1. MAR 4156 - International Marketing
Analysis of the BMW Company on a Global Scale
Group 11 Members:
Andrea Alvarez
Kristen Jameson
Ethan Jenkins
Paul Schmidt
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1. Introduction
Bayerische Motoren Werke is a German automobile, motorcycle and engine
manufacturing company. It was founded in 1917 and was originally Rapp Motorenwerke
aircraft manufacturing firm. By the end of World War I, the firm was forced to discontinue
aircraft engine production by the Versailles Armistice Treaty. Consequently, the firm’s
focus switched to motorcycle production in 1923. BMW became an automobile
manufacturer four years later when it purchased Fahrzeugfabrik Eisenach, which, at the
time, built Austin Sevens. BMW’s engineers progressed from building small seven-based
cars to six-cylinder luxury vehicles. BMW began production of the BMW 328 Sports car
in 1936. Until World War II BMW’s main product focus would be aircraft engines,
automobiles, and motorcycles. Like many other German manufacturer’s, BMW’s
production was interrupted when the Second World War began. During the war, BMW was
classified as German armaments and war materials manufacturer; they concentrated on
aircraft engines and only produced motorcycles on the side, they ceased automobile
production altogether. At this time, other plants were also opened in addition to those in
Munich and Eisenach. BMW also began building cars in Bavaria with the BMW 501
luxury saloon. The sales from these saloons were not large enough to be profitable, so to
offset this, the company was also building and selling Isettas. Still the profits from selling
these Isettas, or microcars, were not enough to keep out of bankruptcy. Post World War II
was a difficult period for BMW as it adjusted its plant and work force to the manufacturing
of consumer oriented products. The post-war era was an especially difficult time for the
company; BMW’s finances were in such a state that management considered selling the
company to its rival, Daimler Benz. But, fortunately for BMW, Herman Quandt agreed to
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increase his investment in the company from 30% to 50%, securing its financial position
and laying the foundation for investment in a series of new successful models and
technologies. Quandt was instrumental in turning the company around and his investments
allowed the company to expand. These models were said to have established a new
segment in the car market and are credited with putting the company back on a path to
success. By 1966, the Munich plant had reached its production capacity. The company
purchased Hans Glas GmbH with its factories in Dingolfing and Landshut rather than
building an entire new factory. Eberhard von Kuenheim arrival from Daimler-Benz was an
integral step in BMW’s transformation to becoming a global company. He presided over
the company as it transformed from having a European focus to a global one. Under von
Kuenheim car production will quadruple, motorcycle production triple, and turnover
increase by 18-fold. In 1972, BMW’s board of management decides to open up the first
foreign location of the modern day BMW group, the Rosslyn plant near Pretoria, South
Africa. A year later, BMW establishes its own sales company in France; many other
countries will follow their lead in the subsequent years, globalizing the company further.
To heighten the company’s position as a global player, the first BMW production facility in
the USA is opened in 1989. The plant in Spartanburg, South Carolina, exported to locations
all over the world. In the late 1990’s, BMW acquired the naming rights for Rolls-Royce
Motor Cars. The label is still held entirely by Volkswagen until 2003 when BMW took
over full rights and responsibility. BMW continued to expand as they took over Husqvarna
Motorcycles, a Swedish motorcycle company that has been around since the early 1900s. In
2007 BMW adopted its “Strategy Number ONE” with its four pillars of “Growth”,
“Shaping the future”, “Profitability” and “Access to technology and customers”. BMW is
now a world-renowned brand, selling almost 1.7 million autos per year in over 100
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countries with manufacturing facilities in Germany, U.S., China, Austria, U.K., South
Africa, and India. In June of this year BMW was listed as the number one most reputable
company in the world in Forbes.com.
2. Global Marketing Mix Strategies
a. Pricing Strategies
There are several factors that affect prices of the same goods across different
countries. There are issues such as purchasing power parity, taxes, and import tariffs.
Global companies take these and other factors into consideration when determining how
much they charge for a product in these different countries.
The automobile industry takes into account these factors and much more. BMW
specifically takes on a perceived value approach or value-based pricing, meaning that
purchases are tied to emotions. The company enjoys a premium price in comparison to
other competitors because customers associate wealth with BMW aside from the
performance of the vehicle. Because of quality “German Engineering” BMW automobiles
are perceived as status symbols, meaning a customer’s willingness to pay is higher. This
willingness to pay, even though BMW has never been the lowest price competitor in the
market, still varies across countries.
For the purpose of an example of the prices in different countries, the BMW 3 series
sedan in India ranges from $66,349 to $68147, in Germany from $39,666 to $42596, in
China from $54,453 to 68,428, and in the USA starting at $36,500.
i. PESTEL Analysis
The PESTEL analysis is a tool used by global businesses to determine how the
environmental factors of a country influence a company. It is useful when a company
begins operations within a new region or country examines factors beyond its control.
