Group report

BMW company

Prepared by:Victoria TikhonovaAnna KichiginaAnastasia Loseva

С ontent

History of BMW……………………………………………………………….Milestones of success…………………………………………………………..

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BMW innovations……………………………………………………………....Current situation at the company……………………………………………….Competitors…………………………………………………………………….Future of the company………………………………………………………….Personal attitude to the company……………………………………………….

History of BMW company

Bayerische Motoren Werke AG (BMW), (English: Bavarian Motor Works) is an

independent German automobile manufacturer founded in 1916. BMW is a worldwide

manufacturer of high-performance and premium automobiles and motorcycles, and is the current

parent company of both the MINI and Rolls-Royce car brands.

Milestones of the history:

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1916 – Founding of Bayerische Flugzeug-Werke. The new company incorporated Otto-Werke.

BMW acquired the BFW site in 1922, but Bayerische Motoren Werke continues to regard

BFW’s establishment as its date of founding.

1917 – Rapp-Motoren Werke was renamed Bayerische Motoren Werke GmbH. The company

constructed a large plant and built engines for military aircraft there till 1918.

1918 – Bayerische Motoren Werke GmbH was converted into a stock corporation with a share

capital of 12 million Reichsmarks. BMW GmbH becomes BMW AG.

After World War I, BMW (and Germany) were forced to cease aircraft (engine)

production by the terms of the Versailles Armistice Treaty. The company consequently shifted to

motorcycle production in 1923 once the restrictions of the treaty started to be lifted, followed by

automobiles in 1928.

The circular blue and white BMW logo or roundel is often alleged to portray the

movement of an airplane propeller, an interpretation that BMW adopted for convenience in

1929, which was actually twelve years after the roundel was created. In fact, the emblem evolved

from the circular Rapp Motorenwerke company logo, from which the BMW company grew. The

Rapp logo was combined with the blue and white colors of the flag of Bavaria to produce the

BMW roundel so familiar today.

By 1959 the automotive division of BMW was in financial difficulties and a shareholders

meeting was held to decide whether to go into liquidation or find a way of carrying on. It was

decided to carry on and to try to cash in on the current economy car boom enjoyed so

successfully by some of Germany's ex-aircraft manufacturers such as Messerschmitt and

Heinkel. Therefore the rights to manufacture the tiny Italian Iso "Isetta" were bought using a

modified form of BMW's own motorcycle engine. This was moderately successful and helped

the company get back on its feet. The dominating shareholder of the BMW Aktiengesellschaft

since 1959 is the Quandt family. Stefan Quandt, Johanna Quandt and Susanne Klatten (born

Quandt) together own about 46% of the stocks. The rest is in public float.

BMW AG purchased the British Rover Group (which at the time consisted of the Rover,

Land Rover, MINI and MG brands as well as the rights to defunct brands including Austin and

Morris) in 1994 and owned it for six years. By 2000, Rover was making huge losses and BMW

decided to sell the combine. The MG and Rover brands were sold to the Phoenix Consortium to

form MG Rover, while Land Rover was taken over by Ford. BMW, meanwhile, retained the

rights to build the new MINI, which was launched in 2001.

Milestones of success

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BMW's Dream Factory. Sharing the wealth, listening to even the lowest-ranking

workers, and rewarding risk have paid off big time.

Management structure.

BMW's management structure is flat, flexible, entrepreneurial -- and fast, that enable the

company to respond to competitive threats and market trends. The company has become the

industry benchmark for high-performance premium cars, customized production, and savvy

brand management, making it the envy of Mercedes-Benz (DCX ), Audi, and Lexus and the

subject of Harvard Business School case studies. Even mighty Toyota Motor Corp. (TM )

regularly dispatches engineers to BMW's factories to see how the company cranks out 1.3

million customized cars a year.

Most innovative company.

The BMW Group is the most successful premium manufacturer in the automotive

industry. One of the fundamental prerequisites for this success was and is ongoing leadership and

innovation in the construction of cars perceived and acknowledged as leaders by the customer.

Innovation upgrades the product in its substance, and only attractive product substance can

secure the long-term success of a company in sales.

