Marketing Strategies that Provide BMW with a Competitive Advantage
In less than a century, the German automaker Bayerische Motoren Werke ("Bavarian Motor Works" but hereinafter alternatively "BMW" or "the company") has developed a brand with global recognition based on high quality production values and craftsmanship in design. Today, together with major competitors such as Audi, Lexus and Mercedes, BMW competes in the worldwide luxury automobile industry with operations in more than 150 countries. The company's success has also been attributed to its insightful and savvy marketing methods that have increasingly provided a broad range of models, styles and vehicle types for its legions of loyal customers and these issues are discussed further below.
Overview of corporate marketing. The primary focus of corporate marketing in the automobile industry in general and the luxury automobile industry in particular is to promote brand image in ways that positively affect the consumer purchase decision. This focus, though, is especially challenging in the segment in which BMW competes because of the constant shifts in consumer demands and preferences and these issues are discussed further below.
Overview of automobile industry marketing. Using a wide range of marketing theories, researchers have conceptualized automobile marketing practices along a continuum that ultimately focuses specifically on the luxury automobile market. In a Maslow-like formulation, these marketing levels first address basic human needs and then move along the continuum. According to Edgar and Lockwood, the first level of needs is shared by all humans, such as the need for transportation, a need which is satisfied by large groups of organizations known as sectors of an economy.
Moving along the continuum, the industry in which BMW competes is finally reached. In this regard, Edgar and Lockwood report that, "For instance, within the automobile industry are firms that serve segments of customers who want high performance sports cars as well as those who want safe, reliable family sedans."
It is at this level of the continuum that companies competing in the luxury automobile industry apply their marketing resources in an effort to gain a competitive advantage.
Major players. At present, besides BMW, the major players in the global luxury automobile industry include Audi, Lexus and Mercedes (these three companies are discussed further below).
Amount of money. There are significant barriers to entry in the automobile industry in general and the luxury automobile industry in particular, placing BMW and its competitors at a strategic advantage over aspiring new entrants. For example, Edgar and Lockwood emphasize that, "Strategic theory proposes that a relatively impermeable industry, one difficult to enter, is a structurally attractive one providing strong competitive positions within it for organizations to occupy."
With respect to the luxury automobile industry in particular, the competitive position of BMW is further enhanced by its established infrastructure and global network of businesses. In this regard, Edgar and Lockwood report that, "Industries exhibit strategically relevant characteristics. One is their permeability, the ease with which an industry allows new competitors. For example, the automobile industry is relatively impermeable, since it costs a vast amount of money for a firm to enter."
BMW has been able to develop and implement a strategic communications and marketing campaign strategy that provides it with the competitive edge needed in the luxury automobile industry by appealing to an expanding market share.
History of BMW
The history of BMW began in the early 20th century when the company was an aircraft engines manufacturer, a history that has left its legacy on the company today with BMW's stylized propellers contained in its white-and-blue badge work and logo.
By 1918, though, the company began to focus on automobile and motorcycle production following the limitations placed on armaments production pursuant to the Treaty of Versailles.
This fortuitous shift in focus resulted in the introduction one of the first of many innovations, its flat twin motor cycle in 1923 that would propel the company into the luxury automobile industry throughout the 20th century. In fact, this innovation was so technically superior to existing designs that it remains in service essentially unchanged until it was replaced in 1984 by the K100 RS.
Although the company's assets were seized following the end of World War II, they were quickly returned to their owners because they were privately owned and production under civilian management was quickly resumed.
The years following the end of World War II were halcyon days for the German automobile industry, a period that largely corresponded to the enormous economic growth the country experienced. The company, though, experienced some missteps and setbacks for the first few years following the end of World War II. For example, Perry reports that, "For some fifteen years after the war BMW's performance proved to be disastrous. Badly managed and short of capital, the company recorded a loss of DM12 million in 1958 and by 1959 its market share had slumped to less than 2 per cent."
The company recognized its precarious position and sought out a strategic partnership with Daimler-Benz, but aggressive overtures by UK-based GEC to purchase the company at the time prompted the Bavarian government to intervene. The Bavarian government purchased the company and subsequently negotiated its sale to the German company, NAM, which offered as much as GEC had previously. This transition was just what was needed by the company and its fortunes began to improve. In this regard, Perry reports that, "Under the new management the company began to prosper. By 1967 this formerly unprofitable maker of endearingly quirky bubble cars under licence had transformed itself into a company which had doubled its share of the German car market and massively expanded export sales of its motor cycles."
Today, the BMW Group distributes BMW, MINI and Rolls-Royce motor vehicles on a global basis. The company's is currently headquartered in Munich, Germany, the base of operations for an organization with operations in more than 150 countries.
The company's most recent quarterly report notes that the number of BMW, MINI and Rolls-Royce brand cars sold during the 3-month period from April to June 2011 increased by 18.5% to
450,608 units; in addition, sales volume for the six-month period ended June 2011 increased almost 20% (19.7%) to 833,366 units, due in large part to its informed marketed strategy which is discussed further below.
BMW Marketing Strategy
Throughout its long history, the marketing strategy used by BMW has focused on delivering high quality products to a market segment that is exclusive and high end. Indeed, the company's roots in the aviation industry during the first half of the 20th century resulted in extraordinary levels of precise engineering based on the needs of the aviation industry and this legacy has been passed on to its automobile products today. The company's marketing strategy has also focused on being able to deliver its products and services when and where they are needed, no small undertaking given the complexity of the supply chain and high costs of the components that are involved. This corporate agility, though, has provided BMW with a competitive advantage that has endured over the years. This success is congruent with Hyun's observation that, "From the perspective of marketing strategy, strategic direction reflecting the characteristics of the automotive industry and possible discrimination against outsiders from potential gains and fair competitive environment derived from the completion of the internal market have been noted."
In other words, by carefully targeting its niche market for luxury automobiles, BMW has positioned itself as a world-class manufacturer that has no true peers. The company has accomplished this through its marketing mix that focuses on this clientele. For instance, the company continues to invest heavily in sports-related marketing initiatives that target affluent consumers.
Even the company's mainstream media messages promote an image that idealize the company's attributes. In this regard, Evans reports that, "Imagery can be a powerful marketing tool to help create an idealized social model and thus promote product purchases and certain kinds of behavior. The BMW driver cornering nimbly on a windy road embody socially desirable, idealized characteristics. Research has shown that such images feed the targeted audience's aspirations to realize such an ideal-to own a BMW."
One way that the company has been able to grow its market share has been through the use of an increasingly wide array of models, styles and price ranges while still maintaining its focus on high quality and reliability. For instance, during the next several months, the company intends to launch a number of new models and innovations as part of its current marketing strategy, including the following:
1. The new BMW 6 Series Convertible was introduced in the markets in spring 2011;
2. The new 6 Series Coupe will be introduced in autumn 2011;
3. The BMW 1 Series M. Coupe was launched in May 2011;
4. The new BMW M5 will be available in autumn 2011;
5. The BMW 1 Series successor model will become available during the second half of 2011;