BMW COMPANY

EXECUTIVE SUMMARY 1.In 2001 the Border, Midland and Western Regional Assembly, as one of two NUTS II Regional Assemblies established in Ireland under the National Development Plan 2000- 2006 set out on a very ambitious, challenging yet exciting mission. The mission was to frame a credible and substantive Regional Innovative Actions Programme proposal which would address the main prevailing innovation challenges & technological deficiencies throughout the regions economy and involving all of the key regional stakeholders. Being recognised throughout the EU as a competent authority to manage and deliver a Regional Programme of Innovative Actions represented an extension to the Assemblys core management and monitoring responsibilities under the National Development Plan. More importantly the Assembly had a unique opportunity to establish itself as a proactive authority striving for the increased economic development of the region through new and innovative approaches to the delivery of collaborative initiatives. Following an extensive consultation process with the key agencies, a two year programme involving a process of Innovation auditing, pilot actioning (embracing novel approaches to ICT delivery, education outreach delivery, company innovation & policy assessment) and a strategic planning process was approved by the European Commission. The approved actions under each of the strategic themes were as follows:

Contents
History of BMW. Milestones of success.. BMW innovations.... Current situation at the company. Competitors. Future of the company. Personal attitude to the company.

BMW GROUP
Introduction
Nowadays BMW Group Company is powerful international company represented all over the world with more than 94.000 employees and over one million vehicles sold every year. Importers in 120 countries represent the BMW and worldwide sales organization comprised 24 sales subsidiaries. BMW has worldwide subsidiaries and manufacturing plants in Germany, Austria, the UK, the USA, Mexico, Brazil, South Africa, Egypt, Thailand, Malaysia, Indonesia, the Philippines and Vietnam. The activities of the business fields of the BMW Group are broken down into the segments BMW automobiles, Rover Automobiles, BMW motorcycles and Financial Services.1 BMW automobiles and Rover automobiles account for the larger part of activities within Group. These business fields manufacture, assemble and sell automobiles, spare parts and accessories. The BMW Motorcycles segment develops, manufactures, and sells motorcycles as well as spare parts and accessories. The Financial Segment focuses on the leasing of automobiles and financing credit for customers and dealers. Miscellaneous and consolidated companies segment include Aero Engines business, Software and other intra-segment activities.

Background
BMW was founded in 1916 as an aircraft-engine factory in Munich. In 1923 BMW builds first motorcycle. In 1928 BMW bought the car factory at Eisenach, Thuringia with the license to build a small car called the Dixie. This first BMW car was developed in Munich, like all other BMW products. In 1932 BMW 3/20 was developed in Munich, in 1933 - 6 cylinder's BMW 303. Until Second World War BMW showed active growth in all three branches: automobile, aero engine and motorcycles industries. o In 1973 the first BMW subsidiaries were created in France and North America. In 1979 BMW developed first digital engine electronics and began R&D on hydrogen engines. In 1984 the first European models with catalytic converters appear. Computers and robots revolutionize work in planning and production. In 1989 in the year the Iron Curtain fell, BMW has another first by producing half a million cars. The company also has a turnover of DM 20.000 million, and acquires Kontron GmbH, a specialist in process engineering. o The BMW Group is the most successful premium manufacturer in the automotive industry. One of the fundamental prerequisites for this success was and is ongoing leadership and innovation in the construction of cars perceived and acknowledged as leaders by the customer. Innovation upgrades the product in its substance, and only attractive product substance can secure the long-term success of a company in sales. A further point is that innovation is the right tool to clearly stand out from the competition in an increasingly competitive premium market. Modern premium cars today have reached a comparably high level of technology in many respects, the customer taking features such as passive safety and quality for granted right from the start. A few examples: o - Jet-guided High Precision Injection direct gasoline injection technology significantly reduces fuel consumption and increases engine output at the same time. o - Runflat tyres save space and weight by omitting the spare wheel and at the same time offer a significant enhancement of safety. o - Active Steering offers the driver supremacy on the road on fast straight-ahead stretches, outstanding agility in a rapid succession of bends, and comfortable steering behaviour when parking. In addition, the BMW Group will successively introduce the Auto Start/Stop Function feature to their range of models, starting with the BMW 1 Series. This innovation automatically switches off the engine as soon as the vehicle stops moving and starts it again extremely quickly as soon as the driver wishes to continue the journey. This technology can help to save a great deal of fuel, especially in urban stop-and-go driving conditions.