A further point is that innovation is the right tool to clearly stand out from the

competition in an increasingly competitive premium market. Modern premium cars today have

reached a comparably high level of technology in many respects, the customer taking features

such as passive safety and quality for granted right from the start.

A few examples:

-  Jet-guided High Precision Injection direct gasoline injection technology significantly reduces fuel consumption and increases engine output at the same time.

-  Runflat tyres save space and weight by omitting the spare wheel and at the same time offer a significant enhancement of safety.

-  Active Steering offers the driver supremacy on the road on fast straight-ahead stretches, outstanding agility in a rapid succession of bends, and comfortable steering behaviour when parking.

Only innovations offering clearly recognizable customer benefits, strengthening the

character of cars and brands, meeting the greatest demands in terms of quality and reliability, and

providing a sensible business case, meet the prerequisites for actual use in series production.

Through its EfficientDynamics concept, the BMW Group is continually generating fuel

consumption reductions with the aim of offering the most efficient vehicle in each relevant

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premium segment. Measures taken to improve EfficientDynamics contribute to further

reductions in fuel consumption and vehicle emissions, simultaneously enhancing both dynamics

and performance. BMW Group’s engineers consider all potential areas for optimising a vehicle,

including improved aerodynamics, more efficient engine technologies, lightweight construction

through to a comprehensive system of energy and heat management within the vehicle. The

BMW Group endeavors to make any new fuel consumption reducing technologies available to as

many customers as possible, as soon as possible. This is seen as the only way to achieve

ecological progress for the fleet as a whole.

In addition, the BMW Group will successively introduce the Auto Start/Stop Function

feature to their range of models, starting with the BMW 1 Series. This innovation automatically

switches off the engine as soon as the vehicle stops moving and starts it again extremely quickly

as soon as the driver wishes to continue the journey. This technology can help to save a great

deal of fuel, especially in urban stop-and-go driving conditions.

The technological lead.

To maintain its position as a worldwide technological leader in the automobile branch,

transforming creative ideas into innovations is essential for the BMW Group. This is why we

systematically develop and realize technologies for tomorrow's automobiles and motorcycles

which hold a great deal of benefit for our customers. We have oriented our development and

working structures accordingly.

Lateral thinking – getting ideas from the entire world.

New solutions are often spontaneously born by seeing examples from the widest

imaginable fields, including architecture, art or nature. Studying nature – which has developed

its fascinating richness over billions of years – gives us valuable inspirations for efficient

technical solutions because the evolutionary process has constantly optimised natural functions.

Building on these, aerodynamics scientists at the BMW Group have studied, for example, the

streamlined bodies of dolphins to obtain new knowledge for designing automobiles.

Cooperation with science.

The BMW Group promotes constant dialog with scientists. In addition to numerous joint

projects with research institutes and universities, the BMW Group bestows the internationally

recognised and highly endowed prize for university students, the "Scientific Award", every two

years. With the motto "Passion for Innovation", this prize promotes and honours the passion of

young researchers and scientists taking an interdisciplinary approach to their work.

Virtual innovative agency

Shape the future with us!

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Our task is to secure the long-term innovation and technology leadership of the BMW

Group. To realise this goal, the BMW Group is permanently looking for unusual innovations on

the subject "mobile future".

We are not only interested in our own research and development departments, but also in

the creative minds outside the BMW Group. Your submission through the Virtual Innovation

Agency (VIA) could be the start of a forward-looking cooperation with the BMW Group.

The path for your innovative solution into the world of the BMW Group!

If you have innovative solutions for our complex challenges, then you are on the right

road with us. The Virtual Innovation Agency is the platform for you to bring your achievement

into the world of the BMW Group.

Entrepreneurial culture. Happy Workers, Better Cars.

Much of BMW's success stems from an entrepreneurial culture that's rare in corporate

Germany, where management is usually top-down and the gulf between workers and managers is

vast. BMW's 106,000 employees have become a nimble network of true believers with few

hierarchical barriers to hinder innovation. From the moment they set foot inside the company,

workers are inculcated with a sense of place, history, and mission. Individuals from all strata of

the corporation work elbow to elbow, creating informal networks where they can hatch even the

most unorthodox ideas for making better Bimmers or boosting profits.

