Bmw 5 Series example essay topic

Case 2 focuses on the Bayerische Motoren Werke (BMW) Company. My analysis will define each of the company's strengths, weaknesses, opportunities, and threats as brought about within the case as well as through additional research. The history of the Bavarian Motor Works is a history of innovation, dedication and determination. These achievements are reflected in the BMW emblem, symbolizing a rotating airplane propeller from BMW's early years as an aircraft engine manufacturer.

Today, the emblem signifies a global company that annually produces hundreds of thousands of engines, motorcycles, and cars. May 19, 2003 BMW was about to launch a new version of their already extremely popular 5 series of luxury sedans. The automobile being introduced was BMW's fifth generation 5 series and was expected to initiate BMW's aggressive and extremely ambitious plan of rolling out a new or updated model nearly every three years through the year 2005. CEO Helmut P anke defined his goal as "expanding annual sales by 40 percent over the next five years, to 1.4 million cars, and beat out Mercedes-Benz (DCX) as the number one maker of premium cars in the world. We won't accept the position of number two". Certainly a very aggressive plan, could it be done?

The auto market during the 1990's had begun to shrink as a percentage of total sales. This was particularly evident in the United States where the auto market was hot for some new niches and BMW was finding it costly to make three differently sized cars, namely the 3, 5, and 7 series. Strengths Reputation. Having a reputation for luxury, BMW's are smooth and refined. BMW have developed a marquee prized highly by many company executives. The BMW brand also relates well to the domestic owner reinforced by BMW's reputation for quality, reliability and their dealer's attention to service.

Hailed as the ultimate driving machines and leading the field in a whole host of classes, BMW are constantly innovating in their quest to stay ahead of the pack. Engineering History. BMW is not only a car maker; they are one of the world leaders in motorcycle production, aircraft engines, in addition to marine engines. BMW has a long history of providing the best engineering possible in the market.

Facilities. BMW's factories are considered the most flexible and most productive in Germany; its suppliers are the industry's best; and the workforce among the industry's most talented. Strong Financial Position. Despite a 53 percent increase in research and development and a 75 percent increase in capital expenditures over the past two years, BMW's net profit for 2003 rose 8.3 percent to $2.36 billion, while revenues climbed 9.9 percent, to $49.5 billion. Operating margins, at 8 percent in 2002 and 8.7 percent in 2001 were among the highest in the industry. Success of the Mini.

Profits for this car line are greatly exceeding BMW's forecast with unexpectedly strong sales of loaded models. Buyers are snapping up options from navigation systems to sunroofs, paying as much as $35,000 per car. Shared components. BMW is able to keep overall costs down by using shared components across its similar-sized cars. For example, the 5 Series shares components with the X 5 and the 6 Series, and the 3 Series shares with the X 3, and the 1 Series. Continuous Improvement.

BMW identified the need for improved quality and customer care. BMW now offers a four-year warranty, including maintenance and service, in the price of the car, cutting out complaints that occasional technological glitches made the brand extremely expensive to maintain. Weaknesses Looking too far ahead too fast? Rolling out a new or updated model nearly every three months through 2005 may shift emphasis on getting a new model to market rather than focusing on issues that may develop with existing models, issues such as software, and mechanical problems. Manufacturing costs. Compared with other volume producers, BMW's manufacturing costs are much higher, its product development process more costly, and its purchasing costs are higher.

Reflecting these risks, BMW shares have slid 41% to $32 from a year ago (2002). Relying on 1 Series. BMW is relying to heavily on one model, the 1 Series to maintain its high margin. They are also realizing profits due to the strong sales of the loaded models of the Mini, but need to diversify, or in other words not keep all their eggs in one basket. Shared components.

Although this can also be identified as a strength it can also be a true weakness. If cars are using shared components or if they are too similar, it could lead to cannibalization of the sales of higher priced models, in BMW's case the 3 Series. Leasing strategies. Although BMW has an aggressive leasing strategy, the company relies on selling the car at the end of the lease to the leaseholder. If the sale of the leased car doesn't match BMW's high residual value estimate, the company could suffer lower return on cars than it has traditionally achieved. Even though BMW maintains some of the highest residual values in the industry, typically 60 percent for a three-year-old car, it's unclear what will happen to values if an increasing number of leased cars hit the market down the road.

Opportunities Success of new series. BMW has been successful with the release of the Mini throughout Europe and the US. To continue with this success, they will be offering a diesel version to be released in the spring of 2003. Also, BMW will be offering the new 1 Series subcompact that will go head-to-head with the Audi 3, Mercedes A-Class, and high end versions of the Volkswagen Golf. In the fall of 2003 they will be offering the X 3, a downsized version of the X 5 sport-utility vehicle. In addition, BMW will also be introducing a 6 Series convertible and a station wagon version of the 5 Series.

Improved quality and customer care. Through continuous improvement BMW can continue to be a leader in quality and customer care by always refining and improving its policies and procedures. Threats Competition. The major players that BMW needs to look out for are Lexus, Mercedes-Benz, Audi, and even Cadillac. As an example, the Lexus RX 300 SUV rivals the BMW X 5; the Mercedes E-Class still outsells the BMW 5 Series worldwide; Audi 3, 6 and 8 Series compete directly with BMW's 3, 5 and 7 Series; Cadillac which has a whole new generation of models on the horizon. Growing strength of the Euro.

The growing strength of the Euro poses a risk to BMW's dollar-denominated earnings. The company has hedged nearly 100 percent against its dollar risk in 2003 and 60 percent in 2004 - but only 30 percent in 2005. Receptiveness of 1 Series. Analysts warn that receptiveness of the 1 Series may diminish the BMW brand in the eyes of the 7 Series buyers. The 1 Series models may be viewed as cheaper cars with less quality.

It could also be viewed as a tactic for BMW to obtain higher sales volumes. Outsourcing. To speed the X 3 to market, BMW outsourced development and production to Austria's Magna International Inc. Magna Steyr is dedicated an entire factory in Graz to making up to 150,000 X 3's per year. This move could be an innovative alternative to building new plants, but this strategy leaves BMW with only limited control over the final product.

Bibliography

Pearce, J. and Robinson, R. (2005). Strategic Management, Formulation, Implementation and Control. New York, NY: McGraw-Hill / Irwin web.