What are the sources of BMW’s competitive advantage?
BMW is a leading brand of luxury and sports vehicles with a global footprint. Apart from its leading position in the luxury car segment worldwide, BMW is also known for its focus on technological innovation, passenger safety, and product quality. BMW has 3 brands in its portfolio which include BMW, MINI and Rolls-Royce. Over the last several years, BMW has performed consistently in terms of sales in most of its leading markets leading to improved revenue and accelerated growth. The demand for electric cars has grown worldwide. BMW has also added new models of fully electric cars and hybrids to its product portfolio. Founded in 1916, BMW is headquartered in Munich, Germany. Its net revenue for 2018 reached €97.5 billion. On the Fortune 500 list, BMW was placed 53rd in 2019.
Apart from its large product range, some other sources of competitive advantage for BMW include its global manufacturing and distribution network. Its focus upon research and development, as well as strong global brand recognition, have helped it expand globally and become a leading premium vehicle brand. However, the car industry has entered a difficult phase in 2019. Apart from the economic issues, growing regulation and increased competition are also creating high growth-related pressure on automobile brands. BMW’s leadership position in a highly competitive environment is because of its several sources of competitive advantage. Take a look at the main sources of competitive advantage for BMW and how it has gained a leadership position in the global luxury car industry.
Brand equity is one of the leading sources of competitive advantage in the automobile industry. It denotes the customers’ overall perception of your brand. How your customers perceive your brand affects your brand equity. The stronger your brand equity, the higher will be your sales. As an automobile brand, BMW enjoys a very high level of brand equity. This is mainly because of its focus on product quality, passenger safety, and technological innovation. BMW is seen as an innovative brand of luxury cars. This is why its cars are highly popular in the global markets. The company is also seen as a responsible and innovative company. Since its foundation, BMW has always focused on making cars that deliver a superior riding experience, higher convenience, and improved safety.
All of these factors have resulted in strong brand equity and high global popularity. For the past several years consistently, BMW has enjoyed strong sales in most of its leading markets around the world. In both October and November of 2019, BMW sales in the US grew impressively. To build strong brand equity in the automobile industry brands need to focus on innovation, passenger safety as well as customer service and marketing. BMW excels in all these areas and this is why it has gained a leadership position in the luxury car segment in the global automobile industry. Its superior growth and ability to maintain growth momentum even in difficult times is also a result of stronger brand equity.
Any automobile brand that wants to build a strong source of competitive advantage in the global automobile industry should focus on product quality. Consumers are now highly quality conscious. They want cars that are great in terms of performance as well as style and design. When it comes to product quality, BMW is second to none. Since its foundation, the company has always focused on producing cars that are best in class and matchless in terms of quality. Apart from their strong build BMW, Mini, and Rolls Royce cars also have great interiors and are superior in terms of performance and passenger safety to most of their competitors. In recent years, BMW has expanded its line of environment-friendly vehicles. It is investing more in hybrids and electric mobility. The demand for electric cars has grown since customers are looking for cars that have a low environmental impact. BMW also invests a lot in technology and making its cars safer and reducing their carbon footprint. Product quality is also an important source of differentiation in the automobile industry.
BMW is a luxury car brand. It makes luxury and sports cars that come with a premium price tag. However, behind that premium price tag is a great quality product that offers a distinct riding experience. For most of the BMW customers, BMW cars are also a sign of luxury and class. BMW cars are generally priced in the $35000 – $100,000 range. However, the Rolls-Royce brand owned by the BMW group serves the Ultra-luxury segment. Its cars are priced at $300,000 or higher. BMW maintains the highest level of focus on product quality. Therefore, it invests a lot in good quality raw material as well as advanced technology, marketing, and human resources. All these factors have together led to higher trust and popularity of the BMW brand which is a key source of competitive advantage in the global automobile industry.
Research and development:
The global automobile industry has grown highly competitive. There are a large number of car brands fighting for market share throughout the world in the leading markets. China and the US are the largest markets for vehicles including luxury and sports cars. In a hyper-competitive environment, any brand that wants to retain its leadership position and market share will need to invest a lot in technological innovation. Technological innovation has become a major source of competitive advantage for automobile firms and also the key to faster growth. BMW invests a lot each year in research and development to bring safer and better performing cars to the market. The rise of digital technology has also brought new opportunities for auto businesses. BMW has focused on some important areas where it makes the most investment in terms of research and development. Some of the key priorities in terms of R&D for BMW are passenger safety, autonomous driving, and environmental impact.
