BMW Project

Canadian International College (CIC)

Marketing Plan Evaluation

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BMW marketing plan Page 1


Table of contents:

1. Executive summary ………………………..…………………………………

2. Introduction …………………………………………………………………………….

3. Situational analysis ………………………………………………….………………

3.1 External environment…………………………………………………………..

3.2 Competitive environment ………………………………………………..…

4. SWOT analysis………………………………………………………………………………..

4.1 BMW SWOT analysis ……………………………………………………………

4.2 MINI cooper SWOT analysis ………………………………………….……..

5. Marketing Planning …………………………………………………………………………

5.1 Objectives ………………………………………………………………………….….

5.2 Target market ………………………………………………………………………

5.3 Marketing Mix ……………………………………………………………………….

6. Financial analysis ……………………………………………………………………………

6.1 Sales forecasting …………………………………………………………………….

6.2 Marketing expenses ………………………………………………………………

7. References ………………………………………………………………………………..……



1. Executive Summary:

Company nameBayerische Motoren Werke Aktiengesellschaft (BMW)

Company historyThe history of BMW can be traced to the establishment of Rapp-Motorenwerke by KarlRapp in Munich (Germany) in 1913. The company initially produced aircraft engines.The modern day Bayerische Motoren Werke (BMW) officially came into existence in1917, when Max Friz and Franz-Josef Popp took over Karl Rapp’s business. Thefollowing year the company went public. The first factory of BMW was constructed inNeulerchenfeldstrasse, Germany. In 1928, BMW purchased the Eisenach/Thuringia carfactory along with the license to construct a small car named Dixi. In 1940, the companycommissioned a streamlined body for the famed sports car of the period, Mille Miglia.BMW entered the small car segment with the Isetta in 1956. The company released itsfirst sporty family sedan, the new 1500 in 1961. In 1966, BMW purchased the ailing GlasCompany and converted Dingofling into its biggest plant over the following years.BMW’s first 5 Series car was launched in 1972. During the same year BMW MotorsportGmbH was founded. Almost a decade later, BMW became the first European companyto set up a subsidiary in Japan. More than a decade later, in 2001, BMW took several steps to expand its capacity.Also, production commenced at the company’s Hams Hall plant in Great Britain. BMW decided to construct a new plant in the Leipzig/Halle region. In the latter half of 2002, BMW initiated restructuring of its European sales network following the Block Exemption Regulation (BER) passed by the European Union (EU) commission.In April, 2004, BMW commenced the production of the BMW X5. In May 2004, BMW’s new plant in Shenyang (China), a joint venture with Brilliance Automotive Holdings, was officially inaugurated. BMW opened a Sales and After-Sales Training Academy in Germany. This facility has the capacity to train over 10,000 individuals annually. With its BMW 1 Series launched in September 2004, BMW entered the compact class segment. For the first time the company offered a convertible equipped with a diesel engine when it launched its newBMW 320Cd Convertible.



2. Introduction:

This paper will illustrate an evaluation of the marketing plan applied on BMW. In the paper we will illustrate the BMW situational analysis, analyze the five competitive forces in the automobile industry. More particularly, it will be analyzed how the forces have an effect on the car manufacturer BMW. Based on this analysis, the force with the most impact on the company will be identified. 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.

Business activityBMW Group, headquartered in Munich, Germany, is one of the most successful multi-brandPremium automobile manufacturers in the world. The company manufactures, distributes and sells passenger cars (including Sedans, Coupes, and Convertibles etc) and motorcycles. BMW operates three business segments namely: Automobiles, Motorcycles and Financial Services. In the fiscal ended December 31, 2009, the BMW group posted sales of €144,335 million, an increase of 6.8% over the previous fiscal.

Worldwide LocationsHeadquartered in Munich, Germany, the BMW Group has 15 production and assembly plants across the world. The company also has 1,000 sales subsidiaries and a researchand development (R&D) network. The BMW Group employed 5,755,210 people as ofDecember 31, 2009.



3. Situational Analysis:

A. External Environment:

I. Technology:

Constantly changing environment, BMW efficient Dynamics Technology try to stay one step ahead (BMW IDriver).

Strong Research and development, culture and facilities with high expenditure.

II. Economical:

Cost of oil to go up, could affect consumer buying.

