OB Case Study

Financial Analysis
News that sales for the BMW 3-series and 4-series are expected to decline by more
than 20% from 2019 to 2020 is particularly alarming since these models
represented 23.32% and 8% of all BMWs sold in 2015, or 19.77% and 6.78% of all
BMW Group (including MINI, Rolls Royce) vehicles sold in 2015, respectively
(Exhibit). With revenues of $92Billion and $80 Billion in 2015 and 2014, this sales
decline represents a loss of tens of billions of dollars in sales. As such, the
introduction of luxury electric vehicles by Tesla poses a direct threat to the future of
BMW Group. Comparatively, BMWs own electric vehicle line, the i-series is vastly
underperforming other BMW Group vehicle models namely, the i-series made up
merely 1.31% and 0.84% of all BMW Group vehicle sales in 2015 and 2014.
However, adoption rate of BMW electric vehicles appear to be increasing, as sales of
the i-series increased 65.87% between the two years. This reinforces the idea of
emerging consumer preferences for environmentally friendly products.
In order to finance the development of electric models of the 3-series and 4-series,
BMW Group will need to invest heavily in research and development and refocus
efforts to electric vehicles. BMW Group is an innovation leader in the automobile
industry. Total R&D expenditure for BMW Group was $4.7 Billion in 2015 and $4.1
Billion in 2014, representing 6.5% and 6.2% of BMW Groups revenue, respectively.
Comparatively, other European automobile manufacturers spent 4.5% of revenue on
R&D in 2014, followed by 4.1% in Japan and 3.8% in North America (Exhibit). By
maintaining its position as an innovation leader, BMW Group will continue to
innovate at a faster rate than its competitors. This allows BMW Group to deal with
changes in the external environment more effectively. However, a larger R&D
expense can also imply that BMW Group is less efficient than its competitors at
converting R&D dollars to innovation. As a large organization, it can be difficult to
monitor and track such expenditures, which can lead to wasted resources. By
developing horizontal linkages, BMW Group will be able to better observe the
progress of its R&D projects and expenses, ensuring an increase in overall
organizational effectiveness and efficiency.
Implementation (Application of OB Theory)
Chapter 9 Organizational Culture and Ethical Values
Organizational culture is an important component that sets the tone for an entire
business. Organizational culture should reinforce the strategy and structural design
that is needed to be effective within its environment. BMW Group maintains an
external strategic focus, concerned with serving the high-end, luxury segment of
the automotive industry. The external environment of the industry was very stable
there had been no drastic changes in nearly a century. As such, many companies,
including BMW Group, maintained a mission culture (Exhibit). However, as the
needs of the environment begin to shift due to the introduction of disruptive
technology such as electric vehicles, there becomes an increased need for flexibility.
In order to continue to meet customer needs, BMW Group must implement a culture
shift to an adaptability culture. With an adaptive culture, BMW Group encourages

entrepreneurial values, innovation and creativity. Thus, BMW Group can react
quickly to change and continue to maintain their market leadership.