Just about everyone working for the Bavarian automaker -- from the factory floor to the

design studios to the marketing department -- is encouraged to speak out. Ideas bubble up freely,

and there is never a penalty for proposing a new way of doing things. BMW is "a fine-tuned

learning system."

Ecology oriented.

To improve efficient use of resources (material, energy, water) by products as well as

during production, a precise balance between ecological and economical issues must be sought

after.

To save energy, production uses sophisticated central routing technology, for example.

Thisenables energy-using components to be turned on and off precisely when needed. In

addition, the use of heat reclamation equipment, use of industrial waste heat, and cold generation

in absorption equipment supports the development of circulation systems. This makes it possible

to exploit primary energy to a high degree, ensuring an energy supply which is also

environmentally friendly.

BMW innovations

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1. BMW's reputation for innovation can be traced to its equally innovative lateral

management techniques.

"At lunch and breaks everyone is discussing ideas and projects all the time. It's somewhat

manic. But it makes things move faster," says BMW chief designer Adrian van Hooydonk.

Companies such as BMW that leverage workers' tacit knowledge through networks

(cross-functional teams) "are widely ahead of their competitors.

BMW is one of a handful of global companies including Nokia (NOK ) and Raytheon

(RTN ) that have turned to networks to manage day-to-day operations, superseding classic

hierarchies.

2. lighting-fast changes

BMW figures some 90% of the innovations in its new models are electronics-driven.

3. mobile-phone messages

To reach a younger crowd of potential buyers for its new 1 Series launch in 2004, BMW

used mobile-phone messages as the main source of buzz, directing interested people to signups

on BMW's Web site for pre-launch test drives in August that year—something unheard of in the

industry at the time. The experimental tactic worked: BMW sparked responses from 150,000

potential customers—and sales of the 1 Series took off when it was launched in September,

2004.

4. ideas first

Workers at the Bavarian automaker are encouraged from their first day on the job to build

a network or web of personal ties to speed problem-solving and innovation, be it in R&D,

design, production, or marketing. Those ties run across divisions and up and down the chain of

command. BMW's complex customized production system, the polar opposite of Toyota's (TM )

standardized lines, is easier to manage if workers feel empowered to drive change. Like Dell

Computer (DELL ), BMW configures its cars to customers' orders, so each auto moving down

the production line is different.

Current situation at the company

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With BMW, MINI and Rolls-Royce Motor Cars, the BMW Group is the world's only car

maker to pursue a purely premium strategy for all market sectors covered by its brands, from

exclusive smaller cars to top-of-the-range luxury limousines. To achieve its aims, the company

knows how to deploy its strengths with an efficiency that is unmatched in the automotive

industry. The strategic objective is clearly defined: The BMW Group is the leading provider of

premium products and premium services for individual mobility.

BMW brand - has stood for one thing: sheer driving pleasure. Sporting and dynamic

performance combine with peerless design and exclusive quality, resulting in the unique appeal

of BMW automobiles.

The MINI brand wins hearts and turns heads. MINI is refreshingly different: extroverted,

spontaneous and in every respect something out of the ordinary. Ideal for a society, the MINI

Classic became a cult vehicle in the sixties and seventies. MINI is part of a lifestyle that is

cosmopolitan and confident, ready for everything.

Rolls-Royce is one of the most fascinating and well-known brands in the world, the

luxury motor car par excellence. For over 100 years, motor cars of the Rolls-Royce brand have

stood for truly outstanding engineering, quality and reliability.

Premium is the key word for BMW Group motorcycles as well. BMW group sets

standards with regard to technology, environmental protection and safety, and provides

outstanding customer service in the pre- and after-sales phases.

Financial services is a key factor for success in today's mobile world. They have

established an extensive product portfolio which supplies expert information and advice for

situations and questions relating to the finance sector. They provide the following services:

financing and leasing, asset management, dealer financing and company car pools.

German luxury car group BMW said its third quarter results 2008 were hit by the global

financial crisis despite a rise in sales.