BMW GROWTH POLICY

The fundamental objective of the BMW Group is to continue the process of profitable growth by concentrating on high-profit market segments. Precisely, this is why the BMW group will use the potential of the BMW brand to an even greater success in a future. In the first half of the year 2000 BMW has already achieved best sales results ever in the history of the company. Worldwide deliveries have increased by almost 9% to 421 000 units; the turnover was approximately 15% above the corresponding figure in the first half of previous year. The production of BMW Group is developed to satisfy different customers needs, providing a variety of models for luxury, middle and low segments of market. Company constantly works out new technological decisions and improvements and nowadays sets new standards in production. BMW has already achieved in individual requests fulfilling. Now its ambiguous objective is to provide every customer with his individual, personalized car on a defined date agreed in advance. Moreover, BMW Group is setting a new benchmark to process the time required for a new car in distribution and production to 10 days. BMW Company continues to develop the concept of hydrogen engine automobile which according specialists estimations will dominate in the future automotive market because of the limited natural resources. First experimental cars with hydrogen engines already exist. In the future BMW heavily relies on the big E-commerce project, which supposed to increase the number of employees and customers five times within the next three years. BMW Group will bundle its e-business activities in a new company named nexolab. With nexolab, BMW Group creates a platform that will support the entire process chain - from the buying to the sales process for the manufacturing industry. Company has well-defined personnel policy. BMW treats people who works for the company not like corporate funds, but rather the key to its success. This concept leads to lower cost and economic growth. Nevertheless, the commonwealth of big multinational company strongly depends on successful performance of all its segments and divisions.

History of BMW company

Bayerische Motoren Werke AG (BMW), (English: Bavarian Motor Works) is an independent German automobile manufacturer founded in 1916. BMW is a worldwide manufacturer of high-performance and premium automobiles and motorcycles, and is the current parent company of both the MINI and Rolls-Royce car brands.

1916 Founding of Bayerische Flugzeug-Werke. The new company incorporated OttoWerke. BMW acquired the BFW site in 1922, but Bayerische Motoren Werke continues to regard BFWs establishment as its date of founding.

1917 Rapp-Motoren Werke was renamed Bayerische Motoren Werke GmbH. The company constructed a large plant and built engines for military aircraft there till 1918. 1918 Bayerische Motoren Werke GmbH was converted into a stock corporation with a share capital of 12 million Reich marks. BMW GmbH becomes BMW AG. After World War I, BMW (and Germany) were forced to cease aircraft (engine) production by the terms of the Versailles Armistice Treaty. The company consequently shifted to motorcycle production in 1923 once the restrictions of the treaty started to be lifted, followed by automobiles in 1928.

The circular blue and white BMW logo or roundel is often alleged to portray the movement of an airplane propeller, an interpretation that BMW adopted for convenience in 1929, which was actually twelve years after the roundel was created. In fact, the emblem evolved from the circular Rapp Motorenwerke company logo, from which the BMW Company grew. The Rapp logo was combined with the blue and white colors of the flag of Bavaria to produce the BMW roundel so familiar today.

By 1959 the automotive division of BMW was in financial difficulties and a shareholders meeting was held to decide whether to go into liquidation or find a way of carrying on. It was decided to carry on and to try to cash in on the current economy car boom enjoyed so successfully by some of Germany's ex-aircraft manufacturers such as Messerschmitt and Heinkel. Therefore the rights to manufacture the tiny Italian Iso "Isetta" were bought using a modified form of BMW's own motorcycle engine. This was moderately successful and helped the company get back on its feet. The dominating shareholder of the BMW Aktiengesellschaft since 1959 is the Quandt family. Stefan Quandt, Johanna Quandt and
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Susanne Klatten (born Quandt) together own about 46% of the stocks. The rest is in public float. BMW AG purchased the British Rover Group (which at the time consisted of the Rover, Land Rover, MINI and MG brands as well as the rights to defunct brands including Austin and Morris) in 1994 and owned it for six years. By 2000, Rover was making huge losses and BMW decided to sell the combine. The MG and Rover brands were sold to the Phoenix Consortium to form MG Rover, while Land Rover was taken over by Ford. BMW, meanwhile, retained the rights to build the new MINI, which was launched in 2001.

BMW innovations
1. BMW's reputation for innovation can be traced to its equally innovative lateral management techniques. "At lunch and breaks everyone is discussing ideas and projects all the time. It's somewhat manic. But it makes things move faster," says BMW chief designer Adrian van Hooydonk. Companies such as BMW that leverage workers' tacit knowledge through networks (cross-functional teams) "are widely ahead of their competitors. BMW is one of a handful of global companies including Nokia (NOK ) and Raytheon (RTN ) that have turned to networks to manage day-to-day operations, superseding classic hierarchies.

