BMW Startegic Audit Report

Business Policies & Strategic Management.
BMGT490 BMW Strategic Audit
Instructor: Dr. Hisham Al-Radhi
Done by:
1. Basil Jalal
2. Malek Al-Ghshm
3. Mustafa Eshaq
4. Samer Al-Shami
Page 1 of 25
Table of Contents
Background:.............................................................................................................5
Current Situation:...................................................................................................5
Current Performance:............................................................................................5
Strategic Posture:...................................................................................................6
Mission:.............................................................................................................6
Vision:...............................................................................................................6
Values:...............................................................................................................6
Objectives:.........................................................................................................7
Strategies:..........................................................................................................7
Strategic Managers..................................................................................................9
Board of Directors:................................................................................................9
Top Managers:.......................................................................................................9
External Environment:...........................................................................................9
Societal Environment:...........................................................................................9
Economic:..........................................................................................................9
Technology:.....................................................................................................10
Political–legal:.................................................................................................11
Sociocultural:...................................................................................................11
Task environment:...........................................................................................12
Internal Environment:..........................................................................................13
Corporate Structure:............................................................................................13
Corporate Culture:...............................................................................................15
Corporate Resources:...........................................................................................16
Analysis of Strategic Factors................................................................................18
Situation Analysis:...............................................................................................18
S. Strengths:.....................................................................................................18
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W. Weaknesses:...............................................................................................18
O. Opportunities:.............................................................................................18
T. Threats:........................................................................................................18
Review of Current Mission and Objectives:.......................................................19
Strategic Alternatives:...........................................................................................19
Strategic Recommendation:.................................................................................19
Implementation:....................................................................................................20
Evaluation and control:........................................................................................20
Tables:....................................................................................................................21
IFAS:...................................................................................................................21
EFAS:..................................................................................................................23
SFAS:..................................................................................................................25
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Page 4 of 25
Background:
Bayerische Motoren Werke AG, commonly referred to as BMW, is a German multinational

company which produces luxury vehicles and motorcycles. The company was founded in 1916
as a manufacturer of aircraft engines, which it produced from 1917 until 1918 and again from
1933 to 1945.
Automobiles are marketed under the brands BMW, Mini and Rolls-Royce, and motorcycles are
marketed under the brand BMW Motorrad. In 2015, BMW was the world's twelfth-largest
producer of motor vehicles, with 2,279,503 vehicles produced. The company has significant
motorsport history, especially in touring cars, Formula 1, sports cars and the Isle of Man TT.
BMW is headquartered in Munich and produces motor vehicles in Germany, Brazil, China,
India, South Africa, the United Kingdom, the United States and Mexico. The Quandt family are
long-term shareholders of the company (with the remaining shares owned by public float),
following brothers Herbert Quandt and Harald Quandt's investments in 1959 which saved the
company from bankruptcy.
Current Situation:
Current Performance:
In 2019, the BMW Group increased sales by 1.2% to a new record 2.5 million deliveries
worldwide of BMW, Mini, and Rolls-Royce cars. In full calendar year 2019, the BMW Group
reported its ninth consecutive record year with a total of 2,520,307 (+1.2%) BMW, MINI and
Rolls-Royce vehicles delivered to customers worldwide. The BMW, Rolls-Royce and BMW
Motorrad brands also posted new all-time highs for 2019. Sales of electrified BMW and MINI
vehicles also increased. By the end of 2019, the BMW Group had already half a million
electrified vehicles worldwide on the road. BMW claims it was the world’s leading premium car
company for the 16th consecutive year. BMW forecasted continued growth in 2020.
Sale 2019 % Change
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BMW Group Automotive 2,520,307 +1.2
BMW i 2,168,516 +2.0
BMW M GmbH 135,826 +32,2
MINI 346,639 -4.1
BMW Group electrified* 145,815 +2.2
Rolls-Royce 5,152 +25.4
BMW Motorrad 175,162 +5.8
BMW Group Sales by Brand Worldwide in 2019 (Full Year):

