BMW - Growth Strategy Discussion
BMW – Growth Strategy Discussion
BMW is a car manufacturing company
that is synonymous with luxurious, innovative, quality and revolutionary
driving experience. The first car in fact was built just before the beginning
of World War 2, in exactly the year 1927. The evolution of the BMW vehicles has
experienced exponential growth in terms of its make, mechanics, engine power
and other mechanical engineering components which are essential for a long
lasting and durable car.
However, today we want to explore
a potential growth strategy for the BMW brand and the kind of strategy that is
most beneficial to the company’s already established reputation. Moreover, this
growth strategy should provide meaningful contributions to the expansion of the
brand beyond traditional BMW consumers. This means that BMW should be considerate
of various aspects that pertain to geographical areas, demographics, age,
cultural aspects, religious considerations, Living Standards Measure (LSM) and
other macro environmental factors.
Picture above: BMW 2 Series
Pictured above: BMW 2 M2 Series Coupe
Perhaps we must begin by
investigating the meaning of growth strategies as a measure of understanding
exactly which direction BMW ought to take in order to expand and grow.
According to Harrison and John
(2009:95) firms may select growth strategies that enhance their competitive positions
in current businesses. An internal growth strategy such as market penetration
is aimed exclusively at increasing a firm’s market share in an existing
business. Similarly, the external growth strategy of horizontal integration
increases market share immediately. However, growth strategies may also cause a
firm to expand the scope of its activities into new businesses, which is called
diversification.
BMW would need to consider an
acquisition strategy as means of gaining a significant competitive advantage
through obtaining a new customer base, entering new markets, acquiring state of
the art technology, obtaining rare and valuable resources and reducing the
market share of other luxury car manufacturers. An example of an acquisition as
far as the BMW Group is concerned would involve the purchasing of well-known
brands such the Mini Cooper, John Cooper Works and Rolls Royce just to name a
few. Furthermore, BMW has also acquired independent Servicing companies renowned
for their expertise in reworking the important components of a car such as Alphabet,
Digital Energy Solutions, Drive Now and Charge Now just to name a few
technological partners.
Pictures above: Mini Cooper S
The acquisition and ultimately,
the amalgamation of the above mentioned brands all work in unison to enhance
the brand name and portfolio of a mother body, which is BMW Group. This means
that BMW provides itself the opportunity to tailor make certain of its vehicle
models in accordance to the specific demands and expectation of the geographic
region they are trying to enter into. In addition, the acquisition of the above
top brands assists in re-educating consumers who would have previously associated
themselves with these independent brands to be familiar with the BMW Group, who
would have acquired these independent brands into one mother company.
The risks and benefits of
possible growth strategies:
BMW stands to gain significantly
in terms of accessing new markets through its acquisition with other top
vehicle and engineering brands. Moreover, the brand stands to cut costs in
Research and Development (R&D) because the data to conduct such studies
would come directly from former independent entities BMW Group would have
acquired. Furthermore, in terms of data analytics, BMW would be able to profile
it’s current, potential and future customers more accurately in terms of what a
specific geographic region needs, wants, expects and would grow accustomed to.
For example, BMW has developed SUV Double cab “bakkies” that are specifically
meant for the South African market. The reason behind the development of this
model is because BMW is cognisant of the fact that the land mass of South
Africa is largely made up of gravel roads, which means that smaller vehicle
models would not be able to withstand the pressure exerted onto the car by
these sort of roads.
However, risks of adopting this
strategy do tend to take time legally in terms of the Competition Commissions
Tribunal. This stems from the fact that the market forces ideally want to
create as much variety as possible in terms of competition and accessibility to
consumers. Therefore, when one entity “cannibalises” the majority of the market, it
calls for extensive feasibility studies and acquisition processes that the mother
body would need undergo before any acquisition is completed. Secondly, it calls
for heavy investment from a BMW point of view. Astronomical amounts of money
would need to be spent in re-integrating not only the systems but investing in
staff members from many different companies who would be joining the mother
company.
The future benefits and vision of
the new strategy:
The acquisition strategy will
allow brands such BMW to serve markets who are traditionally outside of the
ordinary BMW consumer mould. Meaning that it would have to revisit its positioning
strategy in order to appeal not only to its loyal customer base but to new ones
who are receptive to the BMW brand. This allows BMW to potentially rethink its
model make and target a young market with a car that is more trendy, youthful
and appealing to future would be drivers.
Lastly, BMW can establish various
manufacturing plants in different parts of the world in order to gain a global
perspective on how different markets require different products. Certainly, the
BMW brand would need to utilise its R&D department to establish the
feasibility of establishing a base where BMW doesn’t have a significant stronghold in.
Times are changing and in order to cover every consumer in every corner of the
globe, BMW would need to adapt to local demands and standards of every region
that it wishes to operate in.
Here is a glimpse into the new model that BMW is due to release in the year 2020.
Enjoy!
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