2. Lightning-Fast Changes BMW figures some 90% of the innovations in its new models are electronics-driven.

3. Mobile-Phone Messages To reach a younger crowd of potential buyers for its new 1 Series launch in 2004, BMW used mobile-phone messages as the main source of buzz, directing interested people to signups on BMW's Web site for pre-launch test drives in August that yearsomething unheard of in the industry at the time. The experimental tactic worked: BMW sparked responses from 150,000 potential customersand sales of the 1 Series took off when it was launched in September, 2004.

4. Ideas First Workers at the Bavarian automaker are encouraged from their first day on the job to build a network or web of personal ties to speed problem-solving and innovation, be it in R&D, design, production, or marketing. Those ties run across divisions and up and down the chain of command. BMW's complex customized production system, the polar opposite of Toyota's (TM ) standardized lines, is easier to manage if workers feel empowered to drive change. Like Dell Computer (DELL ), BMW configures its cars to customers' orders, so each auto moving down the production line is different.

Current situation at the company

BMW brand - has stood for one thing: sheer driving pleasure. Sporting and dynamic performance combine with peerless design and exclusive quality, resulting in the unique appeal of BMW automobiles. o The MINI brand wins hearts and turns heads. MINI is refreshingly different: extroverted, spontaneous and in every respect something out of the ordinary. Ideal for a society, the MINI Classic became a cult vehicle in the sixties and seventies. MINI is part of a lifestyle that is cosmopolitan and confident, ready for everything. o Rolls-Royce is one of the most fascinating and well-known brands in the world, the luxury motor car par excellence. For over 100 years, motor cars of the Rolls-Royce brand have stood for truly outstanding engineering, quality and reliability. o Premium is the key word for BMW Group motorcycles as well. BMW group sets standards with regard to technology, environmental protection and safety, and provides outstanding customer service in the pre- and after-sales phases. Financial services are a key factor for success in today's mobile world. They have established an extensive product portfolio which supplies expert information and advice for situations and questions relating to the finance sector. They provide the following services: financing and leasing, asset management, dealer financing and company car pools. German luxury car group BMW said its third quarter results 2008 were hit by the global financial crisis despite a rise in sales. "The financial crisis worsened and the consumption climate grew dark again." o In October 2008 the sales volume of one of the biggest producer of premium-class automobiles fell on 8.3% in comparison with October 2007 till 113005 cars. o It is connected with the decrease of demand on developed markets. The sales in Western Europe fell on 12%, in the USA on 5%, in Japan on 29%. Sales in developing countries have risen: in India on 10%, in China on 36%, in Russia on 40%. The performance of the BMW Group in the third quarter 2008 was perceptibly influenced by the economic downswing in the wake of the financial crisis. Ongoing consumer reticence in the main sales markets, the weak state of the used car markets as well as increasing refinancing costs had a substantial negative impact on the earnings of the BMW Group. Earnings for the nine-month period reflect the ongoing effect of the various adverse external factors described above. In the third quarter 2008, the BMW Group increased the cumulative amount of expense recognised for additional risk provision for residual value and bad debt risks to a total of euro 1,037 million. On top of this, expenditure in conjunction with previously announced measures to reduce the workforce reduced nine-month earnings by euro 258 million. The BMW Group continues to aim to achieve a return on sales of at least 6 % in 2010. The corresponding EBIT margin in the Automobiles segment would then be just under 6 % or better. This does, however, depend on the markets recovering
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Competitors
The current situation in the market is a growing and heavily competitive one. It has blossomed into a full-scale war between mostly the up-scale automobile manufacturers. BMW competitive landscape includes:

Daimler Toyota Volkswagen DAIMLER

Daimler AG with its businesses Mercedes-Benz Cars, Daimler Trucks, Daimler Financial Services, Mercedes-Benz Vans and Daimler Buses, is a globally leading producer of premium passenger cars and the largest manufacturer of commercial vehicles in the world. The Daimler Financial Services division has a broad offering of financial services, including vehicle financing, leasing, insurance and fleet management. Daimler sells its products in nearly all the countries of the world and has production facilities on five continents. The current brand portfolio includes the worlds most valuable automobile brand, Mercedes-Benz, as well as smart, Maybach, Freightliner, Sterling, Western Star, Mitsubishi Fuso, Setra, Orion and Thomas Built Buses.

