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  1. 1. “The truth is that innovation is a key element for BMW’s success in the premium market and one of the key motivations to buy a BMW” ----- BMW Group02/25/13 1 BMW’s Innovation strategies
  2. 2. 02/25/13 2 BMW’s Innovation strategies
  3. 3. BMW MODELS VIDEO02/25/13 3 BMW’s Innovation strategies
  4. 4. Background Note BMW founded as Aero-engine manufacturing company in 1917 Restrictions b/o world war Motorcycle and passengers cars Series of acquisitions & joint venture First motorcycle model BMW R32 in 192302/25/13 4 BMW’s Innovation strategies
  5. 5. Followed by….. Dixi (1929) 315/1 (1934) 319/1 (1934)02/25/13 5 BMW’s Innovation strategies
  6. 6. BMW 238 sports in 1936 ..success in international racing events b/o lightweight construction, outstanding aerodynamics, high performance and elegance…. Company prestige crossed Germany02/25/13 6 BMW’s Innovation strategies
  7. 7. Until 1950s BMW concentrated on limited no. of models and focus on other parts of EuropeBMW 507 Roadster Powerful 3.5 lt., 8-cylinder and lightweight metal engine…. huge success in automobile world02/25/13 7 BMW’s Innovation strategies
  8. 8. Rainy Days…… In 1950’s despite sustained effort to emerge as manufacturer of prestigious vehicle faced bankruptcy on account of decline in motorcycle market With the help of an industrial financer, Herbert Quandt BMW was able to thwart takeover bid by Mercedes Quandt exercised majority of BMW’s shares and initiated restructuring exercise to bring company back on track BMW 700, a small car, came as the much needed boost and BMW regained its position in the market02/25/13 8 BMW’s Innovation strategies
  9. 9. As part of restructuring initiative, BMW focused on sports sedan leading to the launch of its first of ‘New Range’ BMW’s in 1961 Greater emphasis on advertising & sales support, combined with improving engineering and performance related aspects. During 1970’s and 1980’s BMW expanded its operation in the USA Asia and Australia… cars got perceived as more stylish brand than other German brands like Volkswagen and Mercedes and became serious competitors to these brands in the premium car business. In 1989 BMW appointed Karl Gerlinger (master marketer) to lead marketing division in the USA Sales in the USA 1991…53,000 units. in 1992…. 66,000 units Announced to set up new plant outside Germany … Spartanburg, South Carolina (US) in 1992 In 1992 succeeded in outselling Mercedes in Germany Acquired “ROVER” in 1994, production capacity increased by 3% to 503,526 units in 199502/25/13 9 BMW’s Innovation strategies
  10. 10.  In 1995 introduced BMW 5 Series and Z3 Roadster as well Positioned as elegance dynamic performance and safety02/25/13 10 BMW’s Innovation strategies
  11. 11. BMW enter into small and medium size car categories with “The compact” 1997 BMW 316g Compact and 518g touring version - first European natural gas car manufacture. BMW Diversification (1990’s)BMW financial service Bavaria Wirtschaftsagentur &Softlab Bavaria Lloyd Reicburo BETEK Bar-und Energietechnik Kontron Electronic02/25/13 11 BMW’s Innovation strategies
  12. 12. BMW 1992 BMW 1998Revenue £ 15.97 billion £ 32.28 billionNet profit £116 million £ 462 million In 1997 BMW ranked 69th among Fortune Global 500 companies FIZ (Munich) LITZBMW R&D Hub: PATYO (California) BMW Designwork & Oxnard Testing Facility (California)02/25/13 12 BMW’s Innovation strategies
  13. 13. One Sausage Three Different Length BMW 3 Series Focused on product efficiencies, constant generate new product/components ideas, launched new upgraded product02/25/13 13 BMW’s Innovation strategies
  14. 14. BMW Innovation Management Model 1997 BMW approached “Business Innovation Consortium (BIC), USA” Problems with BMW Selection of best ideas Difficulty in prioritizing the innovations flooding in divisions What to do… Selection of winning innovation with short cycle time Integrating the innovation process into BMW’s core business process02/25/13 14 BMW’s Innovation strategies
  15. 15. By early 1998 BMW had created a well defined innovation management process focused on -- Unique selling propositions for each car to be launched -- Breakthrough innovations -- Concept cars to convey brand image at automobile showsRole of IMP or NPD Systematic channeling of potential innovations to actual product development process Ensured creative environment in the company NPDInnovation Research Innovation Management Innovation Transfer02/25/13 15 BMW’s Innovation strategies
