Research and Analysis of BMW Group

Prepared for MGT 3660-Y

Professor Ryan Parks

Prepared by:

Ayonni Soumanou

Dalvir Rehal

Deia Figarola

Moses Seriki

Nnenna Uhuegbulem

Submitted on:

April 8, 2017

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Table of Contents Executive Summary 3

Introduction 3

BMW Group Background information and history: 3

Current Brands, Segments and Value Chain 4

Global Production Network 5

Strategic Partnerships: 6

Purchasing and Supplier Network 7

Sales and Distribution Network 7

Growth in Europe and Asia and decline in the US market 8

Business Network 8

BMW Group Financial Services partnerships 9

Alphabet and its partnerships 9

Acquisitions and Joint Venture 11

Research and Development 11

External Analysis 14

SWOT Analysis 14

Porter’s Five Forces Model for BMW 15

Corporate Social Responsibility 16

Constructive Critiques 17

BMW’s Future Plans 18

Appendices 19

References 26

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Executive Summary

This paper revolves around our research and analysis on a transnational company, BMW Group.

BMW is a well-known brand for the luxury category in the Automotive Industry. Majority of the

company information provided were derived from the company’s own website and their 2016 Annual

Report. BMW also initiated its global manufacturing plant localization strategy as globalization

became prominent due to the rising need to access new markets, access to better suppliers & materials.

BMW expanded in Europe initially as majority of their market is within the European realm before

expanding to the other parts of the world such as Asia and the US. Today, BMW has an operation,

whether manufacturing, sales, research and development, financing or all, in each continent. Further

details regarding their Value Chain, Global Production Network, Business Network and external

network. An analysis of our direct comparison between BMW and Daimler AG (Mercedes) and a

general comparison with other common automotive brands regarding reliability, fuel consumption to

name a few will be discussed. Lastly, we will look into what the company does in terms of Corporate

Social Responsibility and how it affects their brand and consumers purchasing decisions.

Introduction

BMW (Bayerische Motoren Werke) Group, a manufacturer of premium automobiles and

provider of mobility related services, as a transnational company is the focus of the context of this

paper. An overview of the company’s history from the foundation, pre-war operation, during the war,

post-war to what it is now at present shows how BMW came to be & how globalization is changing it.

BMW Group Background information and history:

BMW is a German Trans National Company founded in March 1916 by Karl Rapp and Gustav

Otto who were both engineers and entrepreneurs of aircraft engine design and production hence the

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company logo’s rotating propeller that has since then been reinterpreted but not eliminated despite the

numerous logo redesign. After the First World War, the company relocated to Munich, Bavaria in

Germany to where it’s Headquarters remains today. During the Second World War, BMW became an

armaments manufacturer aside from manufacturing motorbikes, automobile and aircraft engines. After

the Second World War, BMW struggled just like the rest of Europe wherein it took 3 years of

reconstruction and rebuilding before production and operations resumed. BMW had its struggled from

low sales, lack of materials sourcing, financial issues, production and marketing issues, and Labour

(Human Rights) issues. Today, BMW Group has 31 manufacturing facilities and 14 assembly plants

which have been placed strategically in order to market to 150 countries globally (BMW, n.d.).

BMW’s extensive development on manufacturing and production ventures (Joint-venture included) as

well as the acquisitions made throughout the years are as follows: Motorcycle, Automotive, Aircraft

Engines, Finance & Leasing business, Motorsport, BMW Museum, Electric Car, Project i, Modern

Mobility Innovation and the acquisitions of Rover, Triumph, Mini (MINI) & Rolls Royce (BMW,

n.d.).

Current Brands, Segments and Value Chain BMW’s current operations are on Motorcycles, Automotive and Financial services where the

company prides itself as a leading premium manufacturer and provider. Some of the automotive

brands acquired had been sold and they now only manufacture BMW, MINI and Rolls-Royce for

Automotive. The following are all part of BMW Group: Product sector includes BMW, BMWi, BMW

Motorrad, John Cooper Works, MINI, Rolls Royce while Drive now, Reach Now, Park Now, Charge

Now, Digital Energy Solutions, Alphabet, BMW Financial Services and Designworks are their Service

Sector (BMW, n.d.).