TOYOTA COMPANY
Toyota Motor Corporation, Japan's 1 carmaker. The company makes a hybridpowered (gas and electric) sedan -- the Prius -- that is being snapped up in US and European markets. Its gas-powered cars, pickups, minivans, and SUVs (Sport Utility Vehicle) include such models as Camry, Corolla, Runner, Land Cruiser, Sienna, the luxury Lexus line, the Scion brand, and a full-sized pickup truck, the V-8 Tundra. Toyota also makes forklifts and manufactured housing, and offers consumer financial services. Once a dark horse in the global automotive game, Toyota has already passed Chrysler and Ford and is closing in on General Motors.

THE VOLKSWAGEN GROUP

Volkswagen (VW) is one of the worlds leading automobile manufacturers and the largest car producer in Europe. In 2007, the Group increased the number of vehicles delivered to customers to 5.734 million, corresponding to a 9.7 percent share of the world passenger car market. In Western Europe, the largest car market in the world, nearly every fifth new car (19.9 percent) comes from the Volkswagen Group. The Group consists of eight brands: middle class Volkswagen; luxury class Audi, Bentley, Bugatti, Lamborghini; family cars SEAT (Spain), Skoda (the Czech Republic). It also holds 68% of the voting rights in Swedish truck maker Scania and about 30% of MAN AG. The product range extends from lowconsumption small cars to luxury class vehicles. The Group operates 44 manufacturing facilities in 12 countries in Europe and in a further six countries in America, Asia and Africa. VW also offers consumer financing.

Company
BMW

Goods
Premium class cars (MINI) Luxury class automobiles (BMW, Rolls-Royce) Motorcycles Luxury cars (Mercedes-Benz Cars), Trucks (Daimler Trucks), Vans (Mercedes-Benz Vans), Buses (Daimler Buses) Luxury cars (Lexus, Scion) Premium cars (Camry, Corolla, Sienna) Pickups Minivans (Runner, Land Cruiser, RAV) Truck (V-8 Tundra) Low-consumption small, family cars (Volkswagen, SEAT, Skoda); Premium cars (Audi, Volkswagen); Luxury class automobiles (Bentley, Bugatti, Lamborghini) Trucks (Scania, Man)

Services
Financing and leasing, asset management, dealer financing and company car pools Daimler Financial Services: vehicle financing, leasing, insurance and fleet management. Consumer financial services: auto loans and leases and a full lineup of factory-backed insurance services and products

Daimler AG

Toyota Motor Corporation

Volkswagen Group

Consumer financing services: vehicle financing, direct bank business, insurance products, leasing, fleet management

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Products & Services

The BMW Group is one of the most successful multi-brand premium car manufacturers in the automobile industry. The BMW and Rolls-Royce brands of the company serve the premium and ultra premium segments of the automobile market. The BMW brand includes Sedans, Coupes, Tourings, Compacts, etc. The company sells small cars through its Mini premium brand. The following table illustrates key vehicle ranges under each of the Groups automobile

BMW Brand
BMW 1 Series BMW 3 Series models Sedan Convertible Coup Compact Touring BMW 5 Series 525i Sedan 530i Sedan 545i Sedan BMW 6 Series models Coup Convertible BMW Individual 6 Series Convertible BMW Individual 6 Series Coup BMW 7 Series models Sedan Security vehicle BMW X3 Series (X3) BMW X5 models X5
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Security vehicle

BMW Z4 (Z4) BMW M models M3 Coup M3 Convertible

Mini Brand MINI One MINI One D Rolls-Royce Brand Rolls-Royce Phantom Rolls-Royce 100EX MINI Cooper

Rolls-Royce Phantom (Centenary model), limited MINI Cooper S MINI One Cabrio

MINI Cooper Cabrio MINI Cooper S Cabrio M5 M5 Individual M6

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The Result Of Ordinary Business Activity In The BMW Automobile Segment Was Up By 5.1% To 2.106 Million Euro. Generated By BMW Automobile Roi Has Increased From 20.46% In 1998 To 20.83% In 1999. This Branch Also Generates The Highest Earnings On Sales 8.56% In 1999. Sales In Bmw Motorcycles Segment Rose Significantly By 17.8% To 769 Million Euro. This Allowed An Improvement Of The Operating Result Up By 12.5% Comparing To The Previous Year. Sales In The Rover Automobiles Was Up By 2% Over The Previous Year To 8 368 Million Euro. The Losses In The Rover Automobiles Due To The Market Conditions And Currency Effects Were Up By 250 Million Euro To 1 207 Million Euro Or 26.1%. The Roi Drops From 16.77 % In 1998 To 19.23% In 1999. The Return On Sales Declines From -11.30% In 1998 To -13.97% In 1999.

