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During the last years there have been several changes in the automobile

industry, mainly due to the effects of the global economic crisis that started in

2008, which affected the whole industry and required companies to implementcreative marketing strategies. This crisis affected the total sales of vehicles in

2009, hiting especially hard the US automakers. On the other hand the number of

vehicles sold in China rose from 8.6 million to 12.6 million; replacing the US as the

largest market. The 2003-2008 energy crisis that has produced a substantial increase in

the prices of automotive fuels. As a result, the automobile industry needs to adapt to

more fuel efficient models that attract more customers.

The size of some Asian car manufacturers, such as Toyota, Honda and

Nissan, can be already compared to that of the Big Three (General Motors, Ford and

Chrysler) that are losing their dominant position fastly. The predominance of Japanesehybrid cars in the market, and the growth of the Chinese and the Indian markets are

changing the rules of the game. European and American automakers are paying close

attention to the developments in Asia, while at the same time Chinese and Indian

automobile manufacters are increasing their activities in their home markets as well as

in the international markets, producing low-cost cars²about 2.750 USD.

CO2 emissions (24-28 pounds per gallon consumed) are becaming of a higher

concern for a big part of the population. Therefore, governments are incresing the

environmental protections due to the so called ³Global Warming.´ This situation is

driving towards more fuel efficient cars, which are able to circulate longer distanceswith a lower consume and less CO2 emissions. Innovation towards fuel

efficient, electric and other types of ³green´ cars is becaming of a greater importance

for all automobile manufacturers.

BMW was founded in Munich, Germany in 1916. Although originally it

produced aircraft engines, right now the company focuses on the production of cars 2

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BMW should now focus on two strategies that will help them become a

stronger company in the near future. Following a strong and well developed strategy

in Asia will help the company in its internationalization. The important role of the

Asian market during the next decades might help BMW to grow. However, it is

obvious that the company will face fierce competition in this markets, which makes

some important the analysis of the opportunities and threats that surround an Asian

strategy.

On the other hand, BMW should also continue following its innovation

strategy and looking for new and strong Research & Development synergies with its

suppliers. Technological development through the already exiting Efficient Dynamics

Strategy and Connected Drive Strategy will reinforce the innovative position of

BMW. Finally, achieving a sustainable production will also help strengthening BMWs

financial position by reducing production costs.

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Currently, BMWs innovation strategy is well defined according to the

companys vision and mission. The Global Research and Innovation Network

established by BMW, with 11 centers in 5 different countries, helps the development

of new technological improvements in different fields of the automotive industry.

This network has already provided around 13.000 patents and thousands of other

designs in a single year. The achievements of this network will probably help BMW

improve the benefits in different aspects, such as customers or implementation. At

the same time this innovation network is advantageous for the Development Centers

because it enhances the communication between them and allow improvements in

one center to be applied for a different technology by a different center. BMW is also

trying to find new R&D synergies by developing projects together withsuppliers, universities and independent research institutes.

Two of the current innovation strategies adopted by BMW are producing great

results. The focus of the Connected Drive strategy is to improve the interaction

between the car, the driver and the environment. The enhancement of safety

features is a key aspect of this strategy. On the other hand, the Efficiency Dynamics

strategy focuses on the adaptation of BMW cars to the new energetic trends and

environmental policies. BMWs investment on R&D is substantial if compared with

other large German automakers.

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�Laws and regulations had affected the automobile industry since its outburst. These

laws generally revolved around the environmental norms that were to be fulfilled by

any car industry. Thus the car manufacturers had to take care of the environmentalissues during manufacturing of cars.

�Taxes and government foreign policies are critical for the automobile industry. The

foreign polices help us to decide the probability of success in the global market.

�Surplus capital and buying power in the developing economies like India and China

and their personal emergence in the Global market-place.

�Environmental issues and awareness of the harmful emissions through automobiles

�Use of new and sophisticated design to overcome the decreased margins in the

industry

�Shift in consumer¶s tastes and preferences towards use of more eco-friendly

cars, hybrid cars, fuel cell cars etc.

�In industries that are capital or research or advertising intensive, efficiency requires

large-scale operation. The problem for new entrants is that they are faced with the

choice of either entering on a small scale and accepting high unit costs, or entering on

a large scale and running the risk of underutilized capacity while they build up sales

volume.

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� The threat of entry rather than actual entry may be sufficient to ensure that

established firms constrain their prices to the competitive level.

� Barriers to entry also depend on the entrants¶ expectations as to possible retaliationby established firms. Retaliation against a new entrant may take the form of

aggressive price-cutting, increased advertising, sales promotion, or litigation.

� Seller concentration refers to the number and size distribution of firms competing

within a market. It is most commonly measured by the concentration ratio: the

combined market share of the leading producers.

� Low cost products of its competitors

� Experience must prove to the key asset of control costs and attaining cost efficiency.

Through experience the firm should generate competitive advantage through the

collective understanding attained by the firm and its unit costs.� Stern application of the EURO norms set up to curb pollution in developing

countries.

