A Case Study On Bmw Marketing Essay

This report is an examination script and must not be reproduced in whole or in part without the written permission of the Head of School

September 2012

Abstract

Since the global crisis and euro crisis occurred, the biggest problem facing the consumer marketplace is not the weak state of house hold finances. The problem is the uncertainty weighing on people’s minds about the engagement with brand. Therefore, building a strong brand leads to survive and to be successful for the business.

On this paper, a branding perspective will be reviewed to develop a brand. The case studies on BMW will be provided in further research.

Branding is the developing concept of marketing that consists of an important interaction between buyer and seller in marketing transactions in the way of determining consumer behaviors. Brand equity is core value of branding. It includes indispensable assets that are mainly brand knowledge and brand effect, brand loyalty, brand extendibility and various associations and characteristics attached to the brand.

¬Global branding is one of the strategies that leads to have more profitability. However it must consider the differences across countries and culture to success. The differences includes consumer needs, wants and response to marketing mix element etc. Moreover, as competitive increases in globalization, place branding strategies become more and more important to increase the investment and customer communication.

Contents

I. Introduction

1.1. Definition of the brand

1.2. Importance of the brands

1.2.1 Importance of the brand to customer

1.2.2 Importance of the brand to company

1.3 Aim of the project

1.4 Objective of the project

1.5 Methodology of the project

II. Literature Review

2.1 Brand equity

2.2. Brand knowledge

2.2.1 Brand awareness

2.2.2 Brand image

2.3. Brand resonance

2.4. Branding strategies

2.4.1 Manufacturer branding

2.4.2 Own-label / Private-label branding

2.4.3 Price branding

2.4.4 Generic branding

2.5. Global branding

2.6. Place branding

2.7. Business environment analysis

2.7.1 Porter’s five force analysis

2.7.2 PESTLE analysis

2.7.3 SWOT analysis

III. COMPANY DESCRIPTION

3.1 General overview

3.2 Brief history

3.3 Brand width

3.3.1 BMW

3.3.2 BMW Motorcycles

3.3.3 MINI

3.3.4 Rolls-Royce

3.4 Sales profile

3.5 Summary

IV. COMPANY ANALYSIS

4.1 Power of brand

4.2 Business environmental analysis

4.2.1 External analysis using Porter’s five forces

4.2.2 PESTLE analysis

4.2.4 Internal and External analysis using SWOT

4.3 Summary

5. References

6. Bibliography

CHAPTER I

INTRODUCTION

1.1. Definition of Brand

The definition of brand in English dictionary is defined as “trademark or distinctive name identifying a product or a manufacturer.” However, as the business and marketing view, it has more meaning, for example, according to American Marketing Association, brand is defined as “a name, term, sign, symbol, or design, or a combination of them intended to identify the goods and services of one seller or group of sellers and to differentiate from the competition”. In other hand, brand is defined as the needs and wants of a target market using the marketing mix of product, price, place and promotion (Wood, 2000). Moreover, brand is also defined as a whole of values that enables a promise to be made about a unique and welcomed experience (Chernatony, 2009). Therefore, brand is a complex multi faced phenomenon which includes evaluation, image, identity, values equity and consistency.

1.2. Importance of the Brands

Brands are important for both to consumers and to the company because it gives benefits and advantages such as;

To customer

To company

Identification of the product

Ease in comparison

Self-expression through brand personality

Legal protection

Ease in segmentation

Loyalty

Brand Equity

1.2.1 Importance of the brand to customer

Brand benefits to the customers by telling how good or bad the product is. This is based on customer’s past experience, advertisement and rumors. These will help the customer to filter out the countless items. Therefore, brand gives customers the reason to buy and also wastes less time for customers to choose.

Moreover, brand might be used as a symbolic device. For example, a high quality product with highly price could be bought by successful people.

1.2.2 Importance of the brand to company

Brand benefits to the company, most importantly, that is ability to build purchase confidence and improve customer loyalty. The primary loyalty builders are the quality, reliability and performance. The role of the brand is also to protect innovations, to “create a mental patent” and to identify the firm’s technical know-how (Michael, King and Reast, 2001)

The benefits of having a strong brand are; (Hoeffler and Keller, 2003).

