Branding Governing Product Development
BMW: Branding Governing Product Development
Company Background
BMW¡¦s 75 year history of car production has been one of comparative stability and success. The company has grown sales and revenue to all time highs and expanded production and sales into new markets.
The company puts driving first ¡V ¡¥the ultimate driving machine¡¦ ¡V and has excelled in innovation as well as quality. The focus on technology and design is paramount within the organisation. Its management endorse and defend this perspective, identifying it as a key component of its brand, what BMW is all about. They further attribute the disastrous acquisition of the Rover brand and production facilities to the impossibility of one company successfully managing a portfolio of diverse brands pitched at different levels of the market.
At first glance, it appears that BMW is getting everything right. Its revenues are increasing and BMW ranks as the fifth luxury brand in the US. It has a stream of new developments preparing to come to market and it has ramped up production capacity to meet demand. However there are indications of concern among investors about the company¡¦s length of time to market, and associated costs; and the introduction of the 7 Series has been problematic, especially in regards to a recall, which can be disastrous for a brand like BMW which relies so much on its quality and technological advantage.
Issues
1. Has BMW proved itself capable in continuing to build and maintain a premium brand?
2. Can BMW continue to pour money into flagship products with little concern for commercial viability of the resultant products?
Response
Looking at the figures presented more critically two important factors come to light; one is the slowdown in revenue growth ¡V probably coinciding with product lifecycles; and secondly the related problem of an element of cannibalisation between products.
The following graph demonstrates the problem faced by BMW. The inner ring represents sales by model in 1997, the outer ring is 2000. The 5 and 7 Series have lost share to the 3 Series during a period of sales growth and global economic success. The less profitable 3 Series have moved from representing 59% of sales to 70%, with the 5 Series dropping from 34 to 25%. Other products have been omitted for the sake of simplicity.
While this undoubtedly covers many new BMW customers at entry level, there is no strong indication of existing BMW drivers trading up to the next series.
Strengths Weaknesses
ƒ¤Brand and image ¡V global, consistent, pioneering, luxury, leader
ƒ¤Engineering & design excellence
ƒ¤Company performance ¡V record sales and profits ¡V 233% revenue growth ¡¥93-¡¥00
ƒ¤Focus on luxury cars
ƒ¤Innovative R&D ¡V alternative fuel, new driving system
ƒ¤Fast production allowing customisation
ƒ¤Success of new Mini ƒ¤Cost and length of development process
ƒ¤Investors¡¦ anxiety impacting share price
ƒ¤Design department separate to business ¡V poor communication
ƒ¤Loss on Rover
ƒ¤Relevance of proposed new products to BMW drivers (eg hydrogen fuel)
ƒ¤Complexity and [next page]