*BMW i, BMW iPerformance, MINI Electric
Strategic Posture:
Mission:
The BMW Group is the world's leading provider of premium products and premium services for
individual mobility.
Vision:
To be the most successful premium manufacturer in the industry.
Values:
1.Responsibility.
2. Appreciation.
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3. Transparency.
4. Trust.
5. Openness.
Objectives:
The objectives of BMW include:
1. To make their position stronger than at the moment by the end of 2012.
2. To manufacture environmental friendly cars.
3. To stay ahead in the competition.
4. To help the society by being responsible.
5. To increase the sales all across the world.
Strategies:
BMW Group Strategy:
Position (What do we -BMW group- stand for?):
We take on business, environmental and societal challenges. We take responsibility for the
mobility of tomorrow with a compelling offering and through sustainable management.
Direction (What drives us -BMW group-?):
We offer inspiring premium products for individual mobility. Today and for future generations.
We ensue high profitability so we can independently shape the future of mobility.
Strategic approach (Where do we -BMW group- want to go?):
We focus on our customers and fulfil their diverse needs worldwide. We connect innovative
technologies, emotional products and individual customer care to provide a unique overall
experience.
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Cooperation (How do we -BMW group- achieve our goals):
We deliver top performance. Each of us makes a contribution, based on our values. We work
hand in hand internally and with our external partners. This is how we achieve maximum
effectiveness and lead the company to shared success.
BMW Current Strategy:
Business-Level-Strategy: Focused Differentiation:
The group has spread in four brands: "BMW, MlNl, Rolls-Royce Motor Cars and BMW
Motorrad". BMW's business level strategy can be classified as a focused differentiator as it
serves the needs of narrow segments. BMW produces a range of reputable luxury vehicles, while
Rolls Royce is in the sparsely populated segment of luxury collector vehicles. MINI caters to
drivers who are looking for a compact sports vehicle and BMW Motorrad is for customers who
prefer motorcycles over traditional vehicles. In each brand there are models ranging in price
from moderately to extremely expensive, catering to consumers’ varying tastes. Furthermore,
BMW offers financial services; it finances and leases contracts with dealerships and retail
customers. BMW’s research and development investments, in both technology and its workforce,
are aligned with their focused differentiation strategy to produce new and innovative features for
each respective brand.
Corporate-Level-Strategy: Dominant Business Diversification:
BMW Group is operating under a dominant-business diversification strategy. Approximately 78