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PESTEL analysis stands for Political, Economic, Social/Cultural, Technology,
Environmental and Legal factors.
Political factors are how much a government becomes involved in the economy.
Tax policy has a large impact on the automobile industry. For example, in 2002 the Indian
government formed an automotive policy in order to, “promote integrated, phased,
enduring and self-sustained growth of the Indian automotive industry.” This measure
increases the demand for an Indian auto component thus increases the price of foreign made
vehicles.
Economic factors include economic growth, exchange and inflation rates. This
affects the rate of growth for a company to and how fast they expand. The economic
recession in the US decreased spending on luxury goods. Also emerging economies in
developing countries like India and China are finding increased personal buying power.
The Indian economy has grown 8.5%. Increased level of household income leads to
increased purchases of automobiles.
Changing lifestyles in the US had lead to a decline in vehicle purchases. Younger
people especially, are more likely to spend money on smartphones, tablets, and laptops.
Due to this increased use of technology people can connect without being face to face and
therefore drive less. American customers also focus less on cars as status symbols and look
more to fuel efficiency as a top priority. They also choose to walk more in general and
flocking to mass transit as a means of transportation.
Technological factors in the auto industry like restriction on environmental
pollution have a great effect on companies like BMW where high performance vehicles
rather that fuel efficiency are their namesake. These restrictions especially in the EU clearly
affected the cost of capital for the German engineer.
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The increasing awareness of greenhouse gases and global warming has caused a
shift in taste to more eco-friendly cars like hybrids and electric cars. These environmental
factors are set up to altogether curb pollution in developing countries like China. “Of
course from the government’s point of view, we give up some growth, but to achieve better
health for all citizens, it is definitely worth it,” said Chen Haotian, the vice director of
Guangzhou’s top planning agency. Legal factors, like strict pollution policies in the US
markets, also dampen the automobile industry. This leads to an increase investment in
R&D seeking out new ways to increase fuel efficiency without losing quality or
compromising performance.
b. Distribution or Place Strategies
For nearly a decade now, BMW North America (Bavarian Motor Works) has
implemented the motto “The Ultimate Driving Machine” to describe their automobiles.
Their place in the upper echelon of luxury car companies has not always been cemented or
guaranteed. The history of the BMW Company as a force in international car sales is a long
and storied one. In 2008 and 2009 as the global economy began to come apart at the seams,
despite being a luxury car brand, BMW still managed to generate nearly half a billion in
profits for ‘08 and ‘09 combined. This type of success only comes when sales structures,
retail operations, and distributions plans are all working together flawlessly.
i. Channel Structures of BMW
The BMW motor group predominantly employs a channel structure for their automobile
sales in the global market. From the United States to London- the BMW motor group
utilizes authorized dealerships and sales groups to form a regional channel structure. This is
not to be confused with simple third party retail. These automotive groups and independent
dealerships still take their direction and are supervised directly by the BMW group. While
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dealerships have input on a wide range of avenues, the BMW Company has final say on
everything from inventory management to trim and packages offered. The regional channel
structure is the obvious choice for BMW (and most car companies) on the global market.
Direct sales to the public from the manufacturer would take up the majority of BMW’s
energies, time, and resources- so instead they focus their might on creating the best
automobile possible and delegating the sales to a different department. With this regional
channel sales structure, most of the automobiles bought from BMW globally are purchased
when customers physically walk into a dealership, interact with the sales agents, and
purchase a vehicle. However, on July 30th, 2012- BMW international announced they
intended to buck the global trend of regional channel sales structures and enter the direct
sales market. The BMW i3 and i8- two of their upcoming fully electric models will be sold
entirely online and backed up only by a roaming skeleton sales force. With a launch
tentatively scheduled for Q3 2013, this direct sales program will be the first of its kind for
BMW and will be considered a giant risk by most in the automotive community. This
strategy is actually a change in both retail operations and distribution strategy because
potential customers will be able to go into a showroom to physically see and test drive the
car, but the purchasing will be entirely online, and the delivery and customer support will
be provided at the customer’s home by the roaming BMW agent. This new strategy is
possibly significant because it expands their distribution reach dramatically. As it stands
now, if someone wanted to purchase a BMW- they would first need to locate a dealership
or showroom. For many customers in rural areas or countries where BMW may not have
dealerships, the purchasing process would likely require a plane ticket. With most people
unlikely to fly to a new city or country just to buy a car this new online purchasing plan and
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distribution strategy truly opens up the entire globe to potential BMW customers.
ii. PESTEL Analysis
Perhaps BMW international’s decision to shake up their regional sales channels and
distribution programs can be best flushed out through PESTEL analysis of the factors
influencing both their sales and manufacturing. While BMW has managed to remain
profitable through the recent global economic downturn, there is little doubt the recession
has caused many companies to rethink their sales structures. With most of their models
built and designed in Europe, the “Political” element of the PESTEL system plays but a
small role in their sales structure. Beyond the augmented European tax policy, which
contributes significantly to BMW’s overhead, there are few political factors that truly affect
the company.