The BMW segments performance assets, BMW segment million euro 1999 10108 6277 313 20530 1998 9792 5705 303 15287

sales million euro 1999 24610 8638 769 6153 1998 21980 8466 653 5771

BMW automobiles Rover automobiles BMW motorcycles Financial Services

result from ordinary Bus. Activities, mil. euro 1999 1998 2106 2003 -1207 -957 18 16 316 298

BMW segments ratios BMW segment BMW automobiles Rover automobiles BMW motorcycles Financial Services return on investment, % 1999 1998 20.83% 20.46% -19.23% -16.77% 5.75% 5.28% 1.54% 1.95% return on sales,% 1999 1998 8.56% 9.11% -13.97% -11.30% 2.34% 2.45% 5.14% 5.16%

The Financial Services division was successful; sales increased by 6.6% to 6 153 million euro. The result in this segment of the BMW Group increased by 6% to 316 million euro.

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COMPARISON WITH THE FORD MOTOR COMPANY

The main competitor of BMW Group takes the greater share of automobile market. The total balance sheet value of Ford Motor Company exceeds 7 times correspondent value of the BMW Group. Sales of Ford Motor Company counted 7220 thousand of vehicles (136973 million of dollars) against 1187 thousand of vehicles (34677 million of dollars) sold by BMW Group in 1999.2 See Exhibit 2 to compare financial performance of the companies.

INVESTMENT OVERVIEW
The BMW ordinary share is listed since 1926. After the currency reform BMW shares were traded as shares with a par value of DM 50, DM 100 and DM 1000. In 1989 BMW introduced preferred shares traded with a par value of DM 50. The preferred shares are in contrast to ordinary shares non-voting shares, but bear an extra dividend. In 1999 BMW Group introduced the 1 Euro per value share. As of December 31, 1999 the subscribed capital of BMW AG amounted to EUR 670,687,730 and comprised of 622,227,918 ordinary shares and 48,459,812 preferred shares.

During 1999 BMW ordinary and preferable share trends kept with market trends (See Figure 6). Uncertainty about development at Rover decreased the share price in the first half of the year. Then the successful development of the BMW brand and the markets growing confidence in successful outcome of the restructuring measures at Rover pushed up the price. On the last day of the month year-end price was 30.65 euro and the BMW ordinary share lay 22 % above the price quoted in the previous year, beating CDAX automobile index. While the BMW preference share in contrast was enable to turn in the same result as the ordinary share. The closing price of 14 euro put the preference share 5% below the previous year price. In the course of a decade, investors who bought shares at the beginning of 1990 have achieved an average annual return of nearly 19 %. Over the past 5 years yields have been high as 24 % (yields on federal bonds only reached 7 % respectively). In the first half of the year 2000, BMW common stock showed a better development than the shares of any other German car manufactures. Compared with the value of 25.42 on 30 June 1999, stock value has increased in the meantime 24.7% to euro 31.70.

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BMW AND FORD RATIOS IN COMPARISON , 1999

BMW LIQUIDITY Current ratio DEBT3 Quantity (total liabilities/total funds) Quality (current liabilities/debt) ASSETS MANAGEMENT ASSET TURNOVER (sales/assets) DAYS collection period credit period SALES (sales 99 - sales 98)/sales 98*100% EXPENSES production cost/sales marketing and administration cost/sales total expenses/sales MARGIN AND PROFIT ROS (profit/sales) GROSS PROFIT (gross profit/sales) ROI (EBIT/assets) DUPONT ANALYSIS /ROI (EBIT/sales x sales/assets) ROE (net profit/equity) before extraordinary result ROE (after extraordinary result) 2.13 89% 39% FORD 1.98 90% 17%

0.92 25.64 23.74 6.6% 83.59% 13.66% 97.25% 2.71% 16% 2.48%

0.50 10.04 38.51 15.0% 86.91% 6.97% 93.88% 6.12% 13% 3.03%

2.71% X 0.92 6.12% X 0.50 16.86% 26% -63.25%

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BMW Marketing Innovation

Since the competition started to imitate BMWs advertising messages of outstanding quality, BMW decided to come up with a unique way of reaching its target audience. The company did so by hiring Fallon Worldwide, and advertisement agency based in Minneapolis, MN, to come up with a new campaign. Fallon developed the concept The Hire series. Fallon's responsibility also included the way in which these movies were to be delivered to BMW's target audience. It was also questionable whether the campaign should be the same throughout the world, or if it should be localized to adapt to language and consumer taste differences. In order to attract highly recognized directors, as well as actors, BMW was willing to spend a large amount of money. In addition to coming up with a unique advertising campaign, BMW also wanted to change their image. One of the goals was to make BMW look, not only cool, but likeable, which the brand needs to do to combat negative perceptions some people have based on old associations with the 80s style yuppie arrogance.

