STRATEGIC OPTION RECOMMENDATION STRATEGIC CYCLE: 2000 – 2005 Team Mars Spring 2008 Bayerische Motoren Werke

Presentation Outline Introduction X  Objective of case study, Company Background AnalysisY  Addressing the issue,, External and Competitive Environment, Internal Environment, Rover Venture RecommendationZ

BMW’s Mission Statement To be the most successful premium manufacturer in the industry.

BMW’s Historical Background Founded in Munich, Germany in 1916 Initially concentrated on the development & production of air craft engines - building a reputation for reliability & excellence Built its first motorcycle in 1923, and first automobile in 1928

Main Product Segments Automobiles  Only auto maker to pursue a purely premium strategy for all market sectors Motorcycles  develop and build the best motorcycles, set standards with regard to technology, environmental protection and safety, and provide outstanding customer service in the pre- and after-sales phases Financial Services  financing and leasing, asset management, dealer financing and company car pools Others  Insurance, industry-specific strategy & process consulting, solutions and IT services

BMW Strategies Identifying potential and encouraging growth Knowing what they represent Recognizing where their strengths lie and making the best use of every opportunity Following a clear strategy.

Issue: Whether BMW should remain Independent External Environment Competitive Environment Internal Environment

External Environment Global Convergence - Downstream and Upstream globalization in the auto mobile industry Mergers and Acquisition E-commerce Shrinking profit margins

Competitive Environment Volkswagen  well diversified company  interest in consumer’s finance  automobile rental General Motors  worlds no. 1 maker of automobiles and trucks  Hughes Electronics, Allison transmission (automatic transmissions)  Gm Locomotives (locomotives and diesel engines), Isuzu Motors (49%), Subaru (20%) Daimler Chrysler  No. 3 in sales, No. 5 in volume  BMW’s arch rival  successful diversification Toyota  Lexus, best cost provider strategy.

Internal Environment Strengths:  Image – distinctive identity, high performance  Labor force – highly skilled and qualified labor force  High profit margins  Brand management and communication – successful Weaknesses  Technology was advanced but not innovative  Inflexibility

The Rover Venture Objective  Address their inflexibility, as an attempt to expand  Overlap strategy  Broader geographic market Downfall  Inadequate manufacturing  Poor profitability  High breakeven point  Quality overlap  Brand exclusivity rather than cost efficiency

Recommendations BMW should change its corporate strategy of independence; its size is not big enough to warrant that It should acquire other brands despite its ruinous Rover experience; it’s either acquire or be acquired It should hire experienced managers with an extensive knowledge in acquisitions and diversification

Recommendations It should keep pumping $ into R&D in order to maintain its high margins for its most luxurious models It should increase its technological innovation so that higher differentiation can be achieved It should introduce lower cost models to compete with lower priced luxury vehicles such as Lexus LS 400

BMW at Present BMW’s group revenue climbed 14 percent in 2007 to a record $83 billion ($ 25 billion in 2000) The group's vehicle sales in 2007 rose more than 9 percent to 1.5 million units (only 820,000 vehicles in 2000) BMW now owns Mini Cooper, and Rolls-Royce

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