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04/19/23BMW’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
$75,600
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Source: - http://www.businessweek.com/magazine/content/03_23/b3836005_mz044.htm
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BMW
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Marketing Mix
Product
BMW 3Series : Sedan, Coupe, Convertible, Touring, Compact
BMW 5Series : Sedan, Touring
BMW 6Series : Coupe, Convertible
BMW 7Series : Sedan
BMW Z4 : Roadster
BMW X3
BMW X5
BMW M : Sedan
Mini One
Mini Cooper
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Price
BMW price range are from £ 16,000 to £ 60,000
Place
Globally
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Promotion
Same advertising company WCSR since 1979
James Bond film -
The World Is Not Enough (Z8 before its launch)
Austin Power 3-Goldmember -( Mini cooper)
“VIRAL MARKETING”
BMW Films (e.g.. ‘The Hire’ - increased sales
by 12.5% in 2001 compare to 2000
Marketing campaign ‘The Ultimate Driving Machine’
Golden Eye: BMW Z 3
Tomorrow Never Dies: BMW 750iL, R1200 Motorbike
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segmentation
Geographic Region GloballyDensity of area Urban
DemographicAge-above 30Income-$ 25,000 and above annuallyOccupational-professional, Businessmen
PsychologicalPersonality Extrovert, Novelty seekerLearning involvement high
• Perception low risk• Attitude positive
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PsychographicLifestyle segmentation ---status seeker
Socioculture
Social class ---middle upper and upper
Behavioral
Benefit ---safety, elegance, technology
Loyalty status --- medium
Readiness stage ---aware, interested
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Positioning
Attribute
Image
Differentiation
Image
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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
Environmental issues: Pollutions
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
Extremely high competition for customers and resources
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Need -------- Acquired Need) Ego need (Self Esteem, Prestige, Status)
Goals -------- Product Specific Goal
Motivation ------- Emotional Motive (Pride, Status)
Personality -------- Superego, Compliant/Aggressive Individual
Personality trait -------- Low dogmatic
Social character --------- Other-directed
Optimum stimulus level -------- High Variety/Novelty Seeking Exploratory Purchase Behavior
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Cognitive Personality ----- Low NC
Brand Personality ----- Sophistication
Makeup of self-image ------ Ideal Social Self Image
Learning ------ Cognitive
Level of involvement ------- very high (Extensive Buying)
Stimulus Discrimination ------
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