BMW's Revenue Sources

80% 70% 60%

50% 40% 30%

20% 10% 0% Auto Motor Cycles Finance Leasing Other
2000 Revenue

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CHAPTER 6: SWOT ANALYSIS

Strengths
Worldwide, the Bmw Group Is One Of The Most Successful Multi-Brand Premium Car Manufacturer In The Automobile Industry. The Rolls-Royce Phantom Holds The Number One Position In The Super-Luxury Car Segment. Moreover, Bmw Is The Only Automobile Manufacturer Possessing Three Non-Overlapping Premium Car Brands In Its Portfolio. The Bmw Group On An Average Spends Around X% Of Its Revenues On R&D, Which Is One Of The Highest In The Industry. The Keen Focus On R&D Is Evidenced By The Number Of New Models The Group Has Released Over The Past Few Years. Thanks To Its R&D Efforts, Bmw Has Also Developed An Innovative Array Of Engines Such As The Hydrogen H2r Hydrogen Combustion Engine, The Straight-Six Petrol Engine 3 Etc.

Weaknesses
BMWs Heavy Cost German Base Might Affect The Profitability Of The Company In The Long Run As More And More Competitors Shift Product Development Activities To Lower Cost Countries. Bmw Might Be Forced To Negotiate A Way To Maintain Cost Competitiveness And Its Reputation For German Engineering Excellence.

Opportunities
The Expansion of the European Union (Eu) To Xx Countries from Xx Countries In May 2004 has converted the Eu into the Worlds Biggest Trading Bloc with a Combined Population of Million. This Offers Ample Opportunities For Bmw To Leverage Its Strong Around European Position In The Premium Car Segment To Garner More Market Share Across New And Expanding Markets. BMWs Concerted Forays into the Chinese Luxury Car Market Portends to an Increase In The Earnings of the Company over the Coming Years. China Already Ranks As the ThirdLargest Market For BMWs 7 Series Luxury Limousines. Bmw Predicts That Robust Growth Will Place China among the Companys Seven Largest Markets in A Few More Years. This is A Significant Improvement over the 12th Position Held by the Chinese Market for BMW In 2002.

Threats
The Continuing Decline of the Dollar against the Euro Threatens to Undercut BMWs Top line. Thereby Tempering Its Profitability. The Rising Price of Raw Materials Such As Steel Threatens to Offset the Companys Earnings.
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BMW: THE PRODUCT LIFE CYCLE

BMWs strategy is to keep its products in the introduction and growth stages by periodically introducing new models in each of its product lines. In fact, in contrast to many auto manufacturers who launch a new model and then leave it unchanged, BMW works continually to improve its existing products. Explains McDowell, Anyone can sell a lot of cars the first year, when a car is new. It is our challenge to constantly improve the car and to continuously find new innovative ways to market it. BMW started in 1916 as a manufacturer of airplane engines. When you look at our roundel, the BMW symbol, it is a blue-and-white circle, says McDowell, that is meant to represent the spinning propeller on a plane, to remind us of our heritage. Since then the company has added motorcycle and automobile production. Today, BMW is one of the preeminent luxury car manufacturers in the world. BMW produces several lines of cars including the 1, 3, 5, 6, and 7 series, the Z line of roadsters, the X line of sport activity vehicles, and the M line of motor sport sedans. Currently, the U.S., Germany, and the United Kingdom are BMWs largest markets. BMW recently introduced its 1 seriesa compact car designed to compete with the Volkswagen Golf in Europe and the Rabbit in the U.S.to attract a new younger audience. In addition BMW owns the MINI and Rolls-Royce brands. Combined sales of BMW, MINI, and RollsRoyce exceed $59 billion and are expected to increase 40% by 2020. Reasons for the growing popularity of BMW include high-performance products, unique advertising, an awardwinning website, innovations such as smart technologies that learn what the driver prefers, and new vehicles such as the V-serieswhich will compete with popular minivans. BMW cars typically have a product life cycle of 7 years. To keep products in the introductory and growth stages, BMW regularly introduces new models for each of its series to keep the entire series new. For instance, with the 3 series, it will introduce the new sedan model one year, the new coupe the next year, then the convertible, then the station wagon, and then the sport hatchback. Thats a new product introduction for five of the seven years of the product life cycle. McDowell explains, So, even though we have seven-year life cycles, we constantly try to make the cars meaningfully different and new about every three years. And that involves adding features and other capabilities to the cars as well. How well does this strategy work? BMW often sees its best sales numbers in either the sixth or seventh year after the product introduction. As global sales have increased, BMW has become aware of some international product life cycle differences. For example, it has discovered that some competitive products have life cycles that are shorter or longer than 7 years. In Sweden and Britain, automotive product life cycles are 8 years, while in Japan they are typically only 4 years long.

