NAME:JUSTIN JPHILIP ROLL NO. : 569 ROOM NO.: 24 TOPIC: STP ANALYSIS OF BMW CAR INDUSTRY- BMW BMW is a manufacturer of luxury cars. Within this category, it is distinguished between traditional and functional luxury cars. Traditional luxury cars are mainly produced by U.S. manufacturers like Cadillac and focus on customers that want to enjoy a soft, comfortable and living room style appearance (Bernhardt & Kinnear, 1994). Functional luxury cars are represented primarily by European manufacturers like BMW and focus on customers that want the communication with the road via steering and suspension systems (Bernhardt & Kinnear, 1994). They enjoy a pin-point steering and precision suspension system that put the driver in touch with this surrounding and inform the driver of the immediate environment (BMW Corporation, 2004). Following, the impact of each of the five forces on the functional car manufacturer BMW will be analyzed. Intensity of Competitors The automobile market is at the maturity stage of the life cycle, locally and globally, due to an increased number of competitors from domestic and foreign markets. The automobile market is characterized by a low potential for market growth, but high sales and profit potential (Murtagh, 2004). ACHIEVEMENTS Its sales last year set a new record of 1.37 million vehicles. It's pushed DaimlerChrysler AG's Mercedes-Benz aside to become the second- biggest-selling luxury car brand in the U.S., after Toyota Motor Corp.'s Lexus. It has the kind of cult status among owners other car companies can only envy. And it's taken the lowbudget, English Mini Cooper and made it a favourite of the postcollege set. The company's investors, however, aren't satisfied. BMW's stock price was up just 6.7 percent this year as of yesterday's close, while Germany's DAX Index gained 13 percent in the same period. Its profit margin has been stuck in the same place for six years. And competitors are eating away at BMW's market share, with Volkswagen AG's Audi and Lexus growing especially fast. The best evidence that BMW is looking over its shoulder: It now gives U.S. buyers incentives that average $4,000 a vehicle, almost double what Lexus and Mercedes offer. The world is just recovering from a big recession. Various big corporations became bankrupt because of this. Many of the automaker giant posted loss during the last 2 or three years, like – Toyota and the biggest corporation of the world General Electric (GE) became bankrupt. More or less all the big corporations are affected by it. BMW, one of the automaker giant, could retain its’ profitability over last three years when the global recession take place. It also affected by the recession but cannot lose the profitability. This interesting thing inspires me to conduct research on the financial performance of BMW AG. In the beginning of my paper I give an overview on the BMW. Later I analyze the net profit, sales revenue, costs and assets base of the corporation for the last 10 years. Then I go for ratio analysis to judge the financial health of the organization. In ratio analysis I use Return of Assets (ROA), Return on Equity (ROE), Basic Earning Power (BEP), Liquidity ratio, Profitability Ratio, Divided Payout (DP) Ratio and Du Pont Chart to conduct my analysis. The findings on the analysis are discussed along with the respective chapter, besides making separate chapter for it. Market Segmentation, Positioning and targeting for BMW BMW Company Profile BMW was formed in 1917, from the merger of two small aero engine makers. Their famous blue and white symbol stems from the colours of the Bavarian Luftwaffe and is said to resemble the view of the one of their plane through a propeller. BMW is renowned for its sporty, sophisticated & luxury image which has been built up since the 1970's with many motor sport victories ranging from Touring Car to Formula 1. BMW Group's worldwide mission statement is: "To be the most successful premium manufacturer in the industry.” BMW's Marketing Mix To examine BMW we must first look at the marketing mix. A company's marketing mix is made up of four main points these are Price, Product, Promotion and Place. Through these points we can examine the specifics of a company to gain an insight into their segmentation, targeting and positioning. SEGMENTATION Bayerische Motoren Werke Aktiengesells chaft (BMW group) manufactures automobiles and motorcycles worldwide. The activities of the BMW Group are divided into three segments that include the Automobiles, the Motorcycles, and the Financial Services segments. The Automobiles segment The Automobiles segment engages in the development, manufacture, assembly, and sale of cars and off-road vehicles, under the brands BMW, MINI and RollsRoyce, as well as spare parts and accessories. BMW and MINI brand products are sold in Germany through branches of BMW AG and by independent, authorized dealers. Rolls-Royce brand vehicles are sold in the USA through a subsidiary company and elsewhere by independent, authorized dealers. The Motorcycles segment The BMW Motorcycles segment engages in the development, manufacture, assembly and sale of BMW brand motorcycles, as well as spare parts and accessories. The Financial Services segment The Financial Services segment focuses primarily on leasing automobiles, providing loan finance for retail customers and dealers, accepting customer deposits and insurance activities. The BMW Group operates in the world markets with 22 production and assembly plants, 34 sales subsidiaries and a research and development network. Significant Events Deutsche Telekom AG entered into a partnership with BMW Group, as part of which the two companies would organize joint research and development projects in areas, such as data security and vehicle maintenance. BMW Group is collaborating with Mercedes-Benz Cars. Both firms are collaborating to develop, produce and purchase car components. Mercedes-Benz Cars and BMW are exploring cooperation, on a project-by-project basis, in developing and producing components, including engines. BMW Group introduced new variants of its 5 Series sedan in July 2008. The new variants, BMW 520d, 530d and 530d Highline powered by diesel engines, would be additions to its existing petro variants BMW 525i and BMW 530i. BMW Group has extended its collaboration with Daimler AG. The collaboration