BMW Value Chain Analysis
BMW is a leading brand of premium vehicles based in Munich, Germany. The automobile company has maintained a strong global presence through a large network of dealerships. It also enjoys strong popularity globally which is a result of its consistent focus on product quality, technological innovation and passenger safety. Even during the difficult times, BMW has managed to retain its growth momentum. Apart from growing regulations and political uncertainty in several key market regions including Britain, the automobile industry is currently dealing with several major challenges that are hindering sales and growth. The US-China trade wars have also affected the automobile industry apart from changing market trends, consumer dynamics, and other challenges that are political as well as economic in nature. During October and November 2019 it enjoyed strong sales in the US, one of the most important sources of competitive advantage for a company is its well-optimized value chain which has helped it maximize customer satisfaction and control operational costs.
What is the value chain?
The value chain model was introduced by Michael E Porter of the Harvard Business School. In this model, all the activities starting from procurement to production, marketing, sales, and customer service are included. Each of these stages adds value to the final product. Optimizing the value chain helps companies achieve superior results. It can help companies increase their operational efficiency, bring down their operational costs and also build new sources of competitive advantage. There are two types of activities included in the value chain model. They are the primary activities and support activities. Read an analysis of BMW’s value chain and how the company has optimized it to bring higher agility and strengthen its competitive advantage.
The primary activities in the value chain are concerned directly with the creation of products or services.
BMW inbound logistics:
BMW sources from more than 12,000 suppliers globally. The company has 31 production and assembly plants. The largest part of its supplier network is in Germany. BMW sourced around 38% of its raw material from Germany alone in 2018. It sourced 22.4% from Eastern Europe as well as 17% from the rest of Western Europe as well as 14.9% from North America (Annual Report, 2018). DHL is a leading logistics partner of BMW. The logistics provider supports BMW operations throughout the supply chain from sourcing to production and later also with outbound logistics. Apart from Europe, BMW, and DHL partnership has extended to the Asia Pacific region also.
BMW has its headquarters in Munich, Germany. Its global operations span more than 140 countries. Founded in 1916, BMW has grown into one of the world's most successful makers of automobiles and motorcycles. It is also among the largest industrial companies located in Germany. BMW has 31 production locations in 15 countries, twenty of which are owned by the BMW group. Three of them are owned by the BMW Brilliance Automotive joint venture in China. Partners or contract manufacturers run the remaining 8 of them. The BMW Group also has 43 sales subsidiaries and financial services locations worldwide as well as 16 research and development locations. Six of its R&D centers are in Germany alone.
Operations in the United States:
In North America BMW, started its operation in 1975 Rolls-Royce LLC entered the market in 2003.
It refers to the outward flow of goods and services from the company towards the customers. BMW has established an extensive network of dealers and retailers. Outside of Germany, it is mainly the subsidiary companies of BMW which handle its sales and services. DHL is a key logistics partner which takes care of outbound logistics for BMW in most of the markets.
BMW Marketing and Sales
BMW has maintained a strong brand image in the global market. Consistent focus on quality and innovation has also helped it build strong brand equity and achieve higher customer loyalty. BMW uses digital channels mostly for marketing. Apart from its website, the company also uses social media channels for promotions and customer engagement. BMW has used the slogan ‘Sheer Driving Pleasure’ to express the unique experience BMW offers. The sales network of BMW includes 3,500 BMW dealerships 1600 MINI dealerships and 140 Rolls-Royce dealerships (Annual Report, 2018). In the US also BMW has established an extensive network of retailers and dealers to serve the customers. In the US market, there are over 348 BMW Passenger car and sports activity vehicle centers. Apart from that, there are also 149 BMW motorcycle retailers in the US market as well as 121 Mini dealerships and 38 Rolls-Royce dealerships.
Products and services:
The product range of BMW includes automobiles and motorcycles. Apart from the BMW cars and motorcycles, the BMW Group also owns and sells cars under the Mini and Rolls-Royce brands. Rolls-Royce caters to the ultra-luxury segment of customers. With time BMW plans to electrify all its brands. Its large range of motorcycles includes sports, Roadster, Heritage, Adventure, and Urban Mobility segment
Support activities in Porter’s value chain are related to primary activities. They improve the effectiveness and efficiency of primary activities.
Competition has grown a lot in the automobile industry. Technology is an important source of competitive advantage for automobile brands. As a leading auto brand, the BMW group invests a lot in technological innovation. The company has established 16 research and development centers, six of which are located in Germany. Each year BMW invests a very large sum in research and development. In 2018, the company spent €6,890 million on research and development which was around 12.8% higher than the previous year. It is investing in autonomous driving as well as electric mobility. The range of BMW electric and hybrid cars has grown a lot in recent years. The company plans to expand the range to cater to the growing demand worldwide.
The automobile industry has grown highly competitive. Every automobile business needs talented employees to maintain its competitive strength and for growth. Therefore, there is a high level of competition between auto firms to attract the most talented employees. In 2018, BMW employed 134,682 employees. The automotive segment of BMW employed 121,994 people. The company was also ranked among one of the most attractive employers in 2018. Its attrition rate for the year remained low at 2.78 % (Annual Report, 2018). The company strives to maximize employee satisfaction and to provide its employees with outstanding opportunities and career growth. The workforce of BMW included employees from more than 110 nations in 2018. BMW is also working on growing the diversity of its workforce. Women constituted around 19.9% of its workforce in 2018. They held 17.2 percent of managerial roles in the BMW group. In this way, BMW is working to achieve a balanced composition of the workforce with people from diverse backgrounds and having diverse skills and knowledge in diverse fields.
BMW is divided into two main business segments which are automobile and motorcycle. Apart from that, there is a finance segment. Herald Kruger is the CEO of BMW and Oliver Zipse is the chairman of the board of management of BMW AG. The several functions from HR to finance, legal, and procurement have their own heads or directors. Ilka HorstMeier heads the HR function at BMW and Dr. Milan Nedeljkovic heads the production function.
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BMW depends upon a large pool of suppliers for good quality raw materials to produce automobiles and motorcycles. Germany is its biggest source of raw material from which it sourced nearly 38% of its raw material during 2018 followed by 22.4 percent from Eastern Europe. The company has established a purchasing and supply network to take care of procurement. This network also takes care of quality control in the supply chain. The head of the purchasing and supply network of BMW is Dr.-Ing. Andreas Wendt.
Cite this document.
Pratap, Abhijeet. "BMW Value Chain Analysis." Notesmatic, edited by Abhijeet Pratap, Notesmatic, Dec. 2019, notesmatic.com/2019/12/bmw-value-chain-analysis/.
Pratap, A. (2019, December). BMW Value Chain Analysis. In Notesmatic. Retrieved from https://notesmatic.com/2019/12/bmw-value-chain-analysis/