  16. 16. Steps in BMW’s NPD process Innovation Research Innovation Management Innovation Transfer Global technology scouting Innovation councils Definition of vehicle USP Virtual innovation agency (VIA) Evaluation and selection Identification of innovations Trend Analysis Resource allocation ready for series development Coverage of external and Monitoring and reporting Buy-in of vehicle project internal invention sources Annual process02/25/13 16 BMW’s Innovation strategies
  17. 17. Individual project were categorized under 4 categories Potential Innovations Must Innovations Top Innovations Breakthrough Innovation02/25/13 17 BMW’s Innovation strategies
  18. 18. The Result By 2002 BMW significantly decreased the ‘time-to-market’ new products and linked its revenue to the introduction of leading-edge product Focus on strengthening its position as market leader in the premium segment Adopted product offensive strategy, increased R&D expenditure by 53%, reduced time b/w idea generation and product development, complaints came down drastically, i-Drive technology, Active Steering Revenue in 2002 $49.5 billion (9.9% increase compare to 2001), profit $2.36 billion (8.3% increase compare to 2001)02/25/13 18 BMW’s Innovation strategies
  19. 19. The result02/25/13 19 BMW’s Innovation strategies
  20. 20. The result….. 02/25/13 20 BMW’s Innovation strategies
  21. 21. The Result….. $29,400 $75,600 02/25/13 21 BMW’s Innovation strategies
  22. 22. Source: - http://www.businessweek.com/magazine/content/03_23/b3836005_mz044.htm02/25/13 22 BMW’s Innovation strategies
  23. 23. BMW02/25/13 23 BMW’s Innovation strategies
  24. 24. Marketing MixProduct BMW 3Series : Sedan, Coupe, Convertible, Touring, Compact BMW 5Series : Sedan, Touring BMW 6Series : Coupe, Convertible BMW 7Series : Sedan BMW Z4 : Roadster BMW X3 BMW X5 BMW M : Sedan Mini One Mini Cooper02/25/13 24 BMW’s Innovation strategies
  25. 25. PriceBMW price range are from £ 16,000 to £ 60,000PlaceGlobally02/25/13 25 BMW’s Innovation strategies
  26. 26. Promotion Same advertising company WCSR since 1979 James Bond film - The World Is Not Enough (Z8 before its launch) Austin Power 3-Goldmember -( Mini cooper) “VIRAL MARKETING” BMW Films (e.g.. ‘The Hire’ - increased sales by 12.5% in 2001 compare to 2000 Marketing campaign ‘The Ultimate Driving Machine’ Golden Eye: BMW Z 3 Tomorrow Never Dies: BMW 750iL, R1200 Motorbike 02/25/13 26 BMW’s Innovation strategies
  27. 27. segmentation Geographic Region Globally Density of area Urban Demographic Age-above 30 Income-$ 25,000 and above annually Occupational-professional, Businessmen Psychological Personality Extrovert, Novelty seeker Learning involvement high Perception low risk Attitude positive02/25/13 27 BMW’s Innovation strategies
  28. 28. Psychographic Lifestyle segmentation ---status seeker Socioculture Social class ---middle upper and upper Behavioral Benefit ---safety, elegance, technology Loyalty status --- medium Readiness stage ---aware, interested02/25/13 28 BMW’s Innovation strategies
  29. 29. Positioning Attribute Image Differentiation Image02/25/13 29 BMW’s Innovation strategies
  30. 30. SWOT ANALYSIS STRENGTH Diverse ranges of Products - BMW, MINI and Rolls-Royce Strong Cash Flow Position Increase turnover and trading profit Strong Balance Sheet Worlds leading Premium Quality Automobile Manufacturer Brand Awareness Human resources Capabilities to turn resources into advantages02/25/13 30 BMW’s Innovation strategies
  31. 31. WEAKNESSES Perception of High Prices Customer disinterest Environmental issues: Pollutions Buyer sophistication and knowledge Substitute products or technologies02/25/13 31 BMW’s Innovation strategies
  32. 32. OPPORTUNITIES New Products Market shift to globalization Innovation & Alliances Customers demand change to more comfortable and relevantly cheap cars Diversification New Technologies in Automobiles02/25/13 32 BMW’s Innovation strategies
  33. 33. THREATS New & existing competition Volatility in Price of Fuel New legislations Consequences of the oil crisis Economic recession Market shift to globalization Far-East Automobile companies expansion Extremely high competition for customers and resources02/25/13 33 BMW’s Innovation strategies
  34. 34. Need -------- Acquired Need) Ego need (Self Esteem, Prestige, Status)Goals -------- Product Specific GoalMotivation ------- Emotional Motive (Pride, Status)Personality -------- Superego, Compliant/Aggressive IndividualPersonality trait -------- Low dogmaticSocial character --------- Other-directedOptimum stimulus level -------- High Variety/Novelty Seeking Exploratory Purchase Behavior02/25/13 34 BMW’s Innovation strategies
  35. 35. Cognitive Personality ----- Low NCBrand Personality ----- SophisticationMakeup of self-image ------ Ideal Social Self ImageLearning ------ CognitiveLevel of involvement ------- very high (Extensive Buying)Stimulus Discrimination ------02/25/13 35 BMW’s Innovation strategies
  36. 36. 02/25/13 36 BMW’s Innovation strategies