The German group had developed leasing activities in the United States, its main export

market, which suffered from credit defaults, late payments and problems in selling second-hand

cars turned in by customers.

"The financial crisis worsened and the consumption climate grew dark again."

In October 2008 the sales volume of one of the biggest producer of premium-class

automobiles fell on 8,3% in comparison with October 2007 till 113005 cars.

It is connected with the decrease of demand on developed markets. The sales in Western

Europe fell on 12%, in the USA – on 5%, in Japan – on 29%. Sales in developing countries have

risen: in India – on 10%, in China – on 36%, in Russia – on 40%.

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The performance of the BMW Group in the third quarter 2008 was perceptibly influenced

by the economic downswing in the wake of the financial crisis. Ongoing consumer reticence in

the main sales markets, the weak state of the used car markets as well as increasing refinancing

costs had a substantial negative impact on the earnings of the BMW Group.

In addition to the ongoing adverse business climate, the BMW Group's third-quarter

performance was also influenced by model life-cycle factors, particularly in relation to the BMW

brand. Between July and September 2008, the BMW Group sold a total of 349,098 BMW, MINI

and Rolls-Royce brand cars, 4.2 % down on the previous year. The number of cars delivered in

the nine-month period increased marginally (+ 1.7 %) to 1,113,972 units.

Market conditions for the motorcycle business were also difficult. The third-quarter sales volume

achieved by the Motorcycles segment was nevertheless ahead of the previous year's high level.

In total, 24,818 motorcycles were sold during the period (+ 5.4 %). During the first nine months

of the year, 80,750 BMW motorcycles were handed over to customers, 2.5 % short of the

number sold in the corresponding period of 2007.

Third-quarter Group revenues decreased by 8.6 % to euro 12,588 million, reflecting the

noticeable reluctance of customers to spend in the face of the crisis on international financial

markets. Despite this extremely unfavourable situation, the BMW Group, with revenues of euro

40,425 million, was nevertheless able to maintain nine-month revenues at the previous year's

high level. Adjusted for exchange rate factors, Group revenues for the nine-month period were

up by 5.1 %.

Earnings for the nine-month period reflect the ongoing effect of the various adverse

external factors described above. In the third quarter 2008, the BMW Group increased the

cumulative amount of expense recognised for additional risk provision for residual value and bad

debt risks to a total of euro 1,037 million. On top of this, expenditure in conjunction with

previously announced measures to reduce the workforce reduced nine-month earnings by euro

258 million.

The third-quarter profit before financial result fell by 60.2 % to euro 387 million. The

profit before financial result for the nine-month period, at euro 1,639 million, also dropped

steeply (- 43.6 %). External factors also took their toll on the Group's pre-tax earnings. The profit

before tax of euro 279 million for the third quarter was 63.5 % lower than one year earlier, while

that for the nine-month period fell to euro 1,522 million (- 43.3 %).

The BMW Group recorded a net profit of euro 298 million for the third quarter (- 62.9 %). The

net profit for the nine-month period was 39.7 % lower at euro 1,292 million.

Business conditions have deteriorated further for the BMW Group over the past months.

The escalation of the financial crisis and the signs that this will spill over to the real economy 9

have increased the risk of a worldwide recession. The cyclical downturn is going hand in hand

with a noticeable reduction in consumer spending in numerous markets. A further contributing

factor here is the ongoing debate about CO2 emissions which is also having the effect of

unsettling customers, causing them to avoid, or at least put off, the acquisition of consumer

goods, in particular long-lived goods and equipment. A significant level of volatility on the

financial and commodity markets poses the risk of even greater uncertainty.

The market situation has therefore also deteriorated sharply for the automobile industry. Private

consumption and consumer confidence have dipped perceptibly, particularly in the USA, the

BMW Group's largest single market for cars, but also in Europe. The situation on most of the

world's emerging markets remains robust. It is likely, however, that the dynamic growth rates

registered on these markets in recent years will be trimmed back as a result of the financial crisis.

In the triad of traditional car markets, the number of new registrations will drop sharply for the

full year 2008 compared to the preceding year. The side-effect of the economic downturn -

namely some signs of easing pressure on raw material markets and a slightly stronger US dollar -

are nowhere near sufficient to offset the extremely high level of expenses that have had to be

borne.