Looking into the product sector, specifically on automotive production, we can note that the

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organization is highly centralized and has a highly engaged network such as a few innovative

partnerships with Google, Apple (Hwee, 2015). For HR, their workforce is mostly unionized because

of the geographic location of where majority of their manufacturing facilities. They source their

materials globally as the company focuses on quality which means global sourcing is necessary in

order to find the best suppliers. Logistics is straightforward, the company’s strategy is to have

manufacturing or production facility where there is a high market demand in order to maintain their

target 10 days delivery protocol to dealership locations (Hwee, 2015). They do not hold a lot of

inventory mainly due to customization orders and flexible manufacturing technology is not designed

for mass production in BMW (Hwee, 2015). Human element comes in on the design, technology

(machinery control and technological development), quality control, and sales & marketing as shown

on the adapted Value Chain Analysis of BMW (Figure 1). However, the production process produces

automotive that is already pre-ordered and in the US it is at least 80% pre-ordered by customers. Their

core competency is technology and innovative developments that is focused on their main production

(Automotive) while maintaining their profitability, customer-focused strategy and sustainability goals.

Global Production Network

On BMW’s 2016 annual report, BMW Group has a vast production network spread across 31

locations in 14 countries worldwide (BMW, n.d.). The 31 locations are consisting of 19 BMW Group

manufacturing facilities and 5 plants belonging to joint-venture operations, 5 partner plants, and 2

contract production plants (Figure 2). The Group applies the same quality, safety, and sustainability

standards across its production network. Each plant in the production network have strategically

selected products that it manufactures (Figure 3). For instance, the BMW Group plant in Wackersdorf,

Germany is the distribution center for parts and components, cockpit assembly, and processing of

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carbon fibre components. Petrol and diesel engines for BMW and MINI are assembled in Steyr,

Austria along with the production of the core engine parts and high performance engines for M

models.

Strategic Partnerships:

BMW Group ventured out with a few strategic alliances (partnerships) to create flexibility in

serving regional markets. Per its 2016 annual report, the Group manufactured BMW and MINI

vehicles in Russia, Egypt, Indonesia, Malaysia, China, and US (BMW, n.d.). First, the Shenyang

plants in China are operated through a joint-venture partnership with Brilliance China Automotive

Holdings Limited. The plants in Shenyang manufacture exclusively for the Chinese market and

produces petrol engines and core engine parts aside from the extended-wheelbase versions of the

BMW 5, 3 & 2 series and the BMW X1 (BMW, n.d.). The plants also produce plug-in hybrid vehicles

for BMW 5 series and BMW X1 extended-wheelbase version. In 2016, China showed a 17.4% growth

in the automobile market from 2015 registering an increased of 28,293,400 new passengers and light

commercial vehicles (BMW, n.d.). Second, the BMW Group partnered with the SGL Group to form a

joint operative known as SGL Automotive Carbon Fibers (SGL ACF). The joint operation located in

Moses Lake, US produces carbon fibre for subsequent use in the production of carbon fibre fabrics in

Wakershorf, Germany (Figure 4). The carbon fibre fabrics are used in the passenger compartment of

BMW vehicles, specifically the BMW i8 electric vehicle (BMW, n.d.). Third, BMW Group also

outsourced the production of specific vehicles wherein contracts were awarded to produce several

MINI vehicles at Magna Steyr Fahrzeugtchnik in Graz, Austria and VDL Nedcar in Born, Netherlands

in 2016 (BMW, n.d.).

