BMW final

04/08/23BMW’s Innovation strategies

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“The truth is that innovation is a key element for BMW’s success in the premium market and one of the key motivations to buy a

BMW”

----- BMW Group


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BMW MODELS VIDEO


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Background Note

BMW founded as Aero-engine

manufacturing company in 1917

Motorcycle and passengers cars

Restrictions b/o world war

Series of acquisitions & joint venture

First motorcycle model BMW R32 in 1923


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Followed by…..

Dixi (1929) 315/1 (1934) 319/1 (1934)


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..success in international racing events b/o lightweight construction, outstanding aerodynamics, high performance and elegance…. Company prestige crossed Germany

BMW 238 sports in 1936


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Until 1950s BMW concentrated on limited no. of models and focus on other parts of EuropeBMW 507 Roadster

Powerful 3.5 lt., 8-cylinder and lightweight metal engine….

huge success in automobile world


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Rainy Days……

In 1950’s despite sustained effort to emerge as manufacturer of prestigious vehicle faced bankruptcy on account of decline in motorcycle market

With the help of an industrial financer, Herbert Quandt BMW was able to thwart takeover bid by Mercedes

Quandt exercised majority of BMW’s shares and initiated restructuring exercise to bring company back on track

BMW 700, a small car, came as the much needed boost and BMW regained its position in the market


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As part of restructuring initiative, BMW focused on sports sedan leading to the launch of its first of ‘New Range’ BMW’s in 1961Greater emphasis on advertising & sales support, combined with improving engineering and performance related aspects.During 1970’s and 1980’s BMW expanded its operation in the USA Asia and Australia… cars got perceived as more stylish brand than other German brands like Volkswagen and Mercedes and became serious competitors to these brands in the premium car business.In 1989 BMW appointed Karl Gerlinger (master marketer) to lead marketing division in the USASales in the USA 1991…53,000 units. in 1992…. 66,000 unitsAnnounced to set up new plant outside Germany … Spartanburg, South Carolina (US) in 1992In 1992 succeeded in outselling Mercedes in GermanyAcquired “ROVER” in 1994, production capacity increased by 3% to 503,526 units in 1995


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In 1995 introduced BMW 5 Series and Z3 Roadster as well

Positioned as elegance dynamic performance and safety


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BMW enter into small and medium size car categories with “The compact”

1997 BMW 316g Compact and 518g touring version - first European natural gas car manufacture.

BMW Diversification (1990’s)

BMW financial service Bavaria Wirtschaftsagentur &Softlab

Bavaria Lloyd Reicburo BETEK Bar-und Energietechnik

Kontron Electronic


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BMW 1992 BMW 1998

Revenue £ 15.97 billion £ 32.28 billion

Net profit £116 million £ 462 million

In 1997 BMW ranked 69th among Fortune Global 500 companies

FIZ (Munich)

LITZ

BMW R&D Hub:

PATYO (California)

BMW Designwork & Oxnard Testing Facility (California)


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One Sausage Three Different Length

BMW 3 Series

Focused on product efficiencies, constant generate new product/components ideas, launched new upgraded product


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BMW Innovation Management Model

1997 BMW approached “Business Innovation Consortium (BIC), USA”

Problems with BMW

Selection of best ideas

Difficulty in prioritizing the innovations flooding in divisions

What to do…

Selection of winning innovation with short cycle time

Integrating the innovation process into BMW’s core business process


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By early 1998 BMW had created a well defined innovation management process focused on

-- Unique selling propositions for each car to be launched

-- Breakthrough innovations

-- Concept cars to convey brand image at automobile shows

Role of IMP or NPD

Systematic channeling of potential innovations to actual product development process

Ensured creative environment in the company

NPD

Innovation Research Innovation Management Innovation Transfer


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Steps in BMW’s NPD process

Innovation Research Innovation Management Innovation Transfer

Global technology scouting

Virtual innovation agency (VIA)

Trend Analysis

Coverage of external and internal invention sources

Innovation councils

Evaluation and selection

Resource allocation

Monitoring and reporting

Annual process

Definition of vehicle USP

Identification of innovations ready for series development

Buy-in of vehicle project


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Individual project were categorized under 4 categories

Potential Innovations

Must Innovations

Top Innovations

Breakthrough Innovation


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The Result

By 2002 BMW significantly decreased the ‘time-to-market’ new products and linked its revenue to the introduction of leading-edge product

Focus on strengthening its position as market leader in the premium segment

Adopted product offensive strategy,

increased R&D expenditure by 53%,

reduced time b/w idea generation and product development,

complaints came down drastically,

i-Drive technology, Active Steering

Revenue in 2002 $49.5 billion (9.9% increase compare to 2001), profit $2.36 billion (8.3% increase compare to 2001)


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The result


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The result…..


