BMW Changing Focus

1
BMW Changing Focus

• September 27, 2002
• Antti Grönlund
• Mark van Kruistum
• Eirik Langås
• Marieke van der Linden
• Casi Lømo
• Cezary Pietrasik
• Vivien Procher
• Ewa Wiecko

2
Overview

• Introduction
• BMWs strategy concerning Rover
• BMW after Rover
• Outlook
• Conclusion

3
IntroductionCar Industry and BMWs Market

• Early 1990s
• Recession
• Late 1990s
• Depreciation of Asian currencies
• GDP growth fell
• U.S. and East Asian markets slowed
• European car sales held up

• Luxury segment
• Up-scale market
• Main competitors GM, Ford, Toyota, Chrysler,
  Mercedes, Volvo, Saab, Audi
• Most companies operate with different brands

4
IntroductionBMW

• Started in 1916 in Germany by building aero
  engines
• Today leading manufacturer of automobiles and
  motorcycles
• Sales 2001 905 units
• End 2000 93,624 employees
• Quandt family owns 47
• Brands include BMW and Mini
• Positioning the ultimate driving machine

5
Strategy

• Why did BMW decide to acquire Rover and why did
  it fail?

6
StrategyMarket Strategies

• Strategy of development

Specialisation
Diversification
7
StrategyThe Rover Case

• 2-million-threshold
• Similar production volume
• Complementary product range
• Attractiveness of the target
• Land Rover brand
• Dynamic growth (1993 9.7)
• Synergy effects
• Efficiency improvements of Rover

8
StrategyUnofficial Reasons Hidden Agendas?

• General pressure towards consolidation
• Conventional wisdom applicable also in BMWs
  case?
• Other manufacturers were also interested in Rover
• Empire building, not to be a minor player
• Anglophile CEO?
• Principal/Agent problem
• Securing managements position
• Increasing managements pay and prestige
• Other personal aspirations

9
StrategyBMW and Rover Living Together
10
Strategy... a Closer Look
11
StrategyWhy Did the Merger Fail?

• Very strong sterling
• Rover was not strong enough
• Planning
• Mass production rule n/a in luxury segment
• Very different companies
• Brand / Innovation / Financial strength
• Cultural differences
• National icons
• Organisational

12
StrategyWhy Did the Merger Fail?

• Implementation
• Lack of technological integration
• Platform strategy
• Other integration
• Organisational independence maintained
• Financial discipline
• Cultural merger of equals
• Synergies not exploited

13
StrategyDisposal of the English Patient

• More than 3 billion losses
• Image loss in the UK
• Lost development time
• Reorientation of strategy
• Changes of CEOs

14
BMW After Rover

• Where did BMW stand after Rover and where is it
  heading?

15
BMW After RoverStrengths

• Strong global brand
• Strong presence in the luxury segment
• High profit margins
• Fast re-modelling
• Engines
• Financial strength

16
BMW After RoverStrengths

• Good long term share performance

17
BMW After RoverWeaknesses

• Loss of RD time
• Lack of multi-brand experience
• Brand dilusion
• Changing management
• Shareholder structure

18
BMW After RoverOpportunites and Threats

• Fast market growth luxury and SUV segment
• Resistant to recessions
• Dependent on major players
• Network and alliances in the industry
• Technological changes
• Formula 1

19
Outlook

• What is BMWs core competence?

20
OutlookCriteria For Core Competences

• Valueable
• Help exploit opportunities and neutralise threats
• Not substitutable
• Not easily replicable

21
Outlook

• What is BMWs core competence?
• ... excellence in development, production, and
  branding of high performance cars

22
OutlookResource Based View

• Focus on core competence
• Luxury segment
• 3/5/7-series
• Z-series

23
OutlookMarket Based View

• Focus on consumer preferences
• Stretch the brand through organic diversification
• 2-series
• SUV (X-series)
• Mini

24
OutlookFuture Scenarios
BMW stand alone
BMW diversification
MA
Merger/Alliance
Takover

• Market situation
• Quandts family

25
ConclusionFrom Failure to Success

• Typical case of merger failure
• Overestimating synergies
• Underestimating difficulties
• Following market pressure
• Successful demerger

26
Thank you!

• Questions?