The BMW Group cannot avoid the effects of these developments. The uncertainties that

result from the adverse factors described make reliable forecasting difficult, even rendering it

almost impossible to make reliable assertions for the near future.

Taking all of these factors into consideration, the BMW Group estimates that it will no

longer surpass the previous year's record sales volume figure in its automobile business. Due to

the prevailing adverse climate and the uncertainties caused by the financial crisis, the

profitability targets set for 2008 are no longer achievable. In particular, it cannot be ruled out that

the risk provision for bad debts and lease financing will have to be increased again before the

end of 2008. Given the difficult business conditions described above, the likely progress of

business over the coming months cannot be forecast with any exactitude. For this reason, it is not

possible to predict the level of Group earnings for the year, other that they will continue to

remain clearly positive.

The BMW Group continues to aim to achieve a return on sales of at least 6 % in 2010.

The corresponding EBIT margin in the Automobiles segment would then be just under 6 % or

better. This does, however, depend on the markets recovering

Competitors

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The current situation in the market is a growing and heavily competitive one. It has

blossomed into a full-scale war between mostly the up-scale automobile manufacturers.

BMW competitive landscape includes:

Daimler Toyota Volkswagen

Daimler

Daimler AG with its businesses Mercedes-Benz Cars, Daimler Trucks, Daimler Financial

Services, Mercedes-Benz Vans and Daimler Buses, is a globally leading producer of premium

passenger cars and the largest manufacturer of commercial vehicles in the world. The Daimler

Financial Services division has a broad offering of financial services, including vehicle

financing, leasing, insurance and fleet management.

Daimler sells its products in nearly all the countries of the world and has production

facilities on five continents.

The current brand portfolio includes the world’s most valuable automobile brand,

Mercedes-Benz, as well as smart, Maybach, Freightliner, Sterling, Western Star, Mitsubishi

Fuso, Setra, Orion and Thomas Built Buses.

Toyota Company

Toyota Motor Corporation, Japan's №1 carmaker. The company makes a hybrid-powered

(gas and electric) sedan -- the Prius -- that is being snapped up in US and European markets. Its

gas-powered cars, pickups, minivans, and SUVs (Sport Utility Vehicle) include such models as

Camry, Corolla, Runner, Land Cruiser, Sienna, the luxury Lexus line, the Scion brand, and a

full-sized pickup truck, the V-8 Tundra. Toyota also makes forklifts and manufactured housing,

and offers consumer financial services. Once a dark horse in the global automotive game, Toyota

has already passed Chrysler and Ford and is closing in on General Motors.

The Volkswagen Group

Volkswagen (VW) is one of the world’s leading automobile manufacturers and the

largest car producer in Europe. In 2007, the Group increased the number of vehicles delivered to

customers to 5.734 million, corresponding to a 9.7 percent share of the world passenger car

market . In Western Europe, the largest car market in the world, nearly every fifth new car (19.9

percent) comes from the Volkswagen Group. The Group consists of eight brands: middle class –

Volkswagen; luxury class – Audi, Bentley, Bugatti, Lamborghini; family cars – SEAT(Spain),

Skoda(the Czech Republic). It also holds 68% of the voting rights in Swedish truck maker 11

Scania and about 30% of MAN AG. The product range extends from low-consumption small

cars to luxury class vehicles. The Group operates 44 manufacturing facilities in 12 countries in

Europe and in a further six countries in America, Asia and Africa. VW also offers consumer

financing.

Company Goods ServicesBMW Premium class cars (MINI)

Luxury class automobiles (BMW, Rolls-Royce)Motorcycles

Financing and leasing, asset management, dealer financing and company car pools

Daimler AG Luxury cars (Mercedes-Benz Cars), Trucks (Daimler Trucks), Vans (Mercedes-Benz Vans), Buses (Daimler Buses)

Daimler Financial Services: vehicle financing, leasing, insurance and fleet management.

