BMW Value Chain Analysis

BMW Value Chain Analysis Introduction Businesses mainly engage in their activities with a purpose of optimizing their value on their consumers and customers. One way through which this is achieved is by designing and implementing a highly effective value chain. Value chains refer to the systematic procedures through which a product or service is passed through for purposes of enhancing its value to the consumers before it is eventually released to the market (Porter 58). Companies adopt this strategy as a way of warding-off competition from their competitors in the market who target the same consumers. This paper seeks to analyze the aspect of value chains with special reference to BMW, an engine manufacturing firm renowned for its high standard motor vehicles. BMW also manufactures motorcycles and aircraft engines.

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BMW Value Chain BMW’s value proposition reads, “The Ultimate Driving Experience”. To practically enforce this proposition, BMW mainly focuses its attention on three specific areas of research and development, design, as well as marketing.

Research and Development, R&D BMW pays significant attention to its research and development as a key area through which it enhances its overall value to consumers. Products manufactured by the company form the main strength and driving force behind their excellent performance. The company has numerous centers where extensive research on product development is undertaken throughout the world. These research and development centers include an engineering center established in Munich, Germany, a design studio set up in California, and a project team based in Japan, among many others. In total, the company spends 5 per cent of its total revenue on research activities that aim at improving quality and overall performance (Ackel 10).

The extensive research and development activity at BMW has ensured that the company continuously offers products with high value and preference among the customers. The R&D particularly establishes market trends and tastes well in advance and uniquely formulates them and packages them in the BMW product such that it captivates the market. This gives BMW a competitive advantage ahead of its other rivals such as Mercedes Benz.

Design The BMW brand is particularly renowned throughout the world because of its spectacular design and models. Right from the beginning, the BMW brand was targeted to fill up a psychological gap within the market, and not just to cover a product gap. Having pioneered in the automobile industry, the Mercedes Benz was strongly viewed as a status symbol for

individuals in society who had achieved great goals. This status of the Mercedes Benz, which is BMW main rival in the market, spurred the latter’s think tanks into acting towards ensuring that the BMW also achieves a status symbol in the market. Thus, BMW set its objectives as those of building a better engineered car that could compete with Mercedes as a status symbol.

Currently, one of BMW’s main objectives is to manufacture cars that are of high quality, integrating high technology, as well as targeting high performance and exclusivity. The design focus of BMW is underlined by its activity in R&D, which is currently spending the highest percentage of its profits among other automobile manufacturers. The Munich-based R&D Center employs up to 5000 designers and engineers whose main focus is to develop automobiles with novel character. The design attributes targets to return value to its consumers in form of a unique and classic feel which can hardly be experienced with other brands in the market. The core identity of the BMW built over the years today places it at par or even ahead of other fancied brands like the Mercedes Benz (Franzen & Moriarty 510).

Marketing In marketing its brands to the consumers, BMW has strongly adopted personalized marketing such as use of experiments. This strategy has two main benefits to the firm in the sense that it promotes the product by communicating its features and benefits as well as associating it with exclusive and interesting experiences. Its main advertizing line, “Ultimate Driving Machine”, showcases the extent at which the driver is linked to the car, together with the driving experience realized on the road. Test drives are part of BMW’s marketing strategy in order to deliver a pleasing customer experience. In particular, the test drive aspect is the main demarcation that sets apart BMW with its main market rival Mercedes Benz. The idea behind

this scheme is not only to sell for the purpose of making profits but to demonstrate to the consumer how the acquisition of the brand can enrich his or her life.

The one-to-one marketing tool is yet another of BMW’s strength. This aims at enhancing the individual customer brand perception. Individual customers can have the BMW brand customized to suit their personal needs and interests by incorporating special options. The oneon-one contact provides the company’s salesmen with an ideal opportunity to reach the customers via the official website of the company or physically in showrooms.

The unique marketing strategy of the car manufacturer has enabled it to achieve customer loyalty. The experience which customers are subjected to prior to their actual acquisition of preferred models leaves them attached so much to the company. Even among potential consumers who are yet to buy a car, their dream car remains to be the BMW because of the little experience that they already have. This makes BMW to be a head of the park even before marketing efforts such as advertizing are considered (Maguire 7).

Proposed Improvements for the Value Chain Despite the presence of a highly proactive customer orientation currently available at BMW, there are other challenges which continue to inhibit room for improvement at the company. The number of proactive customer-oriented employees with full dedication seems to be few in comparison to BMW’s stature and size. Additionally, it would be appropriate for a clearly future-oriented company that seeks to address latent as well as future needs to report to a hierarchical level that is higher. There is still room at BMW for improvement of customer oriented climate that is proactive, especially guidance and atmosphere.

Owing to the significant role that is being played by independent dealers, it is important that BMW expands its direct customer touch points so as to increase the level of responsive

market orientation. This recommendation aimed at improving on the capability of market-based innovations can particularly be attained by doing the following; increasing customer-oriented insights’ proactive impact. These insights, on many occasions, may prove to be quite significant for purposes of making strategic decisions and, therefore, should be reported to the managing board directly. Secondly, the number of devoted proactive customer-oriented employees as well as their respective influence needs to be increased. This will in turn ensure that technological innovations which are engineer-driven target to meet and fulfill customers’ future needs. A perfect example in this regard would include changing from car selling and instead engaging in mobility solutions to mainly target metropolitan customers.

Finally, there is need to improve employee’s guidance and involvement towards positive customer-oriented behavior. The company’s management needs to act as good role model by emphasizing on the importance of latent as well as future needs. Thus, instead of emphasizing too much focus on the design and customization of personal cars, it would be wise for the management to zero in on mobility solutions and their upcoming value which has already been pointed out by the company’s think tanks (Herhausen 142).

Conclusion Value chain refers to the range of activities and practices which a manufacturer or producer subjects its finished products to with an aim of increasing the overall competitive advantage. Various strategies are employed together in order to ensure that the manufacturer attains this objective and also optimizes on his profitability. The BMW particularly focuses its value chain strategies on three main areas of research and development, design, and marketing.

The company spends huge amounts of its financial resources in supporting research and development activities for the purpose of producing high quality and performing cars. It also

employs hundreds of engineers and designers whose main purpose is to ensure the company produces exclusive cars, which captivates the market in a way that its main competitors cannot manage. The marketing strategy also targets to add value by enabling prospective buyers to have test drives and determine whether the car meets their expectations.

Works Cited Ackel, Philip. Why is the Automotive Producer BMW AG so successful? A Casestudy. Munich, GRIN Verlag, 2007. Print.

Franzen, Giep & Moriarty Sandra. The Science and Art of Branding. New York, NY: M.E. Sharpe, Inc, 2009. Print.

Herhausen, Dennis. Understanding Proactive Customer Orientation: Construct Development and Managerial Implications. Sabine Scholler: Gabler Verlag, 2011. Print.

Maguire, Marion. BMW Brand Audit. Noederstedt: GRIN verlag, 2004. Print.

Porter, Michael E. Competitive Advantage: Creating and Sustaining Superior Performance, New York, NY: Simon & Schuster, 1998. Print.