Egypt in longest ever recession, the economic report shows a decline of GDP 4%

Lowest interest rate, 0.5% set by the central bank in Egypt affect consumer consumption rate.

III. Social:

Estimated Egypt population increased.

Population shift to an increasing older generation

People have a more active lifestyle, related to improved life expectancy.

IV. Environmental:

Lack of nature resources, hence move to hybrid cars.

Global shift to cut CO2 emissions,

More greener lifestyle now.

V. Legislation:

Health and safety, the government force car manufacturer to test all cars.

Insurance groups.



Road tax brackets.

VI. Political

Politics can have an influence on companies in an industry (Cheverton 2004).

One example is the German VAT increase from 16 to 19%. Additionally, reforms put further burdens (e.g. increased health service contributions) on customers. This may reduce demand and could have an effect on the automobile industry (FTD online 2006d).

After the liberalization of the automobile market through the EU, a VW-dealer is also allowed to sell BMW. This strengthens the position of dealers in relation to the manufacturers.

VII. Socio-Cultural

An on average older population in European countries forces car manufacturers to develop new strategies in relation to their target groups (Cheverton 2004, FTD online 2006b).

Increasingly higher numbers of commuters and the demand of lower consumption cars show an attitude change regarding transportation.

Potentially causing image problems for companies producing higher-consumption cars.

A generally lower average income may lead to lower demand for cars, especially in the luxury segment (Innovations Report 2006).

B. Competitive Environment:

Key CompetitorsBMW’s arch-rival in the premium car segment in USA and Europe is DaimlerChrysler’s Mercedes Car Group. Other main competitors of BMW in Western Europe include:Volkswagen (Audi, VW, Bentley), Fiat (Lancia, Ferrari, Alfa Romeo, Maserati), Ford (Jaguar, Land Rover, Aston Martin, Volvo), General Motors (Opel, Saab, Vauxhall), Porsche, Renault, Toyota (Lexus), PSA (Peugeot/Citroen) etc. In USA, the company’s major competitors include Ford (mainly the Lincoln luxury brand), Nissan (Infiniti), Honda (Acura), Toyota (Lexus), Porsche, Volkswagen (Audi, VW, Bentley), and some of the models manufactured by General Motors (Saab, Cadillac). The principal competitors of BMW’s ultra premium Rolls-Royce brand are DaimlerChrysler’s Maybach brand and Bentley sedans.

The five competitive forces model was developed in 1980 by Michael E. Porter. Porter’s five forces model suggests that competition in an industry is rooted in its underlying



economic structure and goes beyond the behavior of current competitors (Porter, 1980). The stage of competition depends upon five basic competitive forces, which determine the degree of competition and the profit potential in an industry.

The five forces are:(a) intensity of competitors, although BMW has a lot of competitors, but the position towards BMW products and services are very powerful to the extent that customers are loyal to the brand and the product differentiate itself from competitors due to intensive technology; market share; variety of products; and exclusive after-sale. (b) power of suppliers, the suppliers power come from that the suppliers are the first and main sources of the product, BMW had a lot of suppliers diversified products; that are distributed around the world.

(c) power of customers, the customers power increased due to the increase knowledgeable and information to the customers, the customers' demands and wants are increasing and the shift in tremendous.

(d) threat of new entrants; the new entrants are increased during the last decade, maybe because of the intensive demands from different segments; that 's why BMW positioned itself as unique diversified brand that is willing to satisfy different categories.

and (e) threat of substitute products; automobile substitute products are taking impact on Europe and US; especially the developed countries; because customers in these regions are highly involved in this process. At these regions customers use underground and bicycles frequently to safe more. This is not the same in Egypt and developing countries as the automobile industry and especially BMW considered one of the specialty product and their customers are considered it as prestigious cars that give its customer the needed prestigious look.



4. BMW SWOT analysis:

Strengths1. Diverse ranges of products (BMW, MINI, Rolls-Royce, which do not overlap)

2. BMW has strongly influenced consumers through media and film industry.

3. Reputation for quality, reliability, and their dealer's attention to service.

4. BMW spends 5.4% of total revenues on R&D (ANNUAL REPORT 2009)

5. Worldwide, the BMW Group is one of the most successful multi-brand premium car manufacturers in the automobile industry.

