy Number ONE, the BMW Group intends to sell over 2 million MINI, Rolls-Royce and BMW brand vehicles.
The projection underscores the fact that the firm’s future success is anchored on its profitability.
Growth in financial services segment
Investment in the financial services segment also contributed towards an increment in the level of profitability. An additional 117, 000 customers were added to the firm’s customer base.
The Chart below illustrates the firm’s earnings over the past two years.
|Group Income Statement|
|in million €|
|Cost of sales||-61,354||-54,276|
|Sales and other administrative expenses||-7,007||-6,177|
|Profit before financial result||8,300||8,018|
|Result from equity accounted investment||271||162|
|Other financial results||-592||-617|
|Earnings before tax||7,819||7,383|
Source: (BMW Group 52)
Sales and distribution networks
The sales strategy adopted by a firm has a significant impact on the sales revenue generated. The BMW Group has adopted an effective sales strategy which entails establishment of sales subsidiaries. Currently, the firm has a sales network of 41wholly-owned sales subsidiaries.
Moreover, the firm’s distribution network is also composed of over 3,000 dealerships. To satisfy international demand, the BMW Group has also incorporated the concept of exportation. Approximately 100 countries around the world are supplied by local importers.
Production and assembly locations
The BMW Group is cognizant of the fact that the premium car brand market is becoming competitive. Consequently, the firm has established 13 assembly and 24 production plants around the world. This has enabled the firm to effective and efficient in meeting the global demand.
The production plants are located in Germany, South Africa, Austria, Italy, and China. On the other hand, assembly plants are situated in Russia, Egypt, Thailand, India, Indonesia and Malaysia. The assembly plants are mainly operated in collaboration with external partners. For example, in Austria, the firm has entered into a contract production with Magna Steyr Fahrzeugtechnik AG & Company.
Investment in research and development
The BMW Group has established a comprehensive research and development network in various countries such as the US, China, Germany and Austria. Its commitment in research and development enables the BMW Group to be effective and efficient in aligning its products and services with market trends.
The firm’s quest to achieve profitable growth motivates its investment in research and development. In 2012, the BMW Group invested €3.9 billion in research and development in order to secure its future growth.
The BMW Group has been leading with regard to incorporation of new information technology options in its car models
The firm has been at the forefront in integrating new technology in its car models. Some of the technologies that the firm has incorporated include BMW ConnetedDrive and the iDrive.
The BMW Group was accused of launching pre-production prototype in the market (Herron para. 5). In line with its commitment towards environmental sustainability, the BMW Group invested in a program that was aimed at electrifying its Mini brand.
However, the firm was accused by Marc Geller and Plugged In America that it did not comply with the CARB regulations. On the contrary, the firm introduced the new model in a rush in order to meet the deadline set.
Moreover, the firm was accused of introducing a pre-production prototype which means that the new model was not a properly designed electric vehicle.
Succeeding in the premium car brand industry is a challenging task. Consequently, firms in the industry have to ensure that they invest in research and development. Additionally, firms have to ensure that they continuously improve their products and services in order to align with the market changes.
BMW Group: Brands 2013. Web.
BMW Group: Annual report 2012. Web.
Deschamps, Jean. Innovation leaders: how senior executives stimulate, steer and sustain innovation, New York: John Wiley and Sons, 2009. Print.
Elmaraghy, Hoda. Enabling manufacturing competitiveness and economic sustainability, Heidelberg, New York: Springer, 2012. Print.
Herron, David. BMW mini e-program has major problems. 6 July 2009. Web.
Tricker, Ian. Corporate governance: principles, policies and practices, Oxford: Oxford University Press, 2012. Print.