The second PESTEL element definitely plays a significant role in influencing the
channel structures and distribution plans of BMW. The Economic factors affecting the
BMW motor group are numerous and complex. First, because BMW is considered a luxury
brand- available discretionary income in accounts of potential customers is a must. With the
global economy just now coming out of a recession, it is simple to see while a dip in sales
combined with a steadily rising overhead produced profit results that significantly deviated
from the BMW’s normal annual reports. It is these global economic factors, which perhaps
inspired the idea of BMW’s foray into direct sales (limiting overhead by selling directly to
consumers without dealerships as a middleman).
Social factors through PESTEL analysis appear to be a non-factor for BMW.
Their marketing team has done an excellent job in portraying the BMW brand as a luxury
for people in all walks of life. In contrast to the limited impact by social factors-
technological factors impacting BMW’s channel structure may be the very reason for them
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altering it. With the widespread proliferation of Internet access across the globe, companies
have begun to re-think many of their sales structures. BMW turning to the Internet as their
main purchasing medium would signal a marked shift in their sales and distribution
program. The environmental factors are also a significant player in the evolution of BMW
International. The increase in global attention to climate change has spurred the focus of
R&D in automobile companies toward electric and more efficient vehicles; BMW is no
exception. The announcement of the i3 and i8 models- both completely electric vehicles,
signals a shift in overall approach. The global environmental indicators have become too
strong for the masses to ignore and rising costs of petroleum have car manufactures
searching for a panacea to the painful problem of paying for petroleum.
c. Promotion Strategies
BMW spends billions of dollars per year advertising around the globe promoting their
products. Their focus is to embed BMW’s superiority into the minds of consumers. They
encourage the core values of their brand: technology, quality, performance, and exclusivity.
Since it’s founding, BMW’s success has relied on their consistent marketing policy, which
is the niche marketing strategy. There have been years of environmental, technological, and
economic changes since BMW’s humble beginnings, and they have been steadily
promoting the value of the cars they build adapting to all changes in society.
i. Advertising Strategies
The main markets for BMW have been Europe, Japan, the United States, South Africa,
and the Pacific region. Almost half of their total car sales come from Germany and the
United States. This is a problem because BMW’s market in Europe and the United States is
becoming more and more saturated every year.
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BMW has used the same advertising agency, WCRS, since 1979. Their promotions
include: TV spots, print advertisements, mega-posters, radio spots, and events. They have
stayed consistent in their advertising throughout the world promoting their vehicles to be a
cut above their competitors. To ensure their success they have developed the 4 C’s:
Customer Solution, Customer Cost, Convenience, and Communication. BMW believes its
important to serve the customers needs, meet the accepted price in each region, allow for
consumers to purchase their cars where ever they live, and provide 24 hour assistance to all
BMW customers.
Social media is the fastest growing outlet for advertising and promotion because it
allows companies to reach markets all over the world at alarming speeds. BMW recently
launched “viral films” on the Internet that promote their products’ excellence while at the
same time improving the company’s image.
BMW found profound success when they launched their advertising campaign in 1975
known as “The Ultimate Driving Machine”. At the center of this campaign is the idea that
BMW’s cars are high-performance vehicles reserved for successful professionals that want
a sense of superiority. Another successful strategy BMW used was product placement,
when they promoted their automobiles in four James Bond movies: Octopussy, GoldenEye,
Tomorrow Never Dies, and The World is Not Enough. These films were extremely
successful and gave BMW lots of worldwide publicity.
BMW has a reputation for pulling pranks to get publicity. Every April Fools day the
British Press publishes a scheme by BMW to trick readers. Recently, they ran
announcements stating they will brand their cars to their customer’s political party
affiliation.
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What makes BMW unique is they are a global company that consistently promotes their
products around the world using the same simple, universal theme: BMW is the “Ultimate
Driving Machine”.
ii. Public Relations Strategies
Public Relations allows companies to promote their products and improve their image
in the minds of consumers. In this global market, it is very important for BMW to keep its
superior image and likability. They have greatly increased the number of auto shows and
special events that focus on improving their image.
If you’re a large company, one big way to garner the public’s good will is to be
environmentally friendly. BMW is a member of the U.S. Environmental Protection
Agency. They work hard to develop engines that don’t pollute the environment. Currently,
they’re developing new fuels electric power, hybrid power, and hydrogen powered cars.