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Purchasing and Supplier Network

The BMW Group relies on a network of over 100 auto parts suppliers from around the world to

support its global production (BMW, n.d.). This provides the automaker with the flexibility to respond

to the fluctuating demands while procuring production materia ls, raw materials, capital goods and

services. There is about 50% of its suppliers are in Germany or was a subsidiary of a German company

while another 35% are in east and western Europe on a 50/50 basis, and the remaining 15% is in the

other parts of the globe. Currently, as shown on the Regional Mix of BMW Group’s 2016 Purchase

Volume, the regional distribution of purchasing volume appears to have changed due to the increasing

vehicle sales and production volumes outside of Europe resulting in an expansion of production

capacity in the Spartanburg, US plant as an example. On Figure 5 in the Appendix, a few suppliers for

BMW Group and the components that each supply is listed. Figure 7, shows BMW’s purchase

volumes in 2016 reflecting the company’s operation, sourcing strategy and locations. The

organization’s goal is to maintain a balanced sale, production, and purchasing volume. Last year,

BMW opened its key components plant called the “Lightweight & Engineering Center” in Landshut to

be built in-house through a collaboration between BMW Group and 160 Engineers from Engineering

Center (BMW, n.d.).

Sales and Distribution Network

The BMW Group enjoys a robust sales and distribution network consisting of 3,400 BMW,

1,580 MINI, and 140 Rolls Royce dealerships globally (BMW, n.d.). Its primary distribution channels

include authorised dealerships, BMW Group branches & subsidiaries, and independent importers in

certain markets like Africa. In addition to on-location sales, new vehicles are also sold online wherein

customers can select a vehicle model, customise its configuration, financing, and payment

arrangements. On top of the that, online customers can even trade-in their old vehicles, receive advice,

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and enter a contract directly with a dealership allowing customers the flexibility to buy products &

avail services at any time and at any location. The new BMWi model is distributed via 1,300

dealership and agency locations worldwide. Sales are delivered via an interlinked multi-channel model

including a mobile sales team, a Customer Interaction Centre (CIC), the internet, and dealerships

(BMW, n.d.). It was published in their 2016 annual report that The BMW Group sold 2,367,603

BMW, MINI and Rolls-Royce brand vehicles worldwide which is a 5.3% increase from what was

reported in 2015. And that on a brand level, the BMW brand sold 2,003,359 units which is a 5.2%

increase compared to their 2015 sales. They boast that MINI’s sold 360,233 units which has also

increased by 6.4% compared to the previous year. They also reported that Rolls-Royce had a 6%

increase in sales as well, delivering 4,011 units to customers in 2016 (BMW, n.d.).

Growth in Europe and Asia and decline in the US market

In 2016, BMW Group’s Key Automobile markets reported mostly an increase except for US as

shown on Figure 6. The BMW Group sold 1,092,155 units; exceeding its 1,000,000 sales target for the

BMW, MINI, and Rolls-Royce brand vehicles in Europe for a second year in a row. In Germany, sale

increased by 4.5% by selling 298,928 units. Regardless of Brexit, vehicle sales in Great Britain grew

by 9.2% in 2016 and even had a record sales of 252,205 units. Asia also had its share of growth,

reporting 747,291units sold in total for all three vehicle brands which is an impressive 9% growth

from 2015. Sales in the US market however struggled because of aggressive marketing by competition

wherein the North American continent sales declined by 7.2% to 460,398 units of sales for all three

brands. In 2015, US sales fell by 9.7% to 366,493 units (BMW, n.d.).

Business Network

Over the years, The BMW Group has differentiated itself within the automotive industry

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through the products and services being provided for their customers. The finance department of the

group’s main function is handling the organization’s financial services which offer a wide range of

products and services such as leasing, retail and commercial financing, selected insurance and banking

products (BMW, n.d.).

BMW Group Financial Services partnerships

The organization’s financial segment group has built strong partnerships with some major

financial institutions around the world to help facilitate its financial transactions and to be able to give

the best services to their customers. In the US, the group established a partnership with Cox

Automotive and Manheim, which allows the manufacturer to expand its auction services with their

RMS Automotive Digital Platform (Manheim, n.d.). Initially, only BMW franchise dealers had an

online access to high-quality BMW and MINI vehicles before they cross the auction block. However,

with the partnership, the independent and non-BMW franchise dealers with a valid “AuctionACCESS”

account now have 24/7 online access to BMW Group's national inventory for off-lease vehicles

(Manheim, n.d.). Also, the BMW Group also built a strategic partnership with the DBS bank in

Singapore. This enables BMW Group’s customers who wish to purchase any BMW, MINI and Rolls-

Royce vehicles to enjoy the wide range of financing services being offered and facilitated by DBS

(BMW, n.d).

