Portfolio:

BMW Marketing Report

Claudio Floritelli
M00390157

17 April 2013

Lecturer: Mark McPherson

Word Count: 3112

Executive Summary

The purpose of this study is to analyse the current position of BMW; the first
phase will aim in providing information on the automotive sector, analysing the
company, the competitors, and the macro-environment identifying also the
key issue of the company. The second phase presents a more practical
approach targeted to the identification of some marketing objectives, and
developing a strategy to achieve them.

1. Introduction

Specialized in the production of automobiles, BMW Group is globally

considered one of the most successful companies in the world. The group is
composed by three main different brands, MINI, BMW and Rolls Royce, which
are aimed respectively to different target markets. BMW continues to be one
of the best players in the luxury automobile sector, growing despite the
European markets crisis; as a matter of fact, BMW sales including Rolls
Royce and MINI reached 191,269 units in March 2013 surpassing the result of
2012 of 5,528 units (Rushlane, 2013). The group is well positioned in
worldwide market with 24 manufacturing facilities in 13 different countries, and
it can count on a distribution network in more than 140 countries (Bmwgroup,
2013). Long term thinking, ecological and social responsibility in the value
chain, strong investment in research and development, and an effective
speed and agility in sustaining the changes in the market, are some on the
key reasons for BMW success. The company has always promoted highperforming product trough a high-profile brand since the early stage; this
perception is still present and evident in the companys culture and has
always been the guideline to narrow the strategic path of the group.

2. Methodology

In this report just secondary data will be used; collected from BMW annual
reports, automotive related website, and market analysis. Some marketing
tool such as PEST analysis, SWOT analysis, Bell curve and Boston matrix
model will be used to analyse the company and some of its products.

3. Findings

a. Competitor analysis

The German automaker experienced a steady increase in sales in the last few
years, as it has always been able to respond to the attacks of its competitors
with an increasing level of technology and innovation that characterizes its
products, thanks to important investments in R&D. The design is also a
fundamental and integrant part of the competitive advantage of BMW, despite
the critics to the ex chief of design Chris Bangle (Wired, 2009). As far as
competitors concern, the BMW has always faced the competition of the
compatriots manufacturers such as: Mercedes, Audi, and Porsche which
benefit from a similar brand-reputation and price range, but also from
overseas brands brand such as Lexus and Toyota. It is important to consider
that BMW Group has two other brands in its product range moving from the
premium sector of MINI to the luxury one of Rolls Royce, which would imply
also a different range of competitors. The automotive sector is a fast moving
sector, and the competitive advantage is not immune to this type of
environment; for this reason BMW cannot count on temporary advantages
over competitors but should always aim to improve their competences
(Mangold, 2012).

b. Market and Customer analysis

The target market of BMW is composed by people aged between 25 and 45

years old, belonging to the upper middle class; generally, professional
employees who hold leading positions in the corporate ladder. However, the
target audience has significantly expanded after the European financial crises,
which had lead European new car registration down to 10.8% in 2012
(Guardian, 2012) providing new opportunities of growth for the German
manufacturer, which can now count on a broader market segment. The BMW
Group is now focusing more and more attention on the entry-level price sector
in the market, producing model such as the X1, 320i, and the 1 Series
(Marketline, 2013). This could be an effective strategy to increase the number
of customers especially in the BRIC emerging markets; Brazil, Russia, India
and China. These countries supported by different macroeconomic variables
such as new urbanization, growing economy, rising salaries and very low car
density are considered to be one of the globally top 7 growing market, which
will affect positively the automotive sector generating new sales (Deloitte,
2013). BMW is currently engaged in the creation of new joint ventures in order
to increase the production capacity that it will need to enter these fast-growing
markets. The Russian market has experienced a growth of 24.2% from 2010
to 2011 when the automotive sector has reached a volume of 2.3 million units
sold, and according with the Marketline industry estimates it should reach a
volume of 3.8 million by 2015, which would mean a plus 65.2% compared to
2011 (Marketline, 2013). As far as the European market, the outlook is very
different; according to the statement given by the CEO of BMW Norbert
Reithofer We believe that the underlying problem in Europe, which is mainly
about debt, will persist for at least five more years (Reithofer, 2013). From the
data seems clear that the group is going to concentrate its production and
marketing on these new emerging markets.

c. Environment analysis

The main purpose of the environment analysis is to identify and evaluate the
future prospective of the company and its relations with the external
environment. PEST analysis will be used analysing political, economical,
social, and technological factors, which affect the macro-environment of
BMW. As far as political factors concern, laws and regulation are strongly
affecting the automotive sector; increasing restriction aimed to the
environment preservation and pollution abatement are being applied,
especially in the European countries, with a major impact on automobile
manufacturers, and BMW (Bmwgroup, 2010). Economic growth on certain
countries and a strong economical crises of others are the two variables
which strongly affect the automotive sector; as mentioned before BRIC
countries are experiencing growth with a resulting increasing buying power
which would affect positively the sector, but at the same time an economic
downturn in the US is generating unpleasant consequences. Demographic
and cultural changes are usually the ones, which affect the social factors in
the analysis. In the automobile sector seems evident a change in the
customer choice; as a matter of fact fuel efficiency and low emission are
becoming more and more important in the car choosing process (Gstatic,
2011), also guided by the economic recession in mature markets.
Technologically, there is a really important trend, which sees R&D taking a
crucial role; increasing technology with the aims to gain competitive
advantages are widely applied from automobile manufacturers and BMW, in
some cases technology is also being used to regain the decreased margins of
the industry (Autoevolution, 2011).

d. Internal analysis

As mentioned Before, BMW operates 24 manufacturing facilities in 13

different countries; most of the manufacturing sites are owned by the
company, representing significant assets for the group (BMW AR, 2012).