Having improved product perception,

Enhancing customer loyalty,

Strong marketing position in the competitive environment

Great trade

Increasing rates of margins

1.3 Aim of the project

In this dissertation, BMW is chosen as a case study considering its strong and famous brand in the automotive industry. It manages to survive and to be surviving the recession period, and even increase the sales of product nowadays. To analyse the factors and strategy enhancing the brand equity of BMW which further leads to the success of the brand will be the main aim of this dissertation. Their brand strategy concepts such as brand image, brand elements selection, and brand identity will be analysed and discussed.

1.4 Objective of the project

In order to achieve the aim of the dissertation, the following objectives are needed to be determined:

To analyse the branding strategy of BMW such as the choosing of brand elements, brand identity, brand image, brand positioning , and brand equity.

To analyse the factors and strategy that contributed significantly to the success of the brand.

To analyse the internal and external business environmental of BMW to design the future strategy of BMW.

To present the possible future branding strategic recommendation for BMW.

1.5 Methodology of the project

The material will be mainly generated by secondary data. The secondary data that will be used are published articles, blog and news that are related to branding, and also information from the official BMW website will be used. Moreover, text books and few articles from the internet will be used to generate the foundation theory of branding and some examples related to the topic.

CHAPTER II

LITERATURE REVIEW

2.1 The Brand equity

Brand equity is one of the most important marketing concepts to increase the profitability. This is because it is unique ability to contribute directly without adding features or lowering price. Strong brand equity is able to; (Quarles, 2007)

Command premium prices

Capture and maintain market share

Support new line extensions

Attract investors

Fend off new competitors

Brand equity is defined in many ways. However, it can be classified as 3 main perspectives which are financial, brand extensions and customer based. Financial perspective is the incremental discounted future cash flows that would result from a product having its brand name in comparison to that would accrue if the same product did not have that brand name. Brand extensions perspective is the benefits that a successful brand can be used as a platform to launch related products. The benefits are the customer awareness of the brand which further will reduce the advertising cost and the risk. Customer based perspective is the differential effect that customer knowledge about a brand that has on consumer response to marketing activities and programs (Kotler and Keller, 2009). Therefore, brand equity can be generally defined as a set of assets connected to the name and symbols of the brand that adds to the value of the product or service to a company and/or company’s customers (Aaker, 1990). Brand equity is mainly considered on 5 types of assets which are;

Brand name awareness

Brand loyalty

Perceived quality

Brand associations

Intellectual rights

These measures allow assessing effectively the value of the brand as a firm asset, and the examination of brand value at regular intervals. Aaker (1999) suggests that these measures can effectively be applied across a variety of products and markets.

2.2 Brand knowledge

The brand knowledge is a key to create brand equity and defined as awareness and image.

2.2.1 Brand awareness

Brand awareness is when consumer is aware of a brand within a purchase category and is a prerequisite for purchase and for the formation of brand attitude. It consists of brand recall and brand recognition (Keller, 2003). According to Aaker (1999), brand awareness can add value to the brands in many ways, such as;

Placing a brand in customer mind

Become a barrier of new-entry product

Ensuring the customer about the commitment of the company of maintaining the quality

Providing leverage in distribution’s channel

2.2.2 Brand image

Brand image is the impression in the consumers’ mind of a brand’s total personality. It consists of consumers’ preconception and of association for the brand (Keller, 2003). This is developed over time through advertising, campaigns and consumers’ direct experience. The components of the brand image can be classified into three groups which are;

The image of company: The image of company that the brand belongs to.

The image of the consumer: Consumers’ ideas and feelings about the brand.

The image of the product/service itself: The image of the brand such as cheap, and innovative.

2.3 Brand resonance

Brand resonances are characterized by a strong relationship between the consumer and the brand. The strong brand resonance has benefits to increase customer loyalty and to reduce the risks by competitive advantage. Building brand resonance involves a series of steps, as seen in Figure 2.1

Figure 2.1 Brand Resonance Pyramid

(Source: Keller, 2009)

The first stage is “Identify”. It is based on customers’ needs and perception.