Alphabet and its partnerships

The BMW Group has been successfully building a strong reputation through its Alphabet

solutions since it became active in the market in 2002; Alphabet was established in 1997 in United

Kingdom. It focuses on providing customized consultation, financing and car services to a wide

variety of multi-brands customers (BMW, n.d.). Currently, Alphabet manages over 300,000 multi-

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brand company car contracts and is represented in 14 countries. The group has been able to create

strategic partnerships through Alphabet’ products and services with over 65,000 companies using

Alphabet services in Europe and Australia (BMW, n.d.) Alphabet provides customized business

mobility solutions and fleet management services to meet specific corporate requirements and bring

the greatest benefits by offering manufacturer independent products and end-to-end consulting for all

their brands and models (Alphabet, n.d.). The BMW Group has a strong relationship with many car

manufacturers such as VolksWagen and Toyota (Lexus) since many of their cars are used it to provide

many of the services. These solutions are delivered through three main products and services which

are funding that offers services such as allowing customers to acquire vehicles through a tailored rental

arrangement for low costs (Alphabet, n.d.); fleet management division provides services such as

maintenance and repair of cars, road assistance, fuel management, and accident management to

companies & individuals, and so on. The advanced mobility solutions complement the funding and

fleet management services by providing enhanced solutions to its clients. AlphaCity is a concept

introduced by the group to promote corporate car sharing. It allows companies to lease premium

BMW Group cars to ease their employees’ business trips at a reduced cost (Alphabet, n.d.). CO2

emissions have become a real concern in our society today, the company has created Alpha Electric

which provides innovative services such as the suitability of electric vehicles (EVs) for fleet, support

for the introduction of EVs into businesses and provide full in-life support services (Alphabet, n.d.).

Alpha Guide, a travel application, is another major solution that provides drivers and fleet managers

with all the necessary information required to facilitate their business trip(s). The application has

numerous features and is accessible through apple store, Google Play, and Microsoft. In addition,

Alpha Guide users can use the application to book Uber and obtain the pricing details (Alphabet, n.d.).

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Acquisitions and Joint Venture

In 1994, BMW Group acquired Rover for £800 million however the acquisition did not benefit

BMW as it failed to consider factors such as cultural clash (Tutor2u, 2012). Then in 2011, the BMW

Group acquired ING car lease. ING car lease was a leader in the operational car leasing & fleet

management sector in Europe as it had 240,000 vehicles and was in the top 10 positions in all the 8

European countries it operated in (ING, n.d.). BMW Group undertook some joint ventures to offer

better designed products and increase its market share in the competitive industry. For instance, BMW

Group formed an alliance with TOYOTA, which is one of the leading brands in the automotive

industry, to produce for both companies’ sports cars. The cars will be produced by Magna Steyr, this is

the company that assembles Mercedes G-Wagen for its main competitor, Daimler AG (Road and

Truck, 2016).

Research and Development

When it comes to research and innovation, the BMW Group has been collaborating with many

technological firms and educational institutions to come up with outstanding and innovative solutions

that will benefit the company. In the US, the car manufacturer’s Information Technology Research

Center (ITRC) has partnered with the State of Carolina specifically with Clemson University to

develop and create innovative technological solutions that will personalized the customer's driving

experience (BMW, n.d.). In Germany, the BMW Group and IBM headquarters of IoT in Munich are

collaborating to research on how technology can be integrated in BMW cars (IBM, 2016).

Comparison between BMW Group and its industry

The BMW Group is keeping up with the technological development in the automotive

industry. Per a KPMG, a survey of 200 automotive executives, the BMW Group has been named the

champion and the leader of connected cars in the industry (Business Insider, 2016). The internet of

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things (IoT) connected cars have taken over the industry. in terms of convenience. (Business Insider,

2016). Car companies are also focusing on improving performance and energy efficiency. Yearly in

the US, automakers usually invest more than $15 billions in research and development as connected

cars are expected to generate $8.1 trillion between 2015 and 2020 (Business Insider, 2016). However,

despite being the leader of connected cars in the industry, the BMW Group does not spend as much as

its competitors on R&D. The biggest spender in 2016 was Volkswagen's with $15.3 billion while