percent of BMW's revenue comes from the automotive segment, as illustrated by' BMW’s Year-
end December 31, 2014 external revenues of €76,059 million. This revenue is comprised of
(£59,654 million from the automotive segment, €1,671 million from motorcycles, €19,073
million from financial services, and (£3 million from other sources. By focusing on only a few
businesses, namely the automotive sector, BMW Group is able to “develop capabilities useful for
these markets ‘and can provide superior service to their customers".
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Strategic Managers
Board of Directors:
_ There are 6 members of the board of directors all of them are internet.
_ Dr. ING_Norbert Reithofer, chairman of management.
_ Ernst Bauman, human resources, industrial relations director.
_ Dr. Michael Ganal, sales and marketing.
_ Dr. ING_Klaus Draeger, development and purchasing.
_ Stefan. Krause, finance.
_ Frank. Peter Arndt, production.
Top Managers:
_ There is only one chairman:
_ Dr. Joachim Milberg, chairman.
_ Manfred Schach, deputy chairman.
_ Stefan. Quandt, deputy chairman.
_ Konrad. Gottinger, deputy chairman.
_ Dr. Hans_Dietrich, deputy chairman.
External Environment:
Societal Environment:
Economic:
• The global economic environment has an immediate effect on the business of car brands.
• Global economy grew at 3.7% and demand for BMW automobiles was strong.
• Economy saw critical development. 2019 development rate was 2.9% riding on strong domestic
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demand.
• Vehicle market has entered a difficult stage but BMW is growing against market trends.
• Strong performance of BMW can be attributed to the strong performance of the global
economy.
• Global economy fluctuations also influence BMW’s performance, valuation, and benefits.
• Fluctuations make it difficult for BMW Group to guess benefits and losses within the coming
year since the currency is so unstable.
• Tariffs are too impactful to BMW.
• Tariffs increase the costs for essential vehicle parts, such as steel and aluminum.
• With historically low unemployment rate of 4% and rising wages, American economy was in
great shape.
Technology:
• Technology is playing a central part in driving the growth of the BMW.
• Digital technology has helped BMW develop quicker.
• Technological factors are presently at the core of the whole customer experience.
• Technology lets BMW for Having new customer segments.
• Digital technology is helping BMW market its brand with higher efficiency and effect.
• Technology is shaping the development of the BMW and helping it fill the customer experience
gab.
• BMW has made digital technology a core focus in its business strategy.
• BMW automobiles is making its cars outstanding in terms of efficiency, performance and
passenger safety.
• Research and development plays a central part in the growth and success of BMW.
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• Electrical mobility, digitalization and autonomous driving are important for BMW to concerns
within the area of research and innovation for the producer of luxury cars.
• BMW Group won several prizes for innovation excellence in 2019. This refers that BMW
Group are focusing on research and innovation and technological excellence.
• Considering BMW is known for its luxury; the company can’t afford to skip out on these
“leisure” choices because consumers have come to expect them.
Political–legal:
• Other factors like trade restrictions, customs policies and international trade policies also hada
clear effect on BMW sales.
• Political instability has a directly impact on BMW.
• BMW Group allocated funds to imp act political factors in favor of the company.
• BMW has an effective compliance management system which is made of tools and techniques
that help the company and its employees ensure that throughout the system people follow the
rules and regulations.
• Compliance is an important focus for BMW.
• BMW has given its compliance team an efficient structure.
• BMW’s success in worldwide markets can also be attributed to its responsible and lawful
conduct of its business.
• BMW has made business obligation and compliance integral components of its culture.
Sociocultural:
• Society and culture are central to international business.
• BMW essential to watch these social and cultural changes because digital technology changes
society and people's lifestyle.
• BMW are focusing on building strong relationships with their customers and employees.
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• BMW has also adopted its business strategy to suit the needs and expectations of its employees.
• People are looking for cars with advanced technologies which provide a safer driving
experience and BMW produce these types of cars to satisfy their customers.
• BMW is also focusing on social responsibility and investing in projects that benefit people and
community.
• The company works in partnership with BMW Herbert Quandt Foundation to empower people
and help them live better lives.
• People’s taste has changed a lot and BMW Focus on design aesthetics because it became
important.
• BMW are carefully focused on differentiation because for retaining competitive advantage.
• BMW released BMW NIGHT SKY for lovers of style and beauty.
• Style and design for BMW are important for components of differentiation for auto brands and
also an important aspect of the sales strategy of BMW.
• BMW Group must adjust products and marketing to fit the desire of their customers.
• BMW chooses the location of these plants based on heavy research and development.
• BMW are not only understanding who the consumers are and why they buy, but also the
political and economic landscape.
• BMW share their ideas with their customers throughout social media to know their reaction and
then decide.
Task environment:
1- Threat of new entry: this force is usually low because of many barriers to entry.
2- Threats of substitute product: this force is medium because there have been many
substitutions. BMW spend a lot of money in R&D to keep up the new technology and be the first
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mover.
3- Bargaining power of buyers: this force is high because of other substitute lower cost products.
4- Bargaining power of suppliers: this force is usually low because of several factors including
the smaller size of supplier businesses, fragmentation and a lack of forward integration.
5- Competitive rivalry: this force is high because of many luxury cars producers.
Internal Environment:
Corporate Structure:
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Large organizations like BMW automobile company have a tall organizational structure that
looks like a pyramid, with several management layers that reflect a more complex reporting
structure with each and every employee having a specific operational role. A brief outline of the
BMW Corporate Hierarchy is given below:
Apex:
President/Chairman forms the apex of the BMW corporate, pyramidal structure.
Top Level:
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The Board of Management includes the Vice President, Secretary, Treasurer and the Directors of
the various departments like Development, Production, Finance, Purchasing and Supplier
network, Sales and Marketing, Human Resources and After Sales. The Chairman or President is
the presiding officer of the Board.
Second Level:
This level comprises of the Executive Director.
Third Level:
This level comprises of the Office Manager Accountant: Managing Editor: Art Director
Advertising Director and Volunteer staff.
Fourth Level:
This level forms the lowest rung of the organizational structure and comprises of the receptionist
Membership.
Thus, a large company like BMW has a well-organized corporate structure with many layers of
management.
Corporate Culture:
1. Passion and Enjoyment:
The BMW Group culture is having the passion in order to build new paths, thinking ahead and
breaking new ground. They look for employees who have the team spirit, initiative and the desire
in wanting to learn new things every day; hiring those who want to do and experience something
extraordinary.
2. Teamwork and Personal Development:
Like with most company cultures where teamwork is essential, the BMW Group culture believes
in creating great things as a team. They are constantly motivating peers to attain even greater
heights, in order to make their products even more outstanding. The BMW Group value and treat
each other with respect; thus employees are connected by a strong sense of unity.
3. Equal Opportunities and Diversity
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Working as a team where people will be treated equally and showing no prejudices or bias
should be one of the company cultures. The employees of the BMW Group work in different
countries on different continents, so they are working with a pool of peers regardless of their
nationality, religion and gender.
This means that the best person for a job or a promotion is the person who earns that position
based on qualifications, experience and knowledge. However, diversity includes not only race
but gender, ethnicity, personality, age, education and background. Workplace diversity values
everyone’s differences.
Corporate Resources:
In order for every organization or firm to thrive and survive globally, it requires and must
possess certain resources and competencies. According to Gerry, Scholes & Whittington, (2008),
every firm has its own strategic capability to endure against all odds. The most common
resources include
Tangible resources which include the physical chattel such as the plant, finance and human labor
within the organizations
Intangible resources includes the non-physical chattel such as information, knowledge and status
BMW’s resources are categorized into
Physical resources which are universally designed and styled technology; supply chain and
dealership management; effective market segmentation
Financial resources which in 2003 financial year were, turnover of 41.53 billion-euro, gross
margins of 3.2 billion, 7.4% profit margins and annual surplus of 3.2 billion euro.
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Intellectual capital represented by the excellent reputation in engineering, powerful brand

