BMW Strategic Positioning Prepared by: Dora Hui Melissa Kinckle Candace Neff History Who is BMW? Founded in 1913 in Germany, Bayerische Motoren Werke, or Bavarian Motor Works in English, puts “the motor” at the core of both their history and innovation. In the beginning, BMW built aircraft engines. Unfortunately, in 1919 after World War I, the Allies banned BMW from building aircraft engines, forcing the company to build in secret. In 1920, the logo we know so well as the trademark of BMW was created. Visually, it represents the motion of an airplane propeller, and the blue and white color scheme harkens back to its roots in Bavaria. In 1922, the first BMW factory was built in Germany to expand production. Meanwhile, BMW was back in the aeronautical industry and doing quite well with their aircraft engines. In 1928, BMW became a car company. The 1936 creation of the 328 Roadster, a car known in racing history as one of the “best and most beautiful cars” ever built, made BMW a household name. The company ran into production issues again after World War II but rallied and was back to building cars, engines and motorcycles by 1949. Throughout the ‘50s, BMW’s reputation as a creator of fast and beautiful automotives continued to grow despite financial struggles. It was with the creation of the BMW 700 that BMW began its ascent to its former glory. By 1971, BMW was enjoying commercial success and began the building of its headquarters in Munich, Germany. In 1972 during the summer Olympics in Germany, BMW strategically created “BMW Motorsports” to secure its place in the racing community. By the time the ‘90s rolled around, BMW was seen as a key contributor to luxury and racing communities worldwide. 1 History Now considered a permanent member of the luxury automaker industry, the BMW brand consists of 4 labels including BWM, Mini, Motorcycles, and Rolls Royce. BMW’s label makes up 78% of their brand and competes with other luxury car markets including Lexus, Audi, and Mercedes-Benz. While over 34 brands of cars are sold worldwide, the brand market set of luxury, non-“exotics” is narrow. Other luxury car brands that are not as competitive include Jaguar, Porsche, Maserati, Land Rover, and Bentley. BMW sells over 1 million vehicles per year and is a market leader in its class, ranking 14 in all car sales and number 1 in luxury cars (Schmidt, 2013). But when did the slogan, “The Ultimate Driving Machine” come into play? How did BMW advertise its brand over the years? 2 History In the ‘50s and early ‘60s, like many car companies, BMW typically had posters with their cars displayed on it. This was a safe industry standard. In 1968, the slogan for BMW became “The Sportsman’s Car,” referencing its ascent into the world of sports cars and associating itself with the upper echelons of society. In the 1970s, the tagline changed to what we know it as today: The Ultimate Driving Machine. The 40-plus-year-old slogan is one of the most prolific taglines in the auto industry. The line was created by BMW’s Sales and Marketing Director Bob Lutz and a little known ad agency called Ammirati & Puris, who helped successfully launch Fiat’s brand. 3 History Over the years, BMW has continually upped the ante in its advertising game by constantly propelling the industry forward, especially with the introduction of video advertisements. The company was one of the first to showcase their cars by demonstrating them in their “natural environment” of racing. An example of showcasing a BMW racing down the speedway is a 2016 commercial that caters to a younger audience with 21 year old model, Gigi Hadid. Gigi is currently an extremely popular model in the fashion industry. (https://www.ispot.tv/ad/ATf3/ 2016-bmw-m2-eyes-on-gigi-hadid) BMW’s video ads mostly focus on the theme of racing, showcasing the car and its abilities as “Ultimate Driving Machine.” Meanwhile, BMW print ads are throwbacks to the typical “car with a background” theme that most car companies employ. It is the industry standard because it serves to highlight the beauty of the car itself, and consumers have come to expect it. 4 History One of BMW’s most recent partnerships is for the 2016 Olympics, specifically the Paralympics. BMW is creating a new racing wheelchair for the Paralympic track and field team and has included the team as part of its advertisements (BMWusa.com, 2016). Diverging from its usual product lineup was a bold move and one that will undoubtedly help consumers associate the brand with positive sentiments. The Olympic Games have historically been a promotion of international unity and BMW is creating a product to allow these athletes to perform at their best. Not only is BMW the creator of the Ultimate Driving Machine, athletes who use BMW wheelchairs will become ultimate machines themselves. BMW strives to consistently demonstrate its tagline, "The Ultimate Driving Machine", through its advertising today just as much as it did years ago. 5 Market Situation The luxury market continues to grow year over year in the United States, demonstrated by the infograph below: The graph above presents the luxury Globally, the market is increasing, as market trend from 2010 to 2015. The demonstrated by the €54 billion growth luxury car market is one of the biggest from 2014 to 2015. 