Toyota was second at $9.2 billion, and Daimler was third with $7.6 billion (Auto News, 2016). The

BMW Group has seen a significant reduction of its market share within the industry; the group used to

be the most seller of premium cars. Mercedes-Benz sales overtook BMW last year for the first time in

more than a decade, a feat achieved, ironically, only after parent company Daimler stopped chasing

market share and focused on making stylish high-tech cars (Reuters, n.d.). The leader manufacturer by

market share in 2016 is GM with over 15%, followed by Ford and Toyota (Figure 8). Mercedes-Benz

is the only premium cars maker that made it to the top ten with barely 2%, taking the spot from BMW

Group (Figure 8). The automotive industry is known to be a major contributor to the environmental

pollution and impacting the climate change, mostly through their fuel consumption and carbon dioxide

emissions (CO2). With the pressure of some pro-environmental groups and international institutions,

the industry is now strictly regulated and CO2 targets have been set for manufacturers (Auto News,

2016). To meet their targets and protect the environment, many car manufacturers are now producing

EV (Electric Vehicles) & e-mobility solutions to support consumers. Per KPMG survey in 2016,

BMW and Toyota will be the leaders as they ranked in the top spots for being the most ground-

breaking innovators in the future followed by Honda, Ford and Tesla. In terms of partnerships, many

cars manufacturers are teaming up with Uber; some, to develop its self driving cars or to deliver its

services through their ride-sharing applications (Bloomberg, 2016).

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Comparison of BMW Group and Daimler AG

BMW Group and Daimler AG are two leaders in the industry when it comes to luxury vehicles

and customized products and services. These 2 global companies are both from Germany and similar

in terms of their business & operations. BMW Group manufactures luxury vehicles, buses, engines,

and motorcycles. Daimler AG produces similar products as BMW Group except motorcycles. In

addition, Daimler has few brands which are Smart, BharatBenz and Western Star. It also acquired a

43% shareholding in Mitsubishi spin-off Mitsubishi Fuso (Daimler, n.d.). These 2 companies both

have a presence in the same countries through their dealerships and production & assembly facilities.

Daimler is also concerned about the environment as it delivers eco friendly mobility products and

solutions. Among all the products and services, the one that they do not have in common is a bus

transport system which provides fast, convenient and cost-effective urban mobility transportation

called Bus Rapid Transit (BRT) of Daimler (Daimler, n.d.). As both companies operate worldwide,

they have built strong partnerships to ease their operations and gain more competitive advantages in

their current markets. For example, the Germans car makers have successful business partnerships

with Uber. Uber is providing services through the Alpha Guide app of BMW Group. Daimler is also

collaborating with Uber to develop autonomous vehicle technology and to eventually put self-driving

Mercedes-Benzes on the Uber ridesharing network (EMercedesBenz, 2017). In China, Daimler built a

strong partnership with Baidu to improve built-in software gadgets in its cars (Business Insider, 2015)

whereas when BMW Group initiated a partnership with Baidu it unfortunately did not last as their

goals on the commercialization of autonomous cars were not the same (Fortune, 2016).

In 2016, Daimler has surpassed its main competitors in revenues as well as in market share.

Daimler’s annual revenues was € 153.3 Billion (Business Insider, 2017) compared to BMW Group

that ended up with € 94.16 Billion (Market Watch, 2017). Both car manufacturers have approximately

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the same standardized delivery of 8-12 weeks (Cartelligent, n.d.) but Daimler’ success could be

attributed to a slightly shorter delivery time. BMW’s six-month deliveries rose 5.8 percent from the

previous year to 986,557 autos, compared with a 12 percent gain to just over 1 million cars for

Daimler’s Mercedes (Bloomberg Pursuits, 2016).

External Analysis

SWOT Analysis

In this research, we discovered the following strengths, weakness, threats and opportunities of

BMW Group as shown in Figure 9 & Figure 10. A very important note is that of the brand reputation.