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BMW uses a system of product advocates to manage the marketing efforts of its product lines. McDowell explains that a series advocate would actually use and drive that series and would constantly be thinking How can I better serve my customer? In addition to modifying each model throughout the product life cycle, BMW modifies the markets it serves. For example, during the past 10 years BMW has expanded its market by appealing to a much larger percentage of women, African Americans, Asians, and Hispanics. BMWs positioning strategy is the same worldwide and that is to offer high-performance, luxury vehicles to individuals. You wont find it as a taxi or a fleet car, says McDowell. Generally, once a model is positioned and introduced, BMW avoids trying to reposition it. The Z, X, and M series dont quite fit in with this system. BMW had a tradition of building experimental, open-air cars and calling them Zs, so when one of them was selected for production, BMW decided to continue with the Z name. For the sport activity vehicles BMW also used a letter namethe X seriessince the four-wheel-drive vehicle didnt fit with the sedan-oriented 1, 3, 5, 6, or 7 series. The M series has a 20-year history with BMW as the line with the luxury and racing-level performance. The lettered series now includes the Z4, X3, X5, M3, M5, and M6. Compared to the evocative names many car manufacturers choose to garner excitement for their new models, the BMW numbers and letters are viewed as a simple and effective branding strategy. The ultimate extravagance in buying a car is having everything customized to the owners preferences. Today, 80% of European buyers and 30% of U.S. buyers use the BMW website to choose from 350 model variations, 500 options, 90 exterior colors, and 170 interior trims to create their perfect vehicle!

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McKinsey 7S Framework
McKinsey's 7S Model that was created by the consulting company McKinsey and Company in the early 1980s. Since then it has been widely used by practitioners and academics alike in analyzing hundreds of organizations. The paper explains each of the seven components of the model and the links between them. It also includes practical guidance and advice for the students to analyze organizations using this model. At the end, some sources for further information on the model and case studies available on this website are mentioned. The McKinsey 7S model was named after a consulting company, McKinsey and Company, which has conducted applied research in business and industry (Pascal & Athos, 1981; Peters & Waterman, 1982). All of the authors worked as consultants at McKinsey and Company; in the 1980s, they used the model to analyze over 70 large organizations. The McKinsey 7S Framework was created as a recognizable and easily remembered model in business. The seven variables, which the authors term "levers", all begin with the letter "S":

McKinsey's 7S Model
These seven variables include structure, strategy, systems, skills, style, staff and shared values. Structure is defined as the skeleton of the organization or the organizational chart. The authors describe strategy as the plan or course of action in allocating resources to achieve identified goals over time. The systems are the routine processes and procedures followed within the organization. Staff are described in terms of personnel categories within the organization (e.g. engineers), whereas the skills variable refers to the capabilities of the staff within the organization as a whole.
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Description of 7 Ss Strategy:
Strategy is the plan of action an organization prepares in response to, or anticipation of, changes in its external environment. Strategy is differentiated by tactics or operational actions by its nature of being premeditated, well thought through and often practically rehearsed. It deals with essentially three questions (as shown in figure 2): 1) where the organization is at this moment in time, 2) where the organization wants to be in a particular length of time and 3) how to get there. Thus, strategy is designed to transform the firm from the present position to the new position described by objectives, subject to constraints of the capabilities or the potential.

Structure:
Business needs to be organized in a specific form of shape that is generally referred to as organizational structure. Organizations are structured in a variety of ways, dependent on their objectives and culture. The structure of the company often dictates the way it operates and performs (Waterman et al., 1980). Traditionally, the businesses have been structured in a hierarchical way with several divisions and departments, each responsible for a specific task such as human resources management, production or marketing. Many layers of management controlled the operations, with each answerable to the upper layer of management. Although this is still the most widely used organizational structure, the recent trend is increasingly towards a flat structure where the work is done in teams of specialists rather than fixed departments. The idea is to make the organization more flexible and devolve the power by empowering the employees and eliminate the middle management layers (Boyle, 2007).

Systems:
Every organization has some systems or internal processes to support and implement the strategy and run day-to-day affairs. For example, a company may follow a particular process for recruitment. These processes are normally strictly followed and are designed to achieve maximum effectiveness. Traditionally the organizations have been following a bureaucratic-style process model where most decisions are taken at the higher management level and there are various and sometimes unnecessary requirements for a specific decision (e.g. procurement of daily use goods) to be taken. Increasingly, the organizations are simplifying and modernizing their process by innovation and use of new technology to make the decision-making process quicker. Special emphasis is on the customers with the intention to make the processes that involve customers as user friendly as possible (Lynch, 2005).

