“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 Group

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BMW’s Innovation strategies
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BMW’s Innovation strategies
 BMW MODELS VIDEO

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BMW’s Innovation strategies
 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 1923

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BMW’s Innovation strategies
Followed by…..

Dixi (1929) 315/1 (1934) 319/1 (1934)

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BMW’s Innovation strategies
 BMW 238 sports in 1936

..success in international racing events b/o lightweight construction,

outstanding aerodynamics, high performance and elegance….
Company prestige crossed Germany

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BMW’s Innovation strategies
Until 1950s BMW concentrated on limited no. of models and focus on other parts of Europe
BMW 507 Roadster

Powerful 3.5
lt., 8-cylinder
and lightweight
metal engine….
huge success in
automobile
world

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BMW’s Innovation strategies
 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 market

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BMW’s Innovation strategies
 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 1995

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BMW’s Innovation strategies
 In 1995 introduced BMW 5 Series and Z3 Roadster as well

Positioned as elegance dynamic performance and safety

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BMW’s Innovation strategies
 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 Electronic

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BMW’s Innovation strategies
 BMW 1992 BMW 1998

Revenue £ 15.97 billion £ 32.28 billion

Net profit £116 million £ 462 million

In 1997 BMW ranked 69th among Fortune Global 500 companies

FIZ (Munich)
LITZ
BMW R&D Hub:
PATYO (California)

BMW Designwork & Oxnard Testing Facility (California)

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BMW’s Innovation strategies
 One Sausage Three Different Length

BMW 3 Series

Focused on product efficiencies, constant generate new product/components

ideas, launched new upgraded product

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BMW’s Innovation strategies
 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 process

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BMW’s Innovation strategies
 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 shows

Role of IMP or NPD

Systematic channeling of potential innovations to actual product development
process
Ensured creative environment in the company
NPD

Innovation Research Innovation Management Innovation Transfer

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BMW’s Innovation strategies
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 internal Monitoring and reporting Buy-in of vehicle project
invention sources Annual process

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BMW’s Innovation strategies
 Individual project were categorized under 4 categories

Potential Innovations
Must Innovations
Top Innovations
Breakthrough Innovation

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BMW’s Innovation strategies
 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)

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BMW’s Innovation strategies
 The result

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BMW’s Innovation strategies
The result…..

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BMW’s Innovation strategies
The Result…..

$29,400

$75,600

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BMW’s Innovation strategies
Source: - http://www.businessweek.com/magazine/content/03_23/b3836005_mz044.htm

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BMW’s Innovation strategies
 BMW

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BMW’s Innovation strategies
 Marketing Mix
Product

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 Cooper

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BMW’s Innovation strategies
Price

BMW price range are from US$ 35,000 to US$ 2,20,000

Place

Globally

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BMW’s Innovation strategies
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’

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BMW’s Innovation strategies
 Segmentation
Geographic
Region developing and developed nation
Density of area Urban
Demographic
Age-above 25
Income-$ 35,000 and above annually
Occupational-professional, Businessmen
Psychological
Need motivation sense of self worth
Personality Extrovert, Novelty seeker, ambitious
• Learning involvement high
• Perception Moderate risk
Attitude positive

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BMW’s Innovation strategies
 Psychographic
Lifestyle segmentation ---status seeker, Enthusiastic
A1 and A2
Socioculture
Social class ---upper middle and upper
Behavioral
Benefit ---safety,elegance, technology
Loyalty status --- medium
Readiness stage ---aware, interested

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BMW’s Innovation strategies
 Positioning

Attribute
Image

Differentiation

Attributes

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BMW’s Innovation strategies
Perceptual map High price

Low quality
High quality

Low price

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BMW’s Innovation strategies
 High prestige

Low performance High performance

Low prestige

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BMW’s Innovation strategies
 SWOT ANALYSIS

STRENGTH

Diverse ranges of Products - BMW, MINI and Rolls-Royce

Strong Cash Flow Position
Increase turnover and trading profit
Strong Balance Sheet
World's leading Premium Quality Automobile Manufacturer
Brand Awareness
Human resources
Capabilities to turn resources into advantages

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 WEAKNESSES

Perception of High Prices

Customer disinterest
Buyer sophistication and knowledge
Substitute products or technologies

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BMW’s Innovation strategies
 OPPORTUNITIES

New Products
Market shift to globalization
Innovation & Alliances
Customers demand change to more comfortable and relevantly cheap cars
Diversification
New Technologies in Automobiles

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 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

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BMW’s Innovation strategies
Need -------- Acquired Need)
Ego need (Self Esteem, Prestige, Status)

BMW

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BMW’s Innovation strategies
Goals -------- Product Specific Goal

Motivation ------- Emotional Motive (Pride, Status)

Positive motivation

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Personality

Freudian Theory -------- Ego

Horney’s CAD Theory -------- Compliant/Aggressive Individual

Consumer Innovativeness -------- Moderate

Personality trait -------- Low dogmatic

Social character -------- Inner-directed

Optimum stimulus level -------- High

Variety/Novelty Seeking
Exploratory Purchase Behavior

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BMW’s Innovation strategies
Cognitive Personality ----- High NC (visualization ad to attract
customers to showrooms)
Brand Personality ----- Sophistication

Makeup of self-image ------ Ideal Social Self Image

Learning ------ Cognitive

Level of involvement ------- High{ Extensive, Limited }

(vary from person to person)
Stimulus Discrimination ------

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BMW’s Innovation strategies
Purchase Pals ------- Opinion Leader

Diffusion Process
The Innovation ------- Product Oriented definition
Continuous Innovation and dynamically

continuous
Channel of Communication ------- Internet

Adopter categories ------- Innovators/Early Adopters/Early majority

Decision Rules ------- non compensatory

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