The brand is highly recognized all over the world for it’s luxury and refined quality. BMW has a

strong brand reputation and they have been named the 2nd most valuable brand by the Forbes. This is

because BMW is committed in continuous improvement practices and innovation throughout their

supply chain and can stay ahead of it’s competitors when it comes to innovation. The BMW’s brand

image also attracts the best suppliers and dealers which further adds to the quality and responsiveness

of their products and services. Their value-added production system is characterized by both flexible

and “leagile” processes such as Built-To-Order & Just-In-Time/Just-In-Sequence which have brought

greater flexibility and agility to their supply chain. Among automakers, BMW have developed one

most of the most comprehensive and unique reverse logistics processes that enables them to achieve a

greater environmental sustainability index. In addition, their acquisition of Rover group (MINI) and

Rolls-Royce have further added value to their existing brand image. The firm also benefited from

technologies and practices used in their acquisition for the supply chain along with the increased

market knowledge and access to the market that they were serving. Their competitive advantage in

constant innovation and continuous improvement are hard to match. The latest mobility services

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“drive now” and the new i3 model are examples of this strength. However, having a global supply

chain can also pose challenges which leads to some of the company’s weaknesses. For the study that

we carried out, we found that BMW’s manufacturing cost are relatively higher than many other firms

in this industry. This is mainly due to a higher purchasing cost as the best of suppliers are used to

ensure quality as well the skilled workforce required for production. Due to the factors mentioned,

BMW’s cost of repair compared to other car makers in the premium segment is relatively known to be

higher. Interestingly, these factors are also their strengths. Many of the key components being used

such the engines are imported which contributes to the higher overhead cost for BMW. However, the

firm is exploring various options on setting up R&D facilities and sourcing a local manufacturing for

engines in countries like India to be in line with their plants in China. Though the firm have initialized

and provided an extended warranty coverage period for their cars, there are still room for

improvements in this area. Allowing customization of their cars also do contribute to higher costs in

manufacturing than those achieved through mass economies of scale production (mass production) but

this also provides opportunities to the firm in improving the mass customization processes. One of the

4 main threats are the increasing competition in their market segment. Volkswagen in the executive

segment, Daimler-Chrysler’s Mercedes and Toyota’s Lexus in the luxury segment along with their

competitive pricing takes a portion of the pie of BMW’s market share. The second main threat is the

risks involved in local sourcing which includes duplication of intellectual assets and grey marketing

wherein BMW mainly faces these challenges in countries like Russia, Poland, Turkey and in some

African nations. Lastly, the fluctuating currency and recession in the European Union are the other

main threats to BMW’s supply chain.

Porter’s Five Forces Model for BMW

BMW has no threat from new entrants because the automobile industry requires both huge

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capital and skilled human capital as shown in Figure 11. For a new company to deliver the same

standard as BMW, they would need to stand out by have an appealing brand and product(s) which

requires intensive capital, technological knowledge, design & engineering skills and not to mention

time. In the automotive industry customers have plenty of choices available which gives them high

bargaining power. Tough competition with similar products & quality are also offered by various

competitors which takes away BMW bargaining power as a producer/manufacturer as reflected in

Figure 11. On this table, we can see that BMW has a low bargaining power with its suppliers because

they choose & use only what they deemed is the best provider as well as the most reliable suppliers

available in the market. These requirements alone limit the number of qualified suppliers which

restricts their negotiation power when it comes to pricing. There is a tough competition in the

automotive industry wherein competitors are offering the almost the same quality type of products at

fair prices compared to what BMW offers. Even though BMW has a very loyal customer base they

struggle with gaining new customers. Another threat of substitute is bicycles for “green” towns such as

Vauban in Germany where the city does not allow cars as well as consumer preference to lower the

Carbon footprint (Business Insider). There is huge and aggressive rivalry among competitors such as

Volkswagen and Daimler AG for premium luxury vehicles. Tough competition is forcing BMW to

reduce their prices which lowers their profit margin to only 9.5%.

