How far do the relative strengths of BMW's strategy arise from a specific combination of internal resources, capabilities and key value creating activities?

Résumé du document

After World War II, the automotive industry experienced a euphoria as more people were able to buy cars. It resulted in an increasing competition in this industry and carmakers had to find ways to sell their cars. Two major segments emerged from those years, the mass-market segment and the luxury segment. The first one was competing on cost reduction while the other one was competing on the quality and the brand appeal. The second one was obviously far more attractive as it brought more profits. Today, this segment is still very attractive as we can see with the growing Tata Motors, which just bought Jaguar in a way to make bigger profits. The following case study is a reflection about the resources BMW has got to compete and to become one of the biggest players under the luxury segment. To understand the strengths of BMW, an internal environment analysis of BMW's capabilities and competences will be conducted after having brought to light the core resources and the value creating activities of BMW.

Extraits

[...] In fact, the quality of BMW cars is essential to the creation of its reputation and BMW is the best player concerning quality. BMW knows how to run an effective and flexible factory with the best qualified workers through unique agreements with workers' unions. To reinforce its position concerning quality, this company also applies long term associations with suppliers and tight control over its distribution network. In fact the whole company is made of complex linkages between all its activities, mainly lead by the quality management. [...]

[...] Reputation The major strength of BMW comes from its reputation which arose from a mixture of several factors. First of all, BMW produces car of premium quality using well qualified labour force all over the world and world- class engineers in the HQ in Germany. Secondly, the whole processes and procedures are under a tight control of BMW. Even though customers do not see those processes they are essential to the final quality of the cars. However, what the customer sees is the BMW showrooms. [...]

[...] The company benefits from agreements with workers' unions giving therefore a high level of flexibility creating therefore cost reductions. Finally, BMW has established long term associations with the suppliers and its distribution network is tightly controlled in order to run an effective brand management Value Creating Activities The value chain analysis' aim is to understand and assess the value created by the company. It brings together activities within the organisation which create a product” (Johnson, Scholes and Whittington P136). A distinction can be made between the primary and support activities. [...]

[...] This way BMW may loose market shares Conclusion Through this internal environment analysis it has been emphasised that the strengths of BMW arise from a combination of its resources, capabilities and key value creating activities. Two major strengths arose from the analysis: In one hand its reputation which results from a quality management, an engineering excellence and impressive marketing capabilities. On the other hand its efficiency in producing premium cars as a result of its HRM and economies of scales. [...]

[...] Infrastructure The strategic position of BMW in the automobile industry is hybrid due to the particularity of this industry. Indeed on one hand BMW compete on the differentiation segment, but on the other hand the pressure for cost reduction is so high that BMW has to be cost effective to survive. The arrival of Helmut Panke in 2002 as the new CEO was a turning point for BMW. Breaking with the old CEO strategies of external growth by acquisitions, Panke has established an internal growth strategy through market and product development new model every three months) to fulfil BMW ambition of being number one. [...]