identity known for its reliability and luxury.
Human resources composing of young and wealthy professionals supported by a highly qualified
labor force
Threshold competencies represented by good relationships with the suppliers, inevitable quality,
reliability and dealings
Core competencies known for its speedy production and technology that are the ultimate driving
machines for BMW
Threshold resources of integrated supply chain, worldwide production and assembly units
supported by young and astute employees
Unique resources of high-quality labor force and excellence in engineering
Cost efficiency at BMW is possible by the contributions of economies of scale, supply chain,
experience and product/process design
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Analysis of Strategic Factors
Situation Analysis:
S. Strengths:
_ One of the most valuable automotive brands in the world.
_ Geographically diversified revenue streams.
_ Successful partnership in China.
_ Perfect engineering and excellent driving experience.
_ Competence in hybrid and electric cars.
_ Clear strategy to meet the future challenges and trends.
W. Weaknesses:
_ Poor automotive brand portfolio with little product differentiation.
_ Increasing debt levels.
O. Opportunities:
_ Fuel prices are expected to rise in the near future.
_ Demand for autonomous vehicles.
_ Weakening euro exchange rate.
_ Timing and frequency of new model releases.
T. Threats:
_ Increasing competition in the worldwide automotive market.
_ Increasing government regulations may raise the costs.
_ U.S. automotive market is poised to slow down or even decline.
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Review of Current Mission and Objectives:
1- The point here is that we need to use as well qualitative measurements that are best suited to
company's mission and objectives.
2- Company also needs to recognize the inherent limitations of data generated through non-
probabilistic methods.
Strategic Alternatives:
One of the strategic alternatives is that while understanding that Competition from the rival
companies is ever rising over the years, BMW should be able to counter this assumption through
strategic planning, enacting strategic policies. Secondly, the company should embrace the
improvement of technological application.
Therefore, the situation calls for a proper evaluation of the strategies that the company intends to
capture the top market in order to avoid failures
Strategic Recommendation:
The main strategic recommendation for the company is to focus on manufacturing luxurious cars
of premium quality at relatively lower cost to attract the prospective buyers who are only limited
by their level of income. This would be the sure way of achieving success in the company.
Therefore, in cases were the external environment posed a great threat to the internal affairs and
strategies of the company, especially this engaged in the car manufacturing industry and market,
the management should adopt competitive policies, which would help it fight off the competition
in the market
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Certainly, this would lead to the advancement of innovative products and the use of effective
marketing strategies to minimize the effects.
Implementation:
Marketing:
• Broad price ranges.
• Promotions.
• Building brand Equity.
• Surveying the market to customer's needs.
• Using different distraction channels.
• Dividing markets into segments and target cash segment separately.
Resource & development:
• New products that increase buyer value.
Human resources:
• Provide sufficient training.
• Recruit new talents with diverse backgrounds.
Information system:
• Advance information system to connected all departments and employees.
Finance:
• Provide great deal of capital.
• Accurate studies in term of department to capital and other ratios.
Evaluation and control:

