Strategic Marketing Communications of BMW

¶ … 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.

a.

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.

b.

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."

2.

Thesis

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.

3.

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.

4.

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;

6. The MINI Coupe celebrated its worldwide debut in June 2011 and a fifth MINI model variant will become available in autumn 2011;

7. Rolls-Royce Motor Cars presented its Ghost Extended Wheelbase version for the first time at the Shanghai Car Show and series production of this model will begin in 2012.

The cumulative effect of the company's marketing efforts during the period 1993 to date can clearly be discerned in Figure 1 below, particularly in recent months due in large part, perhaps, to the initiatives delineated above.

Figure 1. BMW Stock Performance: 1993-2011

Source: http://www.bmwgroup.com/

5.

Major Competitors

A comparative description of BMW and its major competitors is provided in Table 1 below.

Table 1

Major players in the global automobile industry

Company

Key Facts and Figures

Employees

Like BMW, Audi is also one of Germany's oldest-established automobile manufacturers dating back to 1932 when four independent motor-vehicle manufacturers: Audi, DKW, Horch and Wanderer merged to form Audi AG (Audi History, 2011).

The Audi Group employed 53,347 people on average over the year in 2007. The previous year's figure was 52,297. The average workforce in 2005 totaled 52,412, in 2004 it was 53,144 and in 2003, 52,689 (Audi Questions & Answers, 2011).

Lexus

Lexus is a division of Toyota Motor Sales, U.S.A., Inc. A wholly owned subsidiary of Toyota Motor Corporation (Lexus Investor Relations, 2011) and is currently the world's largest automaker (Marr, 2010).

Toyota has 317,734 employees, but there is not corporate breakdown provided concerning employees devoted strictly to Lexus production (Toyota In The World, 2010).

Mercedes

Mercedes-Benz USA (MBUSA) is a Daimler company that distributes and markets Mercedes-Benz and Maybach products. The company sold 225,128 vehicles in the U.S. In 2008. MBUSA was founded in 1965; prior to that, Mercedes-Benz cars were sold in the United States from 1957 to 1964 by Mercedes-Benz Sales, Inc., a subsidiary of the Studebaker-Packard Corporation. (Mercedes About Us, 2011). This competitor has leveraged its resources in ways that have provided it with a competitive advantage, but the same methods that Mercedes has used are not necessarily unique, but are rather shared with a number of major players in the automobile industry. For instance, in their study of the automobile industry, Kim and McElrearth (2001) report that by allocating more or less resources to a particular production facility, agility and nimbleness can be achieved without making any other substantive changes to the business model. In this regard, Kim and McElreath note that, "The diversification provided by having production capacity in various countries reduces an automobile manufacturer's economic exposure. If the real exchange rate declines in one country, the company can shift a larger portion of production to there and increase exports to countries where the real exchange rate has risen. Home production for most companies declined from 1994 to 1998" (2001, 21). This balancing of production needs according to regionalized demand has been shown to provide significant rewards as well. For example, these authorities add that, "Interestingly, Mercedes went from 100% home production to 90% over the period, and slightly surpassed BMW in overseas production on a percentage basis" (Kim & McElreath, 2001, 22).

Mercedes-Benz USA currently has 348 dealerships, more than

1,500 employees, and over 21,500 dealership employees in the United States (Mercedes About Us, 2011).

BMW

Founded in Germany in 1917, BMW has grown to become a major player in the global luxury automobile industry.

The worldwide workforce increased slightly (+1.5%) to 96,943 employees at 30 June 2011. Compared to the end of the financial year 2010, the increase was 1.6% (BMW Second Quarter Report, 2011, p. 5).

6.

Case Study

a.

Discussion of the marketing strategy for the 3 Series BMW. Currently, BMW offers the following models in its 3 series line:

1. BMW 3 Series Sedan

2. BMW 3 Series Touring

3. BMW 3 Series Coupe

4. BMW 3 Series Convertible

5. BMW Individual model

The company has experienced a staggering 80% increase in the sales of its 3 Series models from June 2010 to June 2011.

A representative summary of these models and their respective price ranges is provided in Table 2 below.

Table 2

Summary of the 3 series models and corresponding marketing strategies

3 Series Model

Price Range (MSRP)

BMW 3 Series Sedan

$34,600-$44,150

BMW 3 Series Coupe

$37,650-$46,000

BMW 3 Series Convertible

$46,450-$59,650

Source: The BMW 3 Series at http://www.bmwusa.com/Standard/Content/Vehicles/2011 / 3/default.aspx

As can be seen from the price ranges in Table 2 above, there is a significant amount of overlap between prices for the lower end models compared to higher end models, but there are some distinctive features for each that make them more desirable by certain owners. The decision to purchase a sedan vs. A coupe, though, may be less clear-cut for many consumers than, say, a decision whether a 10-inch or 12-inch table saw best suits their needs. Therefore, by offering an wider range of models, the company's marketing strategy has achieved BMW's corporate goals of growing its business in its various global markets, an approach that is congruent with Hyun's observation that, "In order to formulate an effective marketing strategy, an appropriate understanding of the market condition is an essential requirement. The changing context of the market condition such as market concentration and growth have been found to have a significant impact on price levels, advertising expenditure, and the number of models offered."

These factors are clearly discernible in BMW's marketing strategy for its 3 series. For instance, Perry reports that BMW's marketing strategy during the 1970s was focused on developing models that appealed to targeted markets. This author also cites the organizational attributes of the company that provided it with the framework needed to remain nimble in an increasingly competitive marketplace. In this regard, Perry reports that, "Throughout the 1970s, and OPEC price rises notwithstanding, BMW was the fastest growing car company in Europe, and began to reap the benefits of having a strongly networked, single large shareholder (the Quandt family) with a long-term outlook."

The 3 Series was introduced in 1975 as part of the company's larger marketing program at home and abroad. In this regard, Perry notes that the company "entered into this major expansion phase with the launch of its 5-series in 1972, the same year in which Munich had hosted the Olympic Games from a newly built stadium that was close to the car maker's own new headquarters building. This was followed by the 3-series in 1975 and the 7-series in 1977, thereby establishing a core pattern of three distinct principal model lines."

From 1976 to 1989, the 6 Series coupe as well as the 8 Series that followed, were sports cars that were marketed in relatively small amounts and were intended to directly compete against Porsche and corresponding models from Mercedes. Interestingly, Perry points out that, "Both the core pattern and the 3-5-7 nomenclature have persisted up until the present day. Since the life cycle of these model lines has been about eight to ten years, each of them and the overall tripartite structure have now been reproduced through into a third generation of models."

Almost two-thirds of these models have been BMW's 3 Series vehicles, about a quarter have been 5 Series, and a tenth its 7 Series. The ratio at which these models were introduced corresponded to the end of life cycle for the previous models. The company has therefore clearly established a marketing pattern that involves significant overlap between prices depending on the options and packages selected by the consumer. In this regard, Perry adds that, "What has also been established along with this pattern has been the principle of overlapping engine sizes (and overlapping prices) as between the 3- and 5-series, and between the 5- and 7-series."

As a consequence this model range, and the marketing strategy which informs it, this marketing approach provides the framework in which the company needs to achieve a competitive advantage and sustain it over time. As Alfred Sloan, the then head of GM had put it, "The core of the [GM] product policy [lay] in its concept of producing a full line of cars graded upwards in quality and price."