Corporate Social Responsibility

BMW is striving to become more sustainable and socially responsible. The company has

decreased its energy usage by 36% and water consumption by 31% since 2006 resulting in about 3-4%

improvement per year. They stated in their website the “CO2 emission by BMW Group vehicle fleet

sold in Europe was reduced slightly to 127 grams CO2 / km (2014: 130 grams CO2 / km; – 2.3 %)

during 2015”. BMW Group committed over $36 million: 47% to education, 35% to the community &

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18% to arts as stated in their “Corporate Giving”. When it comes to greenwashing, Investopedia

reports, “The general idea behind greenwashing is to create a benefit by appearing to be a green

company, whether that benefit comes in the form of a higher stock price, more customers or favored

partnerships with green organizations.” Reduction of Carbon Footprint is a hot topic recently and

BMW tries to do their part by releasing hybrid vehicles and battery-operated electric cars. In the

energy industry, companies especially the world's top biggest carbon emitters are attempting to

rebrand themselves as being more environmentally conscious and friendly.

Constructive Critiques

BMW has a high manufacturing cost thereby increasing the overall cost of production for its

products. A percentage of the cost incurred is transferred to the final consumer hence increasing the

cost of the vehicle which is why their products are categorized as premium or luxury. Maintenance of

a BMW vehicle also costs more due to the higher manufacturing parts costs (J, Lancaster, 2016), See

Figure 12 & 13. Based these 2 tables (Figure 12 & 13) we can see that the cost of owning and

maintaining a BMW is not comparable to the cost of owning a Toyota which is statistically the most

reliable. The key is on knowing what the amount of mileage consumption you get out of your vehicle

before it reaches a point when the wheels fall off or beyond repair? Based on that measure, Forbes

reported in 2014 that Toyota makes the longest-lasting cars and trucks with at an average of more than

200,000 miles. The record comparison of various automotive brands made by Forbes was about New

York-based Mojo Motors’ report. Mojo Motors is the company behind the used-car classified ad site

mojomotors.com. Forbes reported that Mojo Motors sought answers by how well will a car last till that

point of worthlessness (uselessness) in terms of the amount of mileages a car can travel by analyzing

its listings for more than half a million cars and trucks from model years 1995 through 2014. Figure 11

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and 12, shows the result of the top ten brands and BMW’s ranking wherein its durability performance

falls behind compared to consumer’s perceived quality of the brand. Commitment to innovation and

increase in product variety has brought on the greatest challenge in the company's history because the

intricacy and complexity of the functions offered in BMW’s premium luxurious cars has multiplied

these last few decades based on increase safety features and connectivity thus increasing the

manufacturing cost even more. These increasing expenses is forcing BMW to increase its prices which

has backlashed with Customer Brand Based Equity for selling overpriced vehicles.

BMW’s Future Plans

The BMW brand will continue to set the bar high when it comes to innovation, design and

technology. This will continuously cause a constant battle with their competitors within this luxury

level or higher category. BMW must maintain its prestigious brand identity and try to maintain their

momentum by evolving its brand, developing new products and push the boundaries of the automotive

industry. An abundance of options for the automotive buyers exists wherein vehicle models have

similar functionality and characteristics. BMW will need to manufacture a unique product and service

that will address the needs and preferences of its current consumers and new consumers alike.

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Appendices FIGURE 1: VALUE CHAIN ANALYSIS

Figure 1: Adapted Value Chain Analysis by Hwee (2015). Source: Building & Sustaining Strategy: Bayerische Motoren Werke (BMW)–Automotive Industry

FIGURE 2: BMW GROUP PRODUCTION PLANTS

BMW Group Production

Plant locations outside

Europe

BMW Group Partner

Plant locations outside

Europe

BMW Group Research and

development network outside Europe

Araquari,Brazil Hosur, India BMW Group DesignWorks, Newbury Park, US BMW Group Technology Office

US Mountain View, US

Chennai, India Jakarta, Indonesia BMW Group Engineering and emissions Test Center, Oxnard, US

Manaus, Brazil Cairo, Egypt BMW Group ConnectedDrive Lab China, Shanghai

Rayong, Thailand Kalinangrad, Russia BMW Group DesignWorks Studio Shanghai China

Rosslyn, South Africa Kulim, Malaysia BMW Group Engineering China, Beijing,

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China

Spatanburg, US BMW Group Engineering Japan, Tokyo,

Japan

BMW Group Engineering US, Woodcliff Lake, US

BMW Technology, Chicago, US

Figure 2: BMW Group Production Plants Source: 2016 BMW Annual Report FIGURE 3: BMW GROUP PRODUCTION PLANT IN EUROPE