The second stage is “Meaning”. It is based on customers’ understanding points of difference and points of parity such as performance and reliability.

The third stage is “Response”. It is based on the responses and judgements of customers about the brand.

The final stage is “Relationships”. It is based on consumer loyalty with the brand. At this stage, customers feel a connection or sense of community with the brand (Keller, 2009)

2.4 Branding strategies

Branding strategy generally aims influencing the perception of customers about products and services to lead to purchase or to use. Moreover, it affects the customer to purchase the products at higher prices and maintain the customer loyalty in the competitive market (Gelder, 2002). There are many forms of branding; however, primarily there are manufacturer, private-label, price, and generic brands.

2.4.1 Manufacturer branding

This strategy used by the manufacturers to brand the product. It helps identify the producer of a brand at the point of purchase. Therefore, this strategy requires the assistance of channel intermediaries for wide distribution, and the promotional drive stems from the manufacturer in an attempt to persuade end users to adopt the brand, which in turn stimulates channel members to stock and distribute the brand. (Chris, 1999)

2.4.2 Own-label / Private-label branding

Own-label branding means that brand is owned not by a manufacturer or producer, it is owned by a retailer or suppler who gets its goods made by a contract manufacturer under its own label. This is also called private brand. This strategy offers many advantages to both the manufacturer and retailer. The advantage on manufacturer is that can use excess capacity, and on retailers is that can earn a higher margin than they can with manufacturer branded goods and at the same time develop organizational images.

2.4.3 Price branding

Price branding are produced by manufacturers in attempt to compete with private brands. The product is low-priced and is further characterized by an absence of any promotional support. The effect on the other brands in the manufacturer’s portfolio may be to stimulate promotional support to prevent the less loyal buyers trading over to the low-priced offering. (Fill, 1999)

2.4.4 Generic branding

This strategy avoids any promotional materials and the packaging only displays information required by law, so that, brand is not widely recognized. However, this strategy uses the less expensive than branded products and sometimes; it is 40% below the price of normal brands. Generic branding is largely used in area of fungible products such as aluminum foil, recording media, hand tools, paper products etc.

2.5 Global branding

The global branding is very important to brands. Especially China is ‘must win’ market for global brands. There are several reasons that the business contributes to the growing interest in global marketing, which are;

Perception of slow growth and increased competition in domestic markets

Belief in enhanced overseas growth and profit opportunities

Desire to reduce costs from economies of scale

Need to diversify risk

Recognition of global mobility of customers

However, it is very difficult to build brand equity all over the world due to fundamental differences across countries and cultures. Critics claim that designing one marketing program for all possible markets often results in unimaginative and in effective strategies geared to the “lowest common denominator”. Possible differences across countries come in a variety of forms as follows; (Keller, 2003)

Differences in consumer needs, wants, and usage patterns for products

Differences in consumer response to marketing mix elements

Differences in brand and product development and the competitive environment

Differences in marketing institutions

Differences in administrative procedures

A global brand must be consider four key areas. Firstly, it must be decided which markets to enter. This decision could be similar to the factors affecting the decision to enter any new markets. The attractiveness of the market and possible competitive advantages must be evaluated. The second decision in developing a global marketing is to decide how to enter the market. There are mainly three alternative ways to enter a new global market which are; (Barwise and Robertson, 1992).

By exporting existing brands of the firm into the new market

By acquiring existing brands already sold in the new market but not owned by the firm

By creating some form of brand alliance with another firm

The third decision is to decide on the actual nature of the program such as the controversy over standardization versus customization strategies. Finally, it must be decide on the most appropriate organizational structure for managing global brands. After, these four decisions are considered the developing a global branding strategy must be made.