6. The Rolls-Royce phantom holds the number one position in the super-luxury car segment.

7. BMW is the only automobile manufacturer possessing three non-overlapping premium car brands in its portfolio.

8. Due to its R&D efforts, BMW has also developed an innovative array of engines such as the Hydrogen.

Weaknesses1. High cost of raw materials due to heavy cost German base.

2. Plants abroad only do assembly.

3. BMW’s heavy cost German base might affect the profitability of the company in the long run

4. More and more competitors shift product development activities to lower cost countries.

5. BMW might be forced to negotiate a way to maintain cost competitiveness and its reputation for German engineering excellence.

Opportunities



1. EU offers ample opportunities for BMW to leverage its strong European position in the premium car segment to garner more market share across new and expanding markets.

2. BMW’s concerted forays into the Chinese luxury car market portends to an increase in the earnings of the company over the coming years. China already ranks as the third largest market for BMW’s 7 Series luxury limousines.

3. BMW predicts that robust growth will place China among the company’s seven largest markets in a few more years.

4. This is a significant improvement over the 12th position held by the Chinese market for BMW in 2002.

Threats1. The continuing decline of the dollar against the euro threatens to undercut BMW’s

Top line thereby tempering its profitability.2. The rising price of raw materials such as steel threatens to offset the company’s

Earnings.

Environmental Opportunities and risks.

Innovation & technology.

Move towards internet shopping

Build your own customized car (www.bmwgroup.com)

Differentiation:

SO: To build on our technological advantage using BMW efficient dynamic program

WO: Turn assembly plants to manufacturing. Using local raw materials.

Environmental Threats

Volatility in price of fuel.

New legislations

More and more competitors shift product development activities to lower cost countries.

Extremely high competitor for customers and resources.

Product development

ST: Use R&D to both make more environment friendly cars with lower CO2 emissions and reduce fuel consumption.

WT: Market development strategy;

Co-operate with local company, develop co-brand to reduce oversee operations risk.

MINI Cooper SWOT Analysis

Internal Strengths:



1. The MINI is its own niche market. 2. There is no other automobile that specifically rivals the MINI brand in its size

and unique style. 3. They have successfully executed in its initial launch in 2002. 4. People that own MINIs are loyal consumers and enthusiasts. 5. They take pride in the fact that their car is unique and original. 6. The original flare comes from the outstanding amount of customizable

options. Internal Weaknesses:

1. A weakness of MINI is and always will be the car’s size. 2. Many people see the size and don’t feel confident in the performance of the

vehicle. 3. Also, the style of the car can intimidate consumers and force them to believe

that the car costs more than it actually does. This doesn’t mean that the car needs to be larger and cheap looking, but there should be improvements in the way people perceive the car. This boils down to marketing and advertising.

4. This is a unique car, but that doesn’t mean certain people should feel excluded from owning one.

5. A weakness can be the overemphasis of the MINI’s strength, which is the fact that it’s one of a kind.

6. The trick is not to exclude, but to make the car accessible for anyone that feels they want to highlight their originality.

External Opportunities: 1. There is an opportunity to reach everyone while highlighting diversity and

originality. 2. These are things that define the MINI.3. MINI is not “trendy” but a trendsetter.4. The car is for anyone that wants to celebrate their differences and show they

are original. 5. The MINI also appeals to a wide range of people, for varying reasons.6. The MINI is diverse in design, function, and personality, which allows

something for everyone. 7. There is the opportunity to educate car buyers on the benefits of owning the

MINI.

External Threats: 1. The MINI has the threat of becoming too much of a trend in the eyes of

consumers. 2. It also could become a car that only a certain type of people buy, thus

eliminating the rest of the population of potential car buyers.



3. The way people view the current branding boxes MINI into a corner, and the owner of the MINI becomes a stereotype.

5. Marketing Planning:

Objectives:

The objective of marketing planning is that it is the base that guides the company plans, strategies, promotion techniques, pricing strategies, and all efforts to the target market

Target market:

1) Existing customers; middle to upper class individuals, families, and also businesses.

A strong CRM focus to a greater service provided.

2) New customers: middle to upper class individuals, families and also businesses who focus on greater performance and sustainability than other competitors.

Marketing Mix:

1) Product_ a luxury performance car, with industry leading efficient dynamic technology system.

2) Price_ value added pricing, pricing out of some people's price range.