Style/Culture:
All organizations have their own distinct culture and management style. It includes the dominant values, beliefs and norms which develop over time and become relatively enduring features of the organizational life. It also entails the way managers interact with the employees and the way they spend their time. The businesses have traditionally been
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influenced by the military style of management and culture where strict adherence to the upper management and procedures was expected from the lower-rank employees. However, there have been extensive efforts in the past couple of decades to change to culture to a more open, innovative and friendly environment with fewer hierarchies and smaller chain of command. Culture remains an important consideration in the implementation of any strategy in the organization.

Staff:
Organizations are made up of humans and it's the people who make the real difference to the success of the organization in the increasingly knowledge-based society. The importance of human resources has thus got the central position in the strategy of the organization, away from the traditional model of capital and land. All leading organizations such as IBM, Microsoft, Cisco, etc put extraordinary emphasis on hiring the best staff, providing them with rigorous training and mentoring support, and pushing their staff to limits in achieving professional excellence, and this forms the basis of these organizations strategy and competitive advantage over their competitors. It is also important for the organization to instill confidence among the employees about their future in the organization and future career growth as an incentive for hard work.

Shared Values/Superordinate Goals:

All members of the organization share some common fundamental ideas or guiding concepts around which the business is built. This may be to make money or to achieve excellence in a particular field. These values and common goals keep the employees working towards a common destination as a coherent team and are important to keep the team spirit alive. The organizations with weak values and common goals often find their employees following their own personal goals that may be different or even in conflict with those of the organization or their fellow colleagues.

Skills:
A detailed case study or comprehensive material on the organization under study is required to analyze it using the 7S model. This is because the model covers almost all aspects of the business and all major parts of the organization. It is therefore highly important to gather as much information about the organization as possible from all available sources such as organizational reports, news and press releases although primary research, e.g. using interviews along with literature review is more suited. The researcher also needs to consider a variety of facts about the 7S model.

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PORTFOLIO ANALYSIS
The objective of portfolio analysis is to help managers construct a balanced portfolio of businesses which will allow the organization to achieve its objectives.

BCG MATRIX
Market share

High

Low

High
Market growth

Stars

Question marks

Low

Cash cows

Dogs

Figure 4.12a The original Boston Consulting Group Matrix (BCG)

The original portfolio matrix was developed by the Boston consulting group and described by Johnson and Scholes. Note that the two parameters on the matrix are market growth and relative market share (defined as a company's sales in a particular market divided by the sales of its largest competitor). These parameters are derived from the experience curve with its emphasis on market share as a prime cause of superior profitability and the life cycle concept which divides markets into phases according to rates of growth. Most texts calibrate the axes as follows: on the vertical axis the midpoint is 10% per annum and on the horizontal axis the midpoint is x 1.5 with the far right as x. 1 and the far left x 10.

BCG or growth share matrix

Stars
High growth / high share. Rapid growth using large amounts of cash to maintain position. Also generate large amounts of cash because they are business leaders. The products which comes under these: BMW 5 Series 525i Sedan 530i Sedan 545i Sedan Coup BMW 7 Series models Sedan Security vehicle
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Cash cows
Low growth / high share. Should have a superior market position and low costs. Profits and cash flow should be high. The products which comes under these: BMW 1 Series BMW 3 Series models Sedan Convertible Coup Compact Touring BMW 6 Series models Coup Convertible BMW Individual 6 Series Convertible BMW Individual 6 Series

Dogs
Low growth / low share. Poor competitive position and poor profits. Low growth means that there is little hope of building share. The products which comes under these: MINI Cooper Cabrio MINI Cooper S Cabrio M5 M5 Individual M6

Question marks
High growth / low share. Cash needs are high because of high growth but cash generation is low because of low share. The products which comes under these: BMW X3 Series (X3) BMW X5 models X5 Security vehicle BMW Z4 (Z4)

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THE INDUSTRY ATTRACTIVENESS-BUSINESS STRENGTH MATRIX

The Industry Attractiveness-Business Strength Matrix

Industry Attractiveness
High Medium Low

Business Strength

Invest/ Grow Selective Investment Harvest/ Divest

Low

Medium

High

Product Life Cycle Product Life Cycle

Sales and Profits Over the Products Life From Introduction to Decline
Sales and Profits ($) Sales

Profits

Time Product Development Losses/ Investments ($) Introduction Growth Maturity Decline

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