The BMW Group has established a global research and development network to foster technological innovation inside the organization. There are currently 15,000 people that work in countries at 16 BMW research and development locations. Every year BMW has kept growing its investment in research and development. Its investment in R and D grew by 12.8% from 2017 to 2018. In 2017, the company invested €6.1 billion in research and development. Next year its investment into R&D grew to €6.89 billion. In the near future, BMW is expected to grow its investment into research and development faster. This is because of the increased competition as well as higher regulation related to passenger safety and the environmental impact of vehicles. However, focus on research and development has helped BMW bring new, more efficient, and more attractive car models to the market-leading to higher sales and popularity. In this way, technological innovation is also an important source of competitive advantage for the BMW brand.
Global sales and distribution network:
BMW has acquired a leadership position in the global luxury automobile market. However, to maintain its position and strong sales, the company has also established global manufacturing, sales, and distribution network. It has an extensive sales and distribution network located throughout its major markets. This large network has helped BMW cater to consumer demand and fast-changing trends with higher efficiency. The production network of BMW includes 31 locations in 15 countries. Three of these locations are owned by the BMW joint venture in China which is known as the BMW brilliance Automotive or BBA. 20 of the manufacturing locations are the BMW Group plants.
The eight remaining sites are operated by BMW partners and contract manufacturers. The company applies the same quality, responsibility, and safety standards to all its production sites worldwide. Apart from the production sites, BMW operates 16 research and development sites located in various corners of the globe. 43 sales and financial services locations of BMW are also operational worldwide. Large and extensive manufacturing, sales, and distribution network is a key source of competitive advantage for the brand that has helped it maintain its global presence efficiently and serve customers in all corners of the world. China, America and some leading European markets which are of higher strategic importance have a stronger BMW sales and service network compared to the other markets.
Large product range:
Another major source of competitive advantage for BMW is its large product range which enables the company to serve various classes of customers with different preferences. Apart from BMW, the BMW Group also owns Mini and Rolls-Royce brands. BMW itself has brought a large range of hybrid and electric cars. Over the next few years, the company is planning to expand its range of electric cars further. The product range of BMW also includes BMW motorcycles. The company has brought some of the most popular cars and motorcycles to the Global market in the premium segment. BMW group has divided its business into three segments. They are cars, motorcycles, and financial services. Its automobile segment is the largest one accounting for the highest part of its revenue. BMW is the core brand of the group catering to a very large range of customer needs from fuel-efficient cars to high-performance models.
The BMWi range is an exclusive range of luxury cars. These models are built with an exclusive focus on luxury, innovation, and sustainability. They are loaded with several innovative features including electric drive trains, improved connectivity, intelligent lightweight construction as well as exceptional design, and newly developed mobility services. The MINI brand owned by the BMW group is also known for the superior driving experience it offers. Rolls-Royce is a premium luxury range of cars from the BMW Group which serves the ultra-luxury segment. BMW has also brought premium motorcycles for its customers worldwide. Its motorcycle range currently includes sports, tourer, roadster, heritage, adventure, and urban mobility segments as well as several scooter models. BMW Motorrad offers a wide range of equipment for a better driving experience as well as higher safety for the riders. A large and varied product range is also a key source of competitive advantage for the brand enabling it to achieve higher sales and faster growth while catering to a larger segment of premium customers.
Talented Human resources:
The global automobile industry has grown highly competitive. Apart from technology and product quality, brands also competing for talented human resources. A large pool of talented employees is essential to maintain a brand’s leadership position in the market. It is why BMW invests heavily in its people. Its employees are one of the most critical strengths of the company. BMW focuses on keeping its employees engaged and motivated. Apart from that, it also focuses on hiring the best employees who can help the company find faster growth. BMW employees are provided training and special benefits like company shares as well as higher opportunities for growth. The company also provides its employees with competitive salaries. In 2018, there were more than 134,000 people working for BMW. More than 15,000 of them were working in the research and development function of the company.
Skilled human resources are important for managing sales, manufacturing, distribution, marketing, and other processes efficiently throughout the globe. Not just this, talented employees also help the company maximize customer satisfaction. In the 21st century, not just the automobile industry but in other industries too the demand for talented employees has grown a lot. Now employees are not just a core source of competitive advantage but focusing on employee growth has also helped several of the auto brands expand faster. Technological innovation continues to foster the growth of the automobile industry. However, managing innovative technology requires a large pool of talented employees. BMW has managed its HR well which has enabled the company to satisfactorily serve its customers worldwide.
CITE THIS SOURCE:
Pratap, A. (2019, December 20). BMW Motors Sources of Competitive Advantage. In Notesmatic. Retrieved from https://notesmatic.com/2019/12/bmw-motors-sources-of-competitive-advantage/
Pratap, Abhijeet. “BMW Motors Sources of Competitive Advantage.” Notesmatic, 20 Dec. 2019, notesmatic.com/2019/12/bmw-motors-sources-of-competitive-advantage/.