3) Place_ internet (design your own car) and car showrooms.

4) Promotion_ product placement, advertising at events that reflect brand image of BMW.

5) People_ strong customer and employee focus, leading to better services.

6) Process_ efficient delivery of service to all customers, strong CRM.

7) Physical evidence_ Merchandise and additional handouts come with any new cars.



6. Financial Analysis.

(1) Sales Forecast:

BMW Group adjusts forecast to market conditionsBusiness conditions for the automobile industry deteriorated sharply again in the second quarter due to further ongoing steep rises in oil and raw material prices, the weakness of the Euro and the deflation of the currency, the impact of the international financial crisis and a weaker economy. As a result, the price level of pre-owned cars in Egypt - and hence the level of revenues that can be generated on vehicles returned at the end of leases - remained under further pressure. This situation has made it necessary for the BMW Group to increase its risk provision. Worldwide: The expense recognized for provisions and allowances for residual value risks and bad debts – including the euro 236 million recorded in the first quarter – increased in total to euro 695 million, thus significantly holding down earnings for the first half of the year. In addition, an expense of euro 107 million was recorded in conjunction with measures already announced to reduce the size of the workforce.

Adjusted return on sales improved to 7.3% for six-month period

The Group’s good operating performance in the current year is being overshadowed by the impact of a significantly less favorable environment.

“At an operating level, the BMW Group has improved significantly during the first half of the year”, stated Norbert Reithofer, Chairman of the Board of Management of BMW. Adjusted for exceptional items - the expense of additional risk provision and one-time personnel expenses - the return on sales improved to 2.08% (first half-year year 2008: 2.0%).The impact of external factors has increased substantially and resulted in additional costs. Despite the operational improvements made, it has not been possible to offset this amount in full as had previously been the case.



In Egypt, the demand on highly-advanced technological cars took place since last decade due to increase in automobile market demand, although the competition is intensive nowadays; but BMW keep its competitive advantage among its direct and indirect competitors. The sales forecast figures prove that the expected demand is increasing around the world and Egypt follow the flow of demand.

Marketing Expenses:

Bavarian Auto Group in cooperation with Ezz El Arab Group & United Company for Trade & Distribution; launch a new distribution and retail sales company solely for BMW in Egypt, with an allowed capital of half a billion EGP & a paid capital of two hundred million EGP.

Bavarian Auto Group, sole importer & assembler of BMW, MINI, Rolls Royce in Egypt; has embarked on this tremendous merge to assert its policies on enhancing customer trust and increase the level of customer satisfaction with its services. Merging with Ezz El Arab Group & United Company for Trade & Distribution secures the new company’s main goal; which is to create a giant economic icon for the BMW sales in the Egyptian market.

Bavarian Auto Group owns the biggest amount of shares in the new company which will be named “ Bavarian Automotive Company “ with an allowed capital of half a billion EGP & a paid capital of two hundred million EGP; in order to ensure customer satisfaction and to stabilize BMW new and used car prices in Egypt. In addition, new and very competitive payment methods will be introduced with exclusive to the new company.

Given the current difficult conditions, the BMW Group will continue to monitor the situation on the pre-owned car markets carefully and, if necessary, adjust the risk provision for residual value risks and bad debts during the second half of the year. Rising raw material prices, increasingly weaker sales markets due to the financial crisis as well as an unfavorable exchange rate environment require additional measures to be taken to ensure that the BMW Group remains on its successful course: “We will use the strong headwinds as an opportunity for change and continue the process of renovating and optimizing our business in conjunction with strategy Number ONE. We must and we will intensify our efforts on both the cost and revenues side even further”, announced Reithofer. Implementation of the strategy Number ONE remains a top priority. The BMW Group is planning, amongst other things, to implement the following additional measures aimed at improving profitability:• The BMW Group will continue to optimize its sales strategy in the light of changed market conditions. The company intends to retain its position as the world’s leading premium manufacturer in the future. This is only possible through growth. Sales volume growth, however, will not be pursued at the expense of profitability. The BMW Group’s Egypt sales



volume figures for 2008 are likely to be lower than one year ago. The emphasis is also being placed on profit-oriented growth in other regions. • Production capacities worldwide will be brought even more closely into line with the major sales markets. The BMW Group has decided to reduce production volumes and increase selling prices.• The introduction of a new working time account model at the beginning of April allows for even greater flexibility in working hours, therefore making it easier to offset production fluctuations.