BMW’s view the biggest source of surprise could be the effects from higher capacity utilization
on the back of the X5 and Min respectively increasingly ramping up.
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The most fundamental obstacle to progress is that business evaluation and control does not
generate revenue in the short term. While the business manager's compensation and continued
employment are usually tied to the achievement of such short-term revenue targets, planning
requires the initial and ongoing commitment of time, people and financial resources to create,
test and monitor. This represents both a direct expense and an opportunity cost, drawing
resources away from the achievement of revenue targets.
External experts should be engaged from the outset. There are highly experienced firms that may
also offer physical facilities as alternative sites.
In a large, complex organization like BMW, it is necessary to have some internal staff focused
on the evaluation and control process. Ideally these resources should be at the corporate level,
outside the potentially conflicting interests of business and technology.
Tables:
IFAS:
# Strengths Weight Rating Weighted Score

1 One of the most valuable automotive brands 0.3 5 1.5
in the world.
2 Geographically diversified revenue streams. 0.1 2 0.2
3 Successful partnership in China. 0.1 1 0.1
4 Perfect engineering and excellent driving 0.2 4 0.8
experience.
5 Competence in hybrid and electric cars. 0.2 3 0.6
6 Clear strategy to meet the future challenges 0.1 2 0.2
and trends.
# Total 1.00 -- 3.4
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# Weakness Weight Rating Weighted Score

1 Poor automotive brand portfolio with little 0.1 2 0.2
product differentiation.
2 Increasing debt levels. 0.2 2 0.4
3 Note that BMW is the smallest firm 0.3 4 1.2
(between Daimler, Toyota, GM, Nissan, and
Volkswagen) in terms of # of employees,
but has the second highest EPS.
4 Inventory turnover of 5 vs the industry 0.1 3 0.3
average of 10.
5 Only uses premium gas, and cost of repairs 0.3 5 1.5
can be higher than normal.
# Total 1.00 -- 3.6
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EFAS:
# Opportunities Weight Rating Weighted Score

1 Fuel prices are expected to rise in the near 0.1 2 0.2
future.
2 Demand for autonomous vehicles. 0.2 1 0.2
3 Weakening euro exchange rate. 0.2 2 0.4
4 Timing and frequency of new model 0.2 3 0.6
releases.
5 Growth in sales of luxury vehicles exceeds 0.3 5 1.5
growth in all other automobile categories.
# Total 1.00 -- 2.9
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# Threats Weight Rating Weighted Score

1 Increasing competition in the worldwide 0.2 3 0.6
automotive market.
2 Increasing government regulations may 0.2 2 0.4
raise the costs.
3 U.S. automotive market is poised to slow 0.1 1 0.1
down or even decline.
4 Audi designs, engineers, manufactures and 0.3 5 1.5
markets automobiles and motorcycles and
competes heavily with BMW on luxury
cars.
5 New companies are entering the scene, 0.2 4 0.8
meeting the expectation of luxury and
technological advancements.
# Total 1.00 -- 3.4
Page 24 of 25
# SFAS (Strategic Factors) Weight Rating Weighted Score