is targeted at purchasing certain vehicle components. Both companies had earlier collaborated to develop hybrid drive train technology. Vattenfall Europe AG and BMW Group, in November 2008, announced that they would launch a field test in Berlin, Germany that would see 50 Mini E cars on the streets and public access to recharging points. The project is supported to by the German Federal Ministry for the Environment, Nature Conservation and Nuclear Safety. GENIVI Alliance founding members BMW Group, Delphi Corp., General Motors Corporation, Intel Corporation, Magneti Marelli SpA, PSA Peugeot Citroen, Visteon Corp., and Wind River Systems, Inc. are collaborating to create a shared GENIVI platform - a common software architecture that is scalable across product lines and generations. The GENIVI platform would accelerate the pace at which automakers can deliver new solutions, bringing them closer to the lifecycle of consumer devices, and accelerating new business models, such as connected services. POSITIONING Positioning is what the customer believes about your product's value, features, and benefits; it is a comparison to the other available alternatives offered by the competition. These beliefs tend to based on customer experiences and evidence, rather than awareness created by advertising or promotion. Marketers manage product positioning by focusing their marketing activities on a positioning strategy. Pricing, promotion, channels of distribution, and advertising all are geared to maximize the chosen positioning strategy. Generally, there are six basic strategies for product positioning: 1. By attribute or benefit- This is the most frequently used positioning strategy. For a light beer, it might be that it tastes great or that it is less filling. For toothpaste, it might be the mint taste or tartar control. 2. By use or application- The users of Apple computers can design and use graphics more easily than with Windows or UNIX. Apple positions its computers based on how the computer will be used. 3. By user- Facebook is a social networking site used exclusively by college students. Facebook is too cool for My Space and serves a smaller, more sophisticated cohort. Only college students may participate with their campus e-mail IDs. 4. By product or service class- Margarine competes as an alternative to butter. Margarine is positioned as a lower cost and healthier alternative to butter, while butter provides better taste and wholesome ingredients. 5. By competitor- BMW and Mercedes often compare themselves to each other segmenting the market to just the crème de la crème of the automobile market. Ford and Chevy need not apply. 6. By price or quality- Tiffany and Costco both sell diamonds. Tiffany wants us to believe that their diamonds are of the highest quality, while Costco tells us that diamonds are diamonds and that only a chump will pay Tiffany prices. Positioning is what the customer believes and not what the provider wants them to believe. Positioning can change due the counter measures taken at the competition. Managing your product positioning requires that you know your customer and that you understand your competition; generally, this is the job of market research not just what the entrepreneur thinks is true. Positioning is undoubtedly one of the simplest and most useful tools to marketers. After segmenting a market and then targeting a consumer, you would proceed to position a product within that market. Remember this important point. Positioning is all about 'perception'. As perception differs from person to person, so do the results of the positioning map e.g what you perceive as quality, value for money, etc, is different to my perception. However, there will be similarities. Products or services are 'mapped' together on a 'positioning map'. This allows them to be compared and contrasted in relation to each other. This is the main strength of this tool. Marketers decide upon a competitive position which enables them to distinguish their own products from the offerings of their competition (hence the term positioning strategy). Take a look at the basic positioning map template below. The term 'positioning' refers to the consumer's perception of a product or service in relation to its competitors. You need to ask yourself, what is the position of the product in the mind of the consumer? Trout and Ries suggest a six-step question framework for successful positioning: 1. What position do you currently own? 2. What position do you want to own? 3. Whom you have to defeat to own the position you want. 4. Do you have the resources to do it? 5. Can you persist until you get there? 6. Are your tactics supporting the positioning objective you set? Look at the example below using the auto market. Product: Ferrari, BMW, Kia, Range Rover, Saab, Hyundai. Positioning Map for Cars. The six products are plotted upon the positioning map. It can be concluded that products tend to bunch in the high price/low economy (fast) sector and also in the low price/high economy sector. There is an opportunity in the low price/ low economy (fast) sector. Maybe Hyundai or Kia could consider introducing a low cost sport saloon. However, remember that it is all down to the perception of the individual. BMW SWOT Analysis • STRENGTHS •Diverse ranges of Products -BMW, MINI and Rolls-Royce •Strong Cash Flow Position •Increase turnover and trading profits •Strong Balance Sheet •World's leading Premium Quality Automobile Manufacturer Brand Awareness •Human resources •Capabilities to turn resources into advantages OPPORTUNITIES •New Products •Market shift to globalisation •Innovation & Alliances •Customers demand change to more comfortable and relevantly cheap cars •Diversification •New Technologies in Automobiles • WEAKNESSES •Perception of High Prices •Customer disinterest •Environmental issues: Pollutions •Buyer sophistication and knowledge •Substitute products or technologies • THREATS •New & existing competition •Volatility in Price of Fuel •New legislations •Consequences of the oil crisis •September 11th •Economic recession •Market shift to globalisation •Takeover bids •Far-East Automobile companies expansion •Extremely high competition for customers and resources The Five Forces Model Potential entrants Suppliers A Competitive Rivalry Buyers bargaining power Threats from Substitutes