BMW Group Production

Plant locations in Europe

Partner Plant locations in

Europe (Contract

production)

Research and development network in

Europe

Berlin, Germany Born, Netherlands BMW Group research and innovation Centre (FIZ), Munich Germany

Dingofing, Germany Graz, Austria BMW Group research and technology centre, Munich, Germany

Eisennach, Germany BMW Car IT, Munich, Germany

BMA Innovation and Technology Centre, Landshut, Germany

Landshut, Germany BMW Diesel Competence Centre, Steyr, Austria

Leipzig, Germany

Munich, Germany

Regensburg, Germany

Wackersdorf, Germany

Steyr, Austria

Hams Hall, Great Britain

Oxford, Great Britain

Swindon, Great Britain

Rolls Royce

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Manufacturing Plant, Goodwood, Great Britain

Figure 3: BMW Group European Production Plant. Source: 2016 BMW Annual Report

FIGURE 4: JOINT VENTURES AND JOINT OPERATIONS

Joint Venture BMW Brilliance Automotive

Holdings Ltd.

Joint Operation SGL Automotive Carbon

Fibres

Dadong (Shenyang), China Moses Lake, US

Tiexi (Shenyang), China Wackerdorf, Germany

Figure 4: Joint Venture and Joint Operations Source: 2016 BMW Annual Report

FIGURE 5: SUPPLIERS

Supplier Component and Parts

Brembo Brake Calipers, clutches, automatic transmissions

Thyssenkrupp Batteries of the BMW i3, Shock absorbers, suspension parts

Elringklinger Gasket and exhaust system

BorgWarner Turbo

Systems

R3S turbocharging system for diesel engines and VTG turbocharger with

low-pressure exhaust gas recirculation (EGR) technology.

Peiker Acustic GmbH

& Co

High speed mobile internet car.

Harman/kardon Interior music and audio system

Delphi Battery and electric vehicle charger components

Figure 5: Suppliers. Source: 2016 BMW Annual Report

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FIGURE 6: 2016 KEY AUTOMOBILE MARKETS

Figure 6: Key Automobile Markets. Source: 2016 BMW Annual Report

FIGURE 7: BMW GROUP PURCHASE VOLUMES

Figure 7: BMW Group Purchase Volumes. Source: 2016 BMW Annual Report

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FIGURE 8: MARKET SHARES BY MANUFACTURERS

Figure 8: Top ten manufacturers. Source: October 2016 Edmunds website. FIGURE 9: S.W.O.T ANALYSIS OF BMWS’S GLOBAL SUPPLY CHAIN

Figure 8: Global Supply Chain SWOT Analysis (Jurevicius, O., 2016)

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FIGURE 10: BMW GROUP’S SWOT ANALYSIS

Figure 10: SWOT Analysis (Dudovskiy, J., 2016) FIGURE 11: PORTER’S FIVE FORCES MODEL FOR BMW

Figure 11: BMW Porter’s Five Forces Analysis (Dudovskiy, J., 2016)

Running Head: Research and Analysis on BMW Group

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FIGURE 12: BMW’S RANKING COMPARISON TO TOP 10 AUTOMOBILE BRANDS

Brands Miles Until

Worthless

Conversion in

Kilometers

1 Toyota 210,705 339,096.83

2 Honda 209,001 336,354.51

3 Ford 198,409 319,308.34

4 Dodge 198,266 319,078.20

5 Chevrole

t 195,754 315,035.53

6 Nissan 193,593 311,557.73

7 Subaru 189,370 304,761.47

8 GMC 188,584 303,496.53

9 Acura 178,947 287,987.28

10 Mazda 177,729 286,027.10

29 BMW 158,000 254,276.35

Figure 12: Automotive Brands Ranking

Source: AutoRemarketing.com FIGURE 13: BMW’S COMPARISON TO TOP 10 AUTOMOBILE BRANDS

Figure 13: Vehicle Lifetime Mileage. Source: AutoRemarketing.com

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