• The BMW Group will also negotiate with the employee representatives about voluntary benefits beyond general pay. • Within the financial services line of business, measures aimed at improving residual values and reducing bad debts will be pursued more intensely.

The benefits generated by the strategy Number ONE should be significantly more perceptible in 2010. The BMW Group aims for 2010, as an intermediate target, to achieve a Group return on sales of at least 6% and in Automobiles segment an EBIT of almost 6% or higher.

By 2012, the BMW Group continues to target a return on capital employed (ROCE) in excess of 26% and an EBIT margin of 8% to 10% for its Automobiles segment.“The increasing challenges clearly show that our strategy Number ONE – which we continue to implement rigorously – is an essential part of the process to safeguard the BMW Group’s future and increase its value”, emphasized Reithofer. The implementation of this strategy is making good progress.

The BMW Group is making good progress in the field of alternative electric-based engines. Results to date are very promising. “We have therefore decided to construct a vehicle equipped with an electro-engine” continued Reithofer. At present, MINI brand vehicles are being used to gain invaluable insights into how a thrilling driving experience can be achieved with a powerful electro-engine. This is a further logical step in the implementation of the company’s Efficient Dynamics strategy.

Compared to the previous year, Group revenues in the second quarter fell by 0.02% to 1,052 million L.E (second quarter 2008: 1,083 million L.E) primarily due to exchange rate factors. The profit before financial result (EBIT) fell by 13% to L.E 580.06 million L.E (second quarter 2007: 520.19 L.E). The net profit decreased by 2.7% to 412 million L.E (second quarter 2007: 423 million L.E).

WORLDWIDE: Revenues for the six-month period rose by 4.5% to 27,837 million (first half-year 2007: euro 26,634 million). Excluding the exchange rate impact, revenues increased by



9.9%. EBIT amounted to euro 1,252 million (first half-year 2007: euro 1,931 million/-35.2%) and the profit before tax was euro 1,243 million (first half-year 2007: euro 1,917 million /-35.2%), both therefore below the previous year’s figures. The pre-tax profit reported for the first half of 2007 included a one-time gain of euro 61 million on the conversion of the exchangeable bond on shares in the aero engine manufacturer, Rolls-Royce plc. Group net profit fell by 25.8% to euro 994 million (first half-year 2007: euro 1,340 million).

In Egypt

BMW Group 1st quarter 2010 1st quarter 2009

EBT(in millions) 1,043 1,007EBT margin(in %) 2.3 2.0EBT adjusted* (in millions) 1,128 1,035EBT margin adjusted * (in %) 1.8 1.3Vehicle production Automobiles units 2,711 1,950 Motorcycles units 902 1,107

(*Figures excluding provisions and allowances for residual value risks and bad debts, workforce reduction expense and the one-time gain on the settlement of the Rolls-Royce exchangeable bond).

Sales volume growth for all three brands The BMW Group registered sales volume growth for all three brands for the period from April to June 2010, and hence new high levels for all brands. The total number of BMW, MINI and Rolls-Royce brand vehicles delivered to customers increased by 4.0%. Sales of BMW brand cars went up by 2.3% to 44,019 units. The MINI brand also recorded strong growth with the second-quarter sales volume up by 13.5% to 8,756. Rolls-Royce Motor Cars recorded an extremely high growth rate, with 23 units (second quarter 2009: 18 units) sold in the quarter.

The BMW Group sales volume for the six-month period increased by 2.7% to 4,274 units (first half-year 2009: 3,985 units). Sales of BMW brand cars went up by 2.4% to 7,569 units (first half-year 2007: 6,915 units) as a result of the success of the 1 Series , the X5 and the X6. 6,810 units (first half-year 2007: 5,576 units)



of the MINI were sold in the period, 17.9% more than one year earlier. This was helped in particular by the performance of the MINI Clubman, which has been available on the markets since November 2009. The number of Rolls-Royce brand cars sold increased by 68.4% to 49 units (first half-year 2007: 34 units).

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www.bmw.com

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http://www.bmw.com/

http://www.grin.com/e-book/.../marketing-plan-bmw-1-series-in-germany

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BMW Project