Toyota Motor Corporation Luxury cars (Lexus, Scion)Premium cars (Camry, Corolla, Sienna) Pickups Minivans (Runner, Land Cruiser, RAV)Truck (V-8 Tundra)

Consumer financial services: auto loans and leases and a full lineup of factory-backed insurance services and products

Volkswagen Group Low-consumption small, family cars (Volkswagen, SEAT, Skoda);Premum cars (Audi, Volkswagen); Luxury class automobiles (Bentley, Bugatti, Lamborghini)Trucks (Scania, Man)

Consumer financing services: vehicle financing, direct bank business, insurance products, leasing, fleet management

Future of the company

The BMW Group has taken measures to deal with changing business conditions. It is

reacting to the challenges that it faces primarily by putting in place various sales strategies aimed

at managing sales volumes around the world. Throughout this, the BMW Group remains sharply

focused on earnings. This also includes aligning sales volumes in specific markets to actual

demand. The BMW Group remains committed to sustaining its strong market position in the

countries and regions involved, maintaining a high level of customer satisfaction and ensuring

the stability of the dealer organisation. This allows the BMW Group to be able to react quickly

and take advantage of the situation as soon as demand revives.

The extreme flexibility of the BMW Group's production network provides a competitive

edge in terms of the ability to realign production volumes where necessary. Thanks to the use of 12

flexible working methods and working-time accounts, the BMW Group can direct its production

capacities highly efficiently to changes in demand on the various sales markets. Its customer-

oriented sales and production processes enable capacities and sales processes to be adjusted

flexibly and at short notice. The BMW Group remains committed to its "production follows the

market" philosophy.

In the light of the current negative developments, the strategy "Number ONE" is proving

to be an appropriate and forward-looking entrepreneurial decision. In the light of the various

challenges that it faces, the BMW Group is now intensifying its efforts to implement its new

strategic alignment. Despite the current gloomy climate for consumer spending, the BMW Group

is convinced that the measures it has initiated will generate benefits in the medium term. This

confidence is based, amongst other things, on a discernible trend towards more efficient drive

systems. Technological expertise represents the key building block for the future success of the

BMW Group. The competitive edge achieved with Efficient Dynamics is a clear demonstration

of this. Upfront investment in this area provides an important basis for taking advantage of

medium and long term opportunities.

The BMW Group will continue to invest in the future on a long-term basis despite

difficult market conditions. Given the various adverse factors described above, initiatives to

improve profitability will also be reinforced. Measures aimed at increasing efficiency and

improving productivity ensure that resources are put to their best use. On the cost side, those

measures also represent another important aspect of the BMW Group's new strategic direction.

Substantial progress has been made during the year to date, most clearly evident in the sharp

focus achieved in the area of research and development spending.

The profitability targets for 2012 set in conjunction with the strategy "Number ONE"

remain in place. The BMW Group will remain on its strategic course by speeding up cost cutting

and efficiency improvement measures. The target is then to achieve a return on capital employed

(ROCE) in the Automobiles segment in excess of 26 % and a return on sales of between 8 % and

10%.

Personal attitude to the company

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There exist several reasons, why we have chosen BMW for analysing. At first it is one of

the leading successful companies in the automoile world. It has a very long history and steps for

becoming successful. BMW is included in the top list of 25 most successful companies in the

world.

It’s very interesting for us to know deeply why the company is successful, how it

developed, what the prospectives for the future are, how the big company acts in the current

situation in the world in conditions of financial crisis.

Automobile industry develops rapidly. There are a lot of players from different countries ,

competing at the international market. Germany is one of the leaders among automobile

producers. Why? That is the question that we also have asked ourselves and investigated in our

report.

One of the members of our team during her trip to Germany visited the production

factory of Mercedes Benz. She was shown the stages of production, told about different models,

technologies, she was even let to sit inside of the new model of Mercedes and shown new

interesting options, which were created to make customers' trip by car convenient. She was

impressed very much. In our report we decided to take another german company, successful as

well and analyse it.

We tried to stop on the main issues in our report. For more information about BMW

company, the following links are available:

1. bmwdrives.com

2. bmw.tuning-club.com.ua

3. usautoparts.net

4. bmw.com

5. bmwgroup.com

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