� The greater the importance of an item as a proportion of total cost, the more

sensitive buyers will be about the price they pay.

� Whereas lack of brand awareness among consumers acts as a barrier to entry to new

suppliers of consumer goods, a more immediate barrier for the new company is likely

to be gaining distribution.

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� The more similar the offerings among rival firms, the more willing customers are to

substitute and the greater the incentive for firms to cut prices to increase sales.

� In an industry where products are differentiated, established firms possess theadvantages of brand recognition and customer loyalty.

� Change in customer tastes and preferences

� Supply costs play an important role and can influence the firm in the bigger way.

Supply costs revolves around the raw material supply, production units efficiency

(Rising supply costs).

� The bargaining power of buyers is high because the consumers can decide the

product according to the price range and buy the products accordingly. Also with

environmental issues hovering over the industry the buyers have the last say with

ample substitutes available.� The bargaining power of suppliers is high in this industry as the suppliers can

dedicate the price tag for the raw materials. Though long time associations with

suppliers can prove fruitful, the final word lies more or less with the suppliers.

� The less differentiated the products of the supplying industry, the more willing the

buyer is to switch suppliers on the basis of price.

� Strict implications of the EURO norms in developing countries e.g. formation of

BHARAT norms on the lines of EURO norms in India

� The price customers are willing to pay for a product depends, in part, on the

availability of substitute products.

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Key Success Factors is the term for an element that is necessary for an organization or

project to achieve its mission. It is a critical factor or activity required for ensuring the

success of a company or an organization. In Case of BMW the above 10 are the keysuccess factors. We are comparing it with the DJSI Sector average and the Best

company on the global basis.

These Key Success Factors can be divided into 3 main groups

1. Economic Dimension

2. Environmental Dimension

3. Social Dimension

Economic Dimension : In economic dimension there are 3 key factors which have an

impact on the performance of the company which includes brand managementwhich BMW has maintained well over the years which is quiet close to the best

companies performance. BMW is the top performer and is at the same range

while comparing Corporate governance and Risk & crisis management. Which

tells us that the company is pretty good in risk management and corporate

governance which is a good indicator for and organizations sustainability. In terms

of Brand Management BMW scores 8.5 as compared to the best company value

at 10. BMW is the leading performer in corporate governance which is equal with

the Best in business at 8.9. BMW was able to survive the recession quiet well as

compared to other brands and that is why it is rated high in risk and crisis

management.

Environmental Dimension : The company has been able to surpass its peers by

exhibiting unparallel commitment to environmental issues. BMW strives to conserve

environmental resources throughout its value chain from production systems to 10

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To all the Key Success Factors discussed in the previous slide the VRIO

framework is applied. The VRIO framework is applied to define which KSFs create

competitive potential.

Value

All the Key Success Factors bring value to the company. Some of these KSFs

are valuable, but are not a rarity in the industry. Most automotive companies focus

on the climate and low carbon strategy. Think about the current trend of investing in

hybrid vehicles, fuel efficiency, Stake holder engagement is of every companys

concern as is talent attraction and retention and corporate governance, so these

valuable factors are certainly not rare.

Rarity

BMWs brand awareness is significant and rare to imitate. BMW focuses its

brand mainly on the great driving experience a BMW offers. They are very good at

passing on this message, as against to their competitors. It is very clear what BMW

stands for. Risk & Crisis management is a rare KSF, because BMW outperformed its

competitors when the world economic crisis hit. Operational efficiency in BMW is

highly influenced by the flexible production system. This system is very particular to

BMW. BMW puts a lot of effort in developing its human capital, though it is not

considered a KSF that is not imitable by other companies without some effort. BMW

invests a lot in its relations with suppliers to pave its way to innovation. This practice

is particularly important to BMW because of its huge focus on quality products.

Imitability

Building a brand like BMWs is difficult, it takes a lot of effort and time. 11

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During the next years, the automotive industry will center its R&D efforts on

developing more environmentally friendly vehicles. These companies should do this

in order to comply with new regulations and to be able to follow society trends.Furthermore, the demand that the emerging market will pose over the industry

during the next years will need to be addressed. This pressure will have its origin in

the rapid growth of the middle and upper classes in these countries. In addition, the

fast growth in number of Free Trade areas will help the industry to access different

markets in shorter period of time.

Regarding BMW, the company should try to vertically integrate its supply

chain. BMWs standards and needs will be better fulfilled if the company has a higher

control over the supply activities, reducing the power of suppliers. Moreover, BMWshould continue its innovative path and develop highly efficient electric cars that will

help the company to succeed in the competitive automotive market. There are also

several other technological improvements that can be further explored and where

BMW needs to be the leader, such as the Automated Highway System.

BMW should continue its innovation strategy in order to develop new

alternatives that will help the companys growth. On the other hand, the company

can try to develop new alliances with other automakers that can help BMW to further

develop new solutions and products.

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