Recently BMW has increased its interest in public relations. For example, they are now
official automotive sponsors of the 2012 Olympics in London. The Olympic games are
honored and revered all over the world. Any company associated with the Olympic games
is certainly going to improve their image.
iii. Addressing Legal and Social Issues
BMW does not have to concern itself with the legal and social issues in the western
world. However, in India where there is a social cast system and the Middle East where
there are strict religious principles, BMW has made slight changes in their strategy.
Since 2010 BMW in India has been expanding rapidly by building manufacturing
plants, increasing promotion, and hiring more employees. They have changed their
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marketing strategies to promote family and fuel efficient cars that will counter the “Anti
flaunting mentality” Indians experience in their social system.
In the Middle East, BMW advertises by being sensitive to the religious rules in
regulations in strict Muslim countries. In Saudi Arabia, women aren’t allowed to drive. No
women are shown in BMW Ad’s unless they are sufficiently covered (no skin).
Overall, BMW’s strategy stays the same. They aggressively promote their machines to
be high class- automobiles built for and to be driven by elite professionals.
d. Product Strategies
i. Product Design
BMW’s products have emerged in the global automobile market as the prominent
leader in luxury. The company’s product offerings pertain exclusively to affluent
professionals seeking high-end quality coupled with performance. This combination gives
way to a product that demonstrates features yielding “extreme driving pleasure.” BMW
differentiates its product offerings by segmenting potential affluent customers; it does so by
creating a myriad of models catering to the unique tastes of different consumers in the
luxury market.
BMW’s product portfolio combines uniqueness and simplicity while reaching every
corner of their target market. The core of BMW’s automotive offerings is characterized by
the 1-7 Series. Each of the seven series offers different body styles, performance standards,
and driving experiences. BMW has created an elementary system of labeling each of its
models. An illustration of this system can be seen in the 328i Model; this simply means
that this particular vehicle is contained within the “3-Series” and its engine size is 2.8
Liters. Outside of its core offering (the 1-7 Series), BMW offers vehicles that appeal to
niche segments of this market, demanding a somewhat more specific product. The “X
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Model” offers a high performance SUV that appeals to affluent families with children
looking for a vehicle that caters to the family environment. The “Z Model” is a sport
roadster, which presents common BMW luxury while emphasizing speed and traction. The
“M Models” are modifications of existing BMW models, which contain performance (such
as engine and transmission) enhancements for the typical BMW customer with a taste for
the extraordinary. BMW also offers a series of motorcycles, from those made for all-terrain
to highway cruisers.
ii. Branding Strategies
BMW‘s international markets have increased steadily for the past several years. When
presenting their vast portfolio to foreign customers, BMW uses standardization and
extension. Their strategy of identifying their products (like the 328i series) is a universal
system that can be understood across cultural boundaries. This BMW has experienced
immense success with this labeling system and will stand by it moving into the future.
BMW’s places great value on the equity and image of their global brand; BMW’s
vehicles all act as extensions of this prestigious brand around the world. Their branding
strategy relates directly to the life-cycle of their products. The average BMW model
demonstrates a life cycle of seven years. BMW makes an attempt to keep its products in the
intro and growth stage of the product life-cycle by using a vigorous rebranding strategy.
Every three years BMW adds “meaningful features” to its existing models, which
constantly keeps the brand exciting and youthful. BMW will go to extensive lengths to
postpone the declination stage of its products, and if a product does begin to enter this
stage, BMW responds with the creation of a new model.
BMW’s brand has sent a quality signal to consumers around the world for many years.
This quality signal was born out of BMW’s unceasing effort to bolster the image and repute
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of its products as well as its brand. BMW’s products demonstrate superiority in intangible,
as well as, tangible attributes. The superior performance and engineering excellence of
every BMW yields an unspoken level of luxury that is synonymous with the BMW brand.
Aside from BMW’s products, they have also bolstered their brand through co-branding and
sub-branding. An example of BMW’s co-branding strategy can be seen in their partnership
with American Express to create a BMW credit card. BMW has also bolstered their status
as a socially responsible brand by creating the sub-brand “BMW i”; this sub-brand will
house several eco-vehicles such as the MGV (MegaCity Vehicle) which runs solely on
electricity. This series of strategic moves illustrates BMW’s concern with crafting and
maintaining a brand that has been the face of automotive excellence for many years.
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References:
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Bruell, A. (2011). Online article . AdAge. DOI:
<http://adage.com/article/agency-news/bmw-early-stages-public-relations-
pitch/230991/>
Bmw brand study. In (2010). StealingShare Inc.. Retrieved from
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Lebarre, S. (2012). Bmw starting a new eco-brand. what gives?. In Co. Design. Retrieved
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