2.6 Place branding

Place branding is a new umbrella term encompassing nation branding, region branding and city branding. It is defined as a network of associations in the consumers’ mind based on the visual, verbal, and behavioral expression of a place (Zenker and Braun, 2010). Place branding aims especially to increase the attractiveness of a place. The successful branded place, such as London, brings an attraction to new investment and creates a positive success to firms and organizations. Therefore, it is more and more important to create branding strategies in branded place. The good example could be Apple. Apple started to have retail stores aiming branded place over the world. The result was the one on factor that bring to have more profits in global crisis by increasing of investment and customer communications.

2.7 Business environment analysis

2.7.1 Porter’s five force analysis

Porter’s five forces analysis is a tool to analyse the competitive strength and also to determine position of brand in the immediate competitive environment. With clear understanding, the company can take the advantage of strength, improve a weakness, and avoid taking wrong decisions. The five forces are described as follows;

five force.png

Figure 2.2 Porter’s Five Forces Analysis

Competitive rivalry

For most industries, the intensity of competitive rivalry is the major determinant of the competitiveness of the industry. It helps to determine the extent to which the value created by an industry will be dissipated through head to head competition. The intense rivalry occurs when there are numerous competitors under the slow growth market condition and high exit barriers. (Needle, 2004)

Bargaining power of suppliers

The power of suppliers influences several factors to the firm. For example, if the suppliers are powerful, it can influence on the producing industry such as selling material at high price. According to Needle (2004) supplier power is stronger when there are few suppliers and raw materials are highly specified.

Bargaining power of customer

The power of customer is the impact that customers have on the company. For example, if the power of customer is stronger, many suppliers with a buyer, the buyer sets the price of product. In reality, only few exist. However, according to Needle (2004), the buyer power will increase when there are numerous competitors who offers similar or substitute products, hence the customer might switch from a brand to another brand.

The threat of new entrants

The new entrants to the market will affect the environment. For example, if it costs little in time or money to enter your market, the new competitors can quickly enter your market and weaken your position. According to Needle (2004), the treat of new entrants relates to how easy for a company to establish or develop a business under the same product market. The barriers of entry are considered to protect the high profit level of firms in the market and inhibit additional rivals from entering market. Barriers could be the capital requirement of entering, customer loyalty in the market, and operating experience which is competitive advantage by existing firms.

The threat of substitution

The threat of substitution is the availability of a product that the consumer can purchase instead of the industry’ product. For example, tap water might be considered a substitute for Coke whereas Pepsi is a competitor’s similar product. Therefore, it depends on the relative price to performance ratios of the different types of products or services to which customers can turn to satisfy the same basic need.

2.6.2 PESTEL analysis

PESTEL analysis is used to analyse the macro-environmental factors that will affect the decisions of the any organisation. It is a strong framework to set stages to develop specific tactics to mitigate the risks involved in executing vision in unfamiliar environment. PESTEL stands for Political, Economic, Social, Technology, Environment, and Legal.

Political

Political aspects is related to government intervention which influence some of the regulatory in the business environment of the company. For example, tax policy and labour law.

Economic

Economic refers to the major impacts on how the business operation and decision. According to Omar (1999), the economical condition affects the development of business cycle of the business and the cost to the business. For example, rental cost, labor cost, cost of inventory and cost of maintaining and developing the market based on economic growth and interest rates.

Social

Sociological aspects refers how to operate the strategy based on the characteristic and behavior of the people, and also the movement of the people (Omar, 1999). For example, population growth rate and age distribution

Technology

Technology enable the company to remain competitive in domestic or foreign market, and even have a competitive advantage in the business environment (Omar, 1999). It also enable the company to reduce cost, innovate the products and improve the quality of product. For example, research development activity and automation.

Environment

Environment aspects is to determine how to operate relate to the surrounding environment and create benefits to business activity. This aspect covers the weather and climate change. For example, tourism, farming and insurance.

Legal

Legal aspect refers to government legislation in the environment of the company operate. For example, employment law and safety law

2.6.3 SWOT analysis

SWOT analysis is a useful technique to identify internal and external factors of business. It stands for Strength, Weakness, Opportunities, and Threat. The internal factors are classified as strength and weakness, while the external factors are classified as threat and opportunity (Omar, 1999). The description and example of SWOT analysis are shown in Figure 2.3;

Strength

Characteristic of the business that gives an advantage over others. For example, reputation, quality of products and services, experience, etc

Weakness

Characteristic of business that gives a disadvantage relative to others. For example, high product cost, lack of distribution channel, lack of expertise, etc

Opportunity

External chances to improve the performance in the environment. For example, emerging market, technological development, new distribution channels etc.