Holding three different premium brands the group is not able to generate the
same economies of scale of the competitors; significant investment in R&D
are in fact hard to be recovered. Despite this, R&D represents one of the main
competitive advantages of the company; being able to produce unexpected
news BMW has always been able to anticipate and respond to the rapid
changes in the market. BMW also has important strategic alliances with Fiat
and Alfa Romeo, which make the company able to benefit from cost savings
and economies of scale resulting by common development and some of the
manufacturing process. The Strategy of BMW is called number one strategy
an has been introduced after the economic crises in 2007; this particular
strategy is focusing on soft issue more than key numbers and aims to the
employees satisfaction and the sustainability in the value chain (bmwgroup,
2012).

e. SWOT analysis

Strengths

Weakness

- Significant investments in R&D

- Strong competition in the luxury

- Strong brand reputation

segment means constant fight for the

- Solid production and distribution

market share

network

- Uncertainty of competitive
advantage

Opportunities

Treats

- Growing market in the BRIC

- Strong competition in the global

countries

market

- Growing demand for hybrid and

- Currency exchange risk

electric vehicles

- New pollution governments

- UAE emerging markets

regulation
- Increase in fuel price
- Economic downturn of certain
markets

f. Key issues

- Could the increase in the fuel price represent a problem for BMW?
- How the company could manage to remain the market leader in the segment
of premium automobile despite the strong competition in the sector?
- Economic downturn of European and US market will represent a problem for
the company?
- Will the new regulations and laws in term of ecology represent a problem for
some of the brand products?

4. Marketing objectives

The key factor of BMWs success could be attributed to a consistent and

effective marketing strategy; As a matter of fact the company has always
focused on a market niche trying to convey in the most effective way
possible its four core values: technology, quality, performance and exclusivity
(Franzen, 2009). As mentioned before after the European crisis the brand
decide to expanded significantly the target market to create new opportunities
and new fertile markets for the company. As next step it is reasonable to say
that one of the main companys marketing objective should be to attract the
new potential buyers in the BRIC counties by developing a strong brand
image in four years time; bearing in mind the European scenario, this would
be one of the best options to experience growth and improve the current
position of BMW. Attract new customers means create the necessary brand
awareness to push the buyer to complete the purchase; this is a process that
could be done just by designing an appropriate marketing campaign based on
the culture, needs and features that distinguish the country.

BMW has always been linked to exclusivity and luxury, but according to the
new perspectives of German carmaker, seems that the group wants to open
the doors to the entry level segment of the market (Bmwgroup, 2012). For this
reason, another important marketing objective should be orientated on
creating product awareness for this particular sector in one-year time; this
would work especially in the markets affected by the crisis in order to regain
the lost sales. Without a correct implementation of this kind of strategy, there
is in fact the possibility that the customer would not consider the possibility of
buying BMW because perceived as too expensive for his budget. At the same
time it is important fort the company to not lower the perception of the main
brand.

BMW is finding increasingly interesting the concept of eco-friendly, and

environmental sustainability car and way of transportation. The company
since 2007 is involved in developing a new sustainable concept of mobility
trough hybrid and electric cars (bmwgroup, 2013). This can be seen and
interpreted in two different ways and it can generate another two important
future marketing objective for the company. The first one is product related;
BMW will soon lunch in the market the new i3, a fully electric concept car
equipped with an high technological content, capable of covering more than
200 km on a single charge, and this demonstrates how the group is interested
to embark on the road of environmental sustainability. Basically, producing
eco-friendly vehicles should be set as a marketing objective bearing in mind
the economic crisis, the increase in fuel and new laws in terms of pollution;
this objective could be reached in four years time because of the already
structured competencies of BMW. Another important example that confirms
the theory comes from the New York Auto Show where the first ever fourcylinder diesel, has been presented in the US market from BMW (Autoblog,
2013). As far as the forth and last marketing objective it presents itself as a
result of the previous one; the group should increase awareness of its Eco
sustainability in two year time, which would also give resonance to all the
advanced technology achieved trough R&D investments.