2013 returned a contributors to the luxury market, and the significant growth of €32 billion. The market itself has a wealthy and loyal upward trend is undeniable and the consumer base which has allowed the market for luxury vehicles continues to segment to continue to grow grow. exponentially. 6 Market Situation Another trend in the automotive industry is the introduction of “eco-friendly” vehicles. BMW is leading the way with luxury electric vehicles such as the hybrid i8 and i3 series. These cars appeal to environmentally-conscious consumers. The addition of hybrid and electric cars is also predicted to increase the market size of luxury cars, including BMW. The automobile industry is integrationg the concepts of connectivity and ergonomics into their environmentally friendly cars. More frequently, brands are implementing connectivity into electric vehicles. This shift will allow the automobile industry to skyrocket into higher growth and sales due to a new market being reached: the eco-conscious luxury car consumer. 2015 marked the fourth consecutive year that BMW has held the title of the most popular luxury car brand by maintaining its position of having most luxury car sales in the US (Vijayenthiran, 2016). The top four luxury car dealers -- Lexus, Mercedes-Benz, Audi, and BMW-- have sales numbers that are more tightly coupled than the remaining eleven. For this reason, Lexus, Mercedes-Benz and Audi are considered BMW’s closest competitors (Vijayenthiran, 2016). 7 Market Situation While BMW is the current luxury car market leader for the fourth time in five years, global estimates show that Mercedes-Benz will overtake BMW in 2016 (Automotive News, 2016). BMW recently announced its slowest sales growth in the last 7 years. BMW global sales only rose 5.2% while Mercedes-Benz grew 13% due to an increased demand and marketing focus in China (Taylor, 2016). BMW is lagging within global sales deliveries while Mercedes-Benz and Audi are tapping into the same market and growing quickly. Both Audi and Mercedes- Benz have declared a goal to unseat BMW as the top luxury car brand by the end of the decade (Behrman 2016). 8 Market Situation Current Initiatives BMW has launched a number of initiatives to further market their brand. Tapping into the car- sharing trend, one includes allowing owners to electronically rent out their Mini Coopers while the car is parked (Soper, 2016). Another initiative is connecting GoPros to the BMW inset dashboard console so that drivers can record their BMW driving experience (Wilson, 2016). An enterprising BMW strategy is allowing customers to buy their BMW via their smartphone (Vizard, 2015). All of these initiatives are marketing efforts that demonstrate that BMW is keeping pace with current social trends and mentalities, staying on the cutting edge and cementing its competitive advantage via diversification and technology. 9 Market Situation The Future of BMW To ensure that BMW maintains its role as the leader of the luxury car industry, the company has identified lifestyle trends and future production prospects that will diversify and elevate the BMW brand. The current social focus on eco-friendly products has impacted the auto industry profoundly. Manufacturers responded by designing alternative-fuel vehicles that cater to the demographic of environmentally-conscious consumers. There will always be a demand for cars, however having a hybrid option can be an advantage that will attract an otherwise disinterested or hesitant consumer. With the introduction of the i8 and i3 electric models, BMW is beginning to tap into this market and it has plans to produce more (bmwusa.org, 2016). Drivers choose a BMW because they want the pinnacle driving experience that BMW is known for. BMW must continue moving in the direction of alternative fuel in order to meet the growing demand for cleaner emissions. Self-driving cars have been in development for the last few years. In March of 2016, BMW released its first prototype of the semi-autonomous BMW Vision Next 100, which was showcased at the company’s celebration of its 100th anniversary (Ziegler, 2016). This car includes a sleek new aluminum look that is still very much recognizable as a BMW, with an augmented reality display that replaces the entire windshield and dashboard.