Threat

External elements in the environment that could cause trouble for the business. For example, new competitor, trade barrier, increasing in cost etc

Figure 2.3 The Example of SWOT Analysis

By good understanding and analysing the SWOT analysis, it helps in matching the firm’s resource and capabilities to the competitive environment in which it operates, in other hands, it helps to gain the competitive advantage based on the surrounding business environment.

CHAPTER III

COMPANY DESCRIPTION

3.1 General Overview

Bavarian Motor Works (BMW) is a German automobile, motorcycle and engine manufacturing company. It is headquartered in Munich, Bavaria, and Germany. It also owns and produces the Mini marque, and is the parent company of Rolls-Royce Motor Cars. BMW produces motorcycles under BMW Motorrad and Husqvarna brands.

The BMW is present in the world markets with 25 production and assembly plants, 43 sales subsidiaries and a research and development network. The BMW rose sales by 14.2% to reach a total of 1,668,982 vehicles in 2011.

The brand value of BMW has been increasing by 10% in 2011 through negative economic turbulence. BMW now has $24,623,000,000 of brand value, the highest brand value in automotive industry. brand value 1.pngbrand value 2.png

Figure 3.1 Most valuable brands in 2012 (Left)

Figure 3.2 Most valuable brands in automotive industry, 2012 (Top)

(Source: Milwardbrown,com, 2012)

3.2 Brief History

BMW was founded in 1917 with ‘Rapp Motorenwerk’ which is aircraft engine manufacturing firm. However, it was forced to cease after First World War in 1918. Therefore, the company shifted to motorcycle production in 1923 and also automobile production in 1928~1929.

In 1920s, the first car, which successfully launched, was produced called ‘Dixi’. It was based on Austin 7 and licensed from the Austin Motor Company in Birmingham. Furthermore, in 1930s, BMW came up with the amazing 328 Roadster which was a legend in the racing history. However, by the year 1959, the company had financial crisis, so that, it had had to be decided either to sell the company or to find a way of carry on. It was decided to carry on and to try to cash in on inexpensive small and medium size cars such as BMW 700. This plan was successful and helped the company get back on its feet.

In 1966, the company bought the crisis-ridden Hans Glas GmbH with its factories in Dingolfing and Landshut. Both plants are restructured, and over the coming decades the world’s largest BMW plants takes shape in Dingolfing.

In 1994, BMW bought the British Rover Group (which at the time consisted of the Rover, Land Rover, and MG brands as well as the rights to defunct brands including Austin and Morris). However, by 2000, MG and Rover brands were sold due to incurring huge losses. Meanwhile, BMW retained to build the new Mini, which was launched in 2001.

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In 1998, with long negotiations, the company obtained the brand and naming rights for Rolls-Royce Motor Cars from Rolls-Royce plc. It was held entirely by Volkswagen until the end of 2002. When BMW Group took over full responsibility of Rolls-Royce Motor Cars, the new Rolls-Royce plant and headquarters were built in Goodwood, in southern England, and was scheduled to manufacture newly developed Roll-Royce models, new Phantome, in 2003.

In 2007, BMW Motorrad took over Husqvarna Motorcycles, a Swedish company. As it is a leading supplier of sporty off-road motorbikes, the firm widens the product range of BMW Group with a host of lightweight machines. Furthermore, BMW Group adopts the Strategy Number ONE with its four pillars, “Growth”, “Shaping the future”, “Profitability”, and Access to technology and customers”. It aligns the BMW Group with two targets, ‘to be profitable’, and ‘to enhance long-term value in times of change’. The mission statement up to the year 2020 is clearly defined as the world’s leading provider of premium products and premium service for individual mobility. (BMW Group, 2012)

In June of 2012, BMW becomes most reputable company in the world based upon on people’s willingness to buy, recommend, work for, products and invest in a company. Kasper Ulf Nielsen, a managing partner at Reputation Institute, is said

” BMW has earned the trust and respect of consumers all around the world though its consistent focus on delivering high quality in all of its actions” (Jacquelyn, 2007)

3.3 Brand width

3.3.1 BMWBMW logo.png

BMW brand has stood for one thing since its inception, ‘Sheering driving pleasure’. Sporting and dynamic performance combine with peerless design and exclusive quality result in the unique appeal of BMW automobiles.