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The Result…..

$29,400

$75,600


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Source: - http://www.businessweek.com/magazine/content/03_23/b3836005_mz044.htm


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BMW


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Marketing Mix

Product

BMW 3Series : Sedan, Coupe, Convertible, Touring, Compact

BMW 5Series : Sedan, Touring

BMW 6Series : Coupe, Convertible

BMW 7Series : Sedan

BMW Z4 : Roadster

BMW X3

BMW X5

BMW M : Sedan

Mini One

Mini Cooper


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Price

BMW price range are from US$ 35,000 to US$ 2,20,000

Place

Globally


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Promotion

Same advertising company WCSR since 1979

James Bond film -

The World Is Not Enough (Z8 before its launch)

Austin Power 3-Goldmember -( Mini cooper)

“VIRAL MARKETING”

BMW Films (e.g.. ‘The Hire’ - increased sales

by 12.5% in 2001 compare to 2000

Marketing campaign ‘The Ultimate Driving Machine’


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Segmentation

Geographic Region developing and developed nationDensity of area Urban

DemographicAge-above 25Income-$ 35,000 and above annuallyOccupational-professional, Businessmen

PsychologicalNeed motivation sense of self worthPersonality Extrovert, Novelty seeker, ambitious

• Learning involvement high• Perception Moderate risk

Attitude positive


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PsychographicLifestyle segmentation ---status seeker, EnthusiasticA1 and A2

SociocultureSocial class ---upper middle and upper

BehavioralBenefit ---safety,elegance, technologyLoyalty status --- mediumReadiness stage ---aware, interested


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Positioning

Attribute

Image

Differentiation

Attributes


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Perceptual map

Low quality

High price

High quality

Low price


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High prestige

High performance

Low prestige

Low performance


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SWOT ANALYSIS

STRENGTH

Diverse ranges of Products - BMW, MINI and Rolls-Royce

Strong Cash Flow Position

Increase turnover and trading profit

Strong Balance Sheet

World's leading Premium Quality Automobile Manufacturer

Brand Awareness

Human resources

Capabilities to turn resources into advantages


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WEAKNESSES

Perception of High Prices

Customer disinterest

Buyer sophistication and knowledge

Substitute products or technologies


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OPPORTUNITIES

New Products

Market shift to globalization

Innovation & Alliances

Customers demand change to more comfortable and relevantly cheap cars

Diversification

New Technologies in Automobiles


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THREATS

New & existing competition

Volatility in Price of Fuel

New legislations

Consequences of the oil crisis

Economic recession

Market shift to globalization

Far-East Automobile companies expansion


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Need -------- Acquired Need)

Ego need (Self Esteem, Prestige, Status)

BMW


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Goals -------- Product Specific Goal

Motivation ------- Emotional Motive (Pride, Status)

Positive motivation


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Personality

Freudian Theory -------- Ego

Horney’s CAD Theory -------- Compliant/Aggressive Individual

Consumer Innovativeness -------- Moderate

Personality trait -------- Low dogmatic

Social character -------- Inner-directed

Optimum stimulus level -------- High Variety/Novelty Seeking Exploratory Purchase Behavior


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Cognitive Personality ----- High NC (visualization ad to attract

customers to showrooms)

Brand Personality ----- Sophistication

Makeup of self-image ------ Ideal Social Self Image

Learning ------ Cognitive

Level of involvement ------- High{ Extensive, Limited }

(vary from person to person)

Stimulus Discrimination ------


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Purchase Pals ------- Opinion Leader

Diffusion Process

The Innovation ------- Product Oriented definition

Continuous Innovation and dynamically

continuous

Channel of Communication ------- Internet

Adopter categories ------- Innovators/Early Adopters/Early majority

Decision Rules ------- non compensatory


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BMW final

Documents

bmws innovation strategies

innovation process

bmw diversification

track bmw

bmw group

bmws success

virtual innovation agency

bmw models video