5. Targeting and positioning

In order to achieve the marketing objectives previously specified, BMW should

put together a marketing plan aimed to reach each of the requirements
previously specified; in this process targeting the right audience represents
one of the most important pre-requisite for a successful marketing strategy.
Expanding into BRIC countries, the brand should stay loyal to its successful
roots that characterize it the European market aiming at reaching people from
the upper middle class till CEOs class, since both are rapidly growing in these
new markets, and BMW might find fertile soil for its high-end products,
establishing itself as premium and luxury brand. As far as European market

concern, which registered a sharp decline from 2009, running in the same
year 3.5 million unit lower than the trend rate (ACEA, 2009) the brand should
probably focus on targeting a lower segment in term of economic capabilities,
making families with the new X1, and average employees with the 1 series
the core part of the target market. It is really important to considerate that this
strategy imply a risk in term of positioning; as a matter of fact moving the
brand reputation form the luxury segment to the average one could cause
unpleasant consequences for the brand in term of perception ans high-ended
product sales. In order to mitigate this possibility the company should
differentiate the two segments; maintaining the scent of luxury brand for the
premium products and at the same time crate a new label to brand the
products designed to the lower market segment. Would be also important for
the company to not lower the product any more than necessary in order to
remain consistent with the philosophy of the group. Regarding the new electric
BMW concept E1 and related eco-friendly products, the target market set
would be different from the main one. Electric car are strongly innovative and
despite their great potential are still positioned as a question mark in the
Boston matrix model, being potentially profitable for the future but having a
low market share for the moment. Seems clear that the target market for this
particular kind of product would be probably found in the first phase of the Bell
curves where can be found the innovators, and early adopters, which
represent together the 16 per cent of the whole market.

6. Growth strategy

BMW is already experiencing growth increasing by 4.4 per cent compared to

2011 and reaching 5.1 billion euros and 11.7 per cent higher revenues to 76.8
billion euros (Business Inquirer, 2013). It has also been nominated
manufacturer of the year for the year 2012 and the outlook seems positive for
2013 (Businesscar, 2013). Despite all this, as mentioned in the SWOT
analysis the company is still suffering form high risk of the currency exchange
rate and from high barriers to entry in certain market such as Brazil. Being

involved in the international markets and generating the 51 per cent of its
revenues from markets outside the Europe, BMW is widely exposed to the
exchange rate risk which can affect the values of the companys equity. In
order to mitigate this risk BMW could move some of its production facilities to
BRIC countries, which are expected to be extremely profitable for the brand in
the future, with a cost cutting effects also in the distribution process. Another
fundamental factor that is suggesting the construction of production facilities
out of the European continent, concern the possibility of being more profitable
in a key market for future growth such as Brazil. According with Frontier
Strategy estimates, the average margin on Latin America is 10.5 per cent
while in Brazil is 5.3 per cent; this happen because the government is raising
barriers to entry for overseas company applying an average corporate tax of
69 per cent of profits (Frontierstrategygroup, 2012). The government is
strongly discouraging the importation of goods but at the same time give the
same protection given to the Brazilian ones for those who decide to set up
plants locally (Financial Times, 2012); this could be a really profitable
opportunity for BMW in order to expand in such rich market and gain a strong
competitive advantage on the competitors.

7. Selection of competitive advantage

As far as competitive advantage is concerned BMW has always structured its

competitive advantage based on R&D and technological development. This
would be a good strategy to keep the company in the right direction, enabling
it to anticipate and lead the market, coming up with innovative products before
the competitors. This strategy already find application in BMW and is named
as Number One strategy (Bmweducation, 2012) In order to maintain this
competitive edge would be also important to structuring a plan for the
introduction of new products; guiding them from the introduction stage to the
growth stage, finishing with the maturity and decline stage. Particular attention
would have to be based on interleaving successfully growing products with

the mature ones to never have too many mature products without a potential
substitute in growth.

8. Marketing mix programme

a. Product

The product is probably the cornerstone of BMW marketing mix programme,

characterized by a high technological content it is definitely the main strength
of the company. In order to reach the objectives it is important to expand the
range of products already very wide targeting the entry-level segment
expanding the line and developing more eco-friendly products such as hybrid
luxury cars and compact city cars designed to the middle market.

b. Price

Price for BMW should continue to be a consequence for the differentiation

strategy; innovation, design and quality have a price. The brand should not
lower the prices for premium and high-ended products despite the recent
crises in some of the markets. At the same time should differentiate the price
for entry-level product by creating special offers aimed at mid-market.

c. Place

Exclusivity of the store is definitely a factor to leveraged on for BMW; the

company should continue to invest in the creation of flagship stores, so as to
maximize the consumer experience. At the same time should also focus
expanding the amount of authorized dealers, which are already present in
more than 100 countries with more than 4.400 stores (Bmwgroup, 2012).

d. Promotion

BMW is very committed in the promotion of its products, the company in fact
invest large amount of money in product placement in movies such as The
World Is Not Enough and others. New advertising techniques are largely
used by the brand to enhance the design and quality of its products, however
could probably be profitable for the company to focus on the environmental
sustainability of its future products. In order to create awareness in the BRIC
countries BMW should apply principles of global marketing to its
advertisements, in order to shape them according to the countys culture.

9. Conclusions

BMW is emerging as one of the most important automobile manufacturer in

the world; through investments in R&D and in the emerging markets is
succeeding in finding a way out of the European debt crisis. However, as
shown previously the company must stay focused accumulate a significant
competitive advantage on the competitors, aiming at achieving leadership in
the emerging markets, through correct positioning, and new environmentally
sustainable products.

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