1 One of the most valuable automotive brands 0.20 5 1.00
in the world. (S)
2 Perfect engineering and excellent driving 0.10 4 0.40
experience. (S)
3 Note that BMW is the smallest firm 0.15 4 0.60
(between Daimler, Toyota, GM, Nissan, and
Volkswagen) in terms of # of employees,
but has the second highest EPS. (W)
4 Only uses premium gas, and cost of repairs 0.10 5 0.50
can be higher than normal. (W)
5 Growth in sales of luxury vehicles exceeds 0.10 5 0.50
growth in all other automobile categories.
(O)
6 Timing and frequency of new model 0.05 3 0.15
releases. (O)
7 Audi designs, engineers, manufactures and 0.20 5 1
markets automobiles and motorcycles and
competes heavily with BMW on luxury
cars. (T)
8 New companies are entering the scene, 0.10 4 0.40
meeting the expectation of luxury and
technological advancements. (T)
SFAS:
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Business Policies & Strategic Management.

BMGT490 BMW Strategic Audit

Instructor: Dr. Hisham Al-Radhi

Bayerische Motoren Werke AG, commonly referred to as BMW, is a German multinational

Sale 2019 % Change

BMW Group Automotive 2,520,307 +1.2

BMW i 2,168,516 +2.0

BMW M GmbH 135,826 +32,2

MINI 346,639 -4.1

BMW Group electrified* 145,815 +2.2

Rolls-Royce 5,152 +25.4

BMW Motorrad 175,162 +5.8

BMW Group Sales by Brand Worldwide in 2019 (Full Year):

2. To manufacture environmental friendly cars.

3. To stay ahead in the competition.

4. To help the society by being responsible.

5. To increase the sales all across the world.

BMW Group Strategy:

Position (What do we -BMW group- stand for?):

Direction (What drives us -BMW group-?):

Strategic approach (Where do we -BMW group- want to go?):

Cooperation (How do we -BMW group- achieve our goals):

BMW Current Strategy:

Business-Level-Strategy: Focused Differentiation:

Corporate-Level-Strategy: Dominant Business Diversiﬁcation:

BMW Group is operating under a dominant-business diversification strategy. Approximately 78

_ Dr. ING_Norbert Reithofer, chairman of management.

_ Ernst Bauman, human resources, industrial relations director.

_ Dr. Michael Ganal, sales and marketing.

_ Dr. ING_Klaus Draeger, development and purchasing.

_ Stefan. Krause, finance.

_ Frank. Peter Arndt, production.

_ There is only one chairman:

_ Dr. Joachim Milberg, chairman.

_ Manfred Schach, deputy chairman.

_ Stefan. Quandt, deputy chairman.

_ Konrad. Gottinger, deputy chairman.

_ Dr. Hans_Dietrich, deputy chairman.

year since the currency is so unstable.

• Tariffs are too impactful to BMW.

• Digital technology has helped BMW develop quicker.

• Technology lets BMW for Having new customer segments.

Group are focusing on research and innovation and technological excellence.

“leisure” choices because consumers have come to expect them.

clear effect on BMW sales.

• Political instability has a directly impact on BMW.

rules and regulations.

• Compliance is an important focus for BMW.

• BMW has given its compliance team an efficient structure.

conduct of its business.

society and people's lifestyle.

and help them live better lives.

also an important aspect of the sales strategy of BMW.

political and economic landscape.

President/Chairman forms the apex of the BMW corporate, pyramidal structure.

This level comprises of the Executive Director.

1. Passion and Enjoyment:

2. Teamwork and Personal Development:

3. Equal Opportunities and Diversity

BMW’s resources are categorized into

Intellectual capital represented by the excellent reputation in engineering, powerful brand

Unique resources of high-quality labor force and excellence in engineering

Analysis of Strategic Factors

_ Geographically diversified revenue streams.