Strategic Management: Macmillan and Tampoe OUP

Strategic Management
Macmillan and Tampoe

OUP
1 (c) Macmillan & Tampoe 2001

Case Examples
BMW in 1999

The reasons for choosing BMW
 The company is well known to most students in the UK

 The industry structure and challenges quite well understood
 It’s a sizable company but a minnow (table C3.1) in terms of
global car production and sales.
 Strong European and US brand image and customer base but
faces tough decisions on how to move forward
 Faced with many options – merge, get taken over, buy to
grow, move into new segment, become specialist supplier,
stay as now.
 Interesting ownership structure.
 Provides comparison with Japanese companies who have
moved into the UK to spread their wings in Europe

Critical Strategic Issues
 Car industry converging into mega-corporations where

size seems to be the determining factor
 BMW very small in comparison to top five (see table
C3.1)
 Can it survive by staying roughly the same size, selling
their extremely successful and sought after high margin
cars to discerning customers?
 If not, how can it grow?
 How can it retain current ownership structure so that
major shareholders do not see their ownership diluted or
lose control of the company?

Consequences of a growth strategy
 Can it exploit its core competence in new markets?
 Can it modify its ethos to match new markets?
 Should it abandon its proven competence and approach
to business?
 How does it choose a new approach?
 Should it seek to develop a new customer base with
wider potential sales?
 Should it spread its brand over wider range of products?
 How will it counter threats to its new approach?
 How will it position itself vis-a-vis it chosen competition?

Strengths pre-Rover acquisition
 Company ranked among the more admired companies
in the auto industry
 Its chief executive a respected industry and national
figure with the industry in his blood
 Customers are loyal to the brand
 5 series is considered the benchmark for the executive
car market
 Profitable
 Perceived to be invincible
 Company announces expansion plans by buying Rover
from BAe in the UK
Possible causes of BMW success
 Its aircraft and motorcycle heritage of quality and

driveability
 Its ability to deliver high value, reliable, consistent
quality
 Its ownership structure (see page 306)
 Its quality of management which was ranked very
high
 Its marketing ability which positioned it as the
epitome of the best and most desirable products in
the industry

Post-Rover Acquisition
 Inherited a range of products to exploit a slightly different

market segment and customer
 Required huge ongoing investment to get production
facilities and product to meet BMW standards
 Attempting to improve Rover’s share of its home market
 UK acquisition draining finance and management time
and effort
 What they got was not what they thought they were
buying
 BMW itself had competing products in its pipeline
 UK acquisition sours

Untangling its investment
 Chief executive and his second in command

leave the company
 Divided the roles and appointed a chief
executive
 Went in search of a new chairman
 Sold its UK subsidiary for £1
 Returned to its knitting having written-off
£billions of investment in the UK
 Harmed its reputation in the UK for a short time

Causes of BMW failure to exploit Rover
 Was it the strategy or the implementation of the

strategy?
 Was it shifts in shape and structure of the industry which
was going through a major reshuffle?
 Was it failure to tackle the structural issues to do with
organisation, management controls, and culture of
Longbridge works?
 Was it because Rover image did not appeal to the
emerging generation – too associated with their parents
and grand parents – ‘uncool’?
 Was it arrogance and complacency?

Question 1 – Survival in global car industry
 Obviously the BMW board felt that it had to grow in size and widen
its appeal to survive as a independent producer of quality cars
 Its 3 and 5 series car were selling very well. There were new
models in the offing (MX5, Z3, Z8 new 3 Series)
 Expanding volume in its own products could cause oversupply and
result in diminution of market appeal with knock-on effect on
residuals and exclusivity
 Growth route chosen was one that protects own brand and widens
scope by entering mass market
 It decided to do this by acquisition of an ailing company but one that
sold to a different market
 It felt that it could inject its ‘magic’ to Rover

Question 2 – Growing the business
 Choices were organic growth, alliances and/or

acquisitions
 Organic growth too slow to match pace set by
other major players who were buying into niche
markets
 Few partners with whom to form alliance
 Fewer still available for purchase
 Choice meant two things – deciding the route
and then picking the target

Question 2 – The way ahead
 By the time BMW took the decision to buy Rover its

choices had diminished because Ford, and GM had
acquired many desirable brands such as Volvo, Jaguar
 VW had acquired lesser brands such as Skoda and SEAT
and then a prestige brand in Bentley and Rolls Royce
 Mergers and alliance opportunities were in France with
Renault or Japan with Nissan, also South Korea
 BMW may not have had the management expertise to
work with non-European manufacturers
 BMW woke up too late and found itself with only Rover as
an acquisition opportunity

Question 3 – Making a Success of
Rover
 Point out that the ‘devil is in the detail’
 Implementation should take consideration of survival and
also quality improvement
 Change culture first before throwing money at the
business
 Protect BMW at all costs
 Do not try to make Rover equivalent to BMW as it is a
different product in a different market
 Rationalise product range
 i.e., keep Mini and Range- Rover - Kill the rest

Question 4 – Rover In hindsight
 Still a good buy?
 Product range complementary to BMW
 Offered entry to new market
 Opportunity to learn how to emulate VW, Skoda,
Seat as way forward
 Reap before re-investment

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Strategic Management

Macmillan and Tampoe

1 (c) Macmillan & Tampoe 2001

2 (c) Macmillan & Tampoe 2001

 The company is well known to most students in the UK

3 (c) Macmillan & Tampoe 2001

 Car industry converging into mega-corporations where

4 (c) Macmillan & Tampoe 2001

5 (c) Macmillan & Tampoe 2001

 Its aircraft and motorcycle heritage of quality and

7 (c) Macmillan & Tampoe 2001

 Inherited a range of products to exploit a slightly different

8 (c) Macmillan & Tampoe 2001

 Chief executive and his second in command

9 (c) Macmillan & Tampoe 2001

 Was it the strategy or the implementation of the

10 (c) Macmillan & Tampoe 2001

11 (c) Macmillan & Tampoe 2001

 Choices were organic growth, alliances and/or

12 (c) Macmillan & Tampoe 2001

 By the time BMW took the decision to buy Rover its

13 (c) Macmillan & Tampoe 2001

14 (c) Macmillan & Tampoe 2001

15 (c) Macmillan & Tampoe 2001

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