3.3.2 BMW Motorcyclesbmw moto logo.png

Premium is the key word for BMW Group which influenced motorcycles as well. To develop and build the best motorcycles regarding to technology, environmental protection, safety, and provide outstanding customer service, has great success to the company.

3.3.3 MINI

MINI is a British automotive marque owned by BMW, which specialises in small cars. Over the years, it has changed from the origin ideal. However, the foundation of small car, its character traits, have remained unchanged from its inception in the 1950s until today. The current MINI range includes the Mini logo.png

Hardtop/Hatch/Convertible, Clubman, Countryman, and Coupe/Roadster.

3.3.4 Roll-RoyceRoll logo.png

Roll-Royce Moter Cars has been part of BMW Group since January, 2003. It is well-known brands in the world with the most fascinating and luxury motor car par excellence. For over 100 years, the Roll-Royce brand have stood for truly outstanding engineering, quality and reliability.

3.4 Sales Profile

Based on BMW Group financial annual report 2011, the overall sales volume increased compared to year 2009 and year 2010. The figure 3.3 shows the highlight of sales volume of BMW products and also the figure 3.4 shows the net profits of BMW Group.

Figure 3.3 Total BMW Group net sales in 2007-2011

BMW group achieved best results with sales volume in 2011. The sales of BMW brand cars alone rose by 12.8% to 1,380,384 units, 21.7% to 285,060 units with MINI brand, and 30.5% to 3,538units with Roll-Royce brand. Moreover, sales of BMW Motorcycles and Husqvarna brand rose by 3.1% to 113,572.

Figure 3.4 Total BMW Group net profit in 2007-2011

BMW Group also achieved best results with net profit in 2011. The net profit significantly improved in 2010 compared to 2009 through the negative economic turbulence. This could be due to strong BMW brand as premium vehicles, which caused strong demand in Asia and in USA in 2010. The net profit in 2011 increased by 51.3 % to € 4,907 million compared to € 3,243 million in 2010.

Figure 3.5 Key automobile market for BMW group

(Source: BMW Group annual report, 2009-2011)

The figure 3.5 shows the key automobile markets. It shows that the sales performance in Asia dynamically increased since 2009 with BMW, MINI and Roll-Royce Motor Cars brand vehicles. The main contributor to this automotive segment significant increased was the Chinese market, with sales up to 233,630 units, nearly double of year 2009.

3.5 Summary

Bavarian Motor Works (BMW) is a German company that is one of the most successful car and motorcycle manufacturers in the world. It owns three of the strongest premium brands in the automobile industry and also strong position in the motorcycles market with the BMW and Husqvarna brands.

The company has grown with corporate strategy with prime objectives as striving for ecological and social sustainability along the entire value-added chain, taking full responsibility for products and giving an unequivocal commitment to preserving resources. For these reasons, the BMW now has top-of-mind brand awareness in car category with around $24.6 billion of brand value.

The brand identity of BMW is the ultimate driving machine. The brand slogan is associated as ‘THE ULTIMATE DRIVING MACHIN’ in USA, Australia and UK and ‘SHEER DRIVING PLEASURE’ in international official website and many other counties. Moreover, the consumer brand association for BMW might be ‘heritage’, ‘stylish’, luxurious’, powerful’, ‘elegant’, performance’ and fuel efficiency’ to extent. In addition, BMW brand strategy consists of innovation, dynamism, exclusivity and aesthetics which helps to boosts the development of brand identity.

CHAPTER IV

COMPANY ANALYSIS

4.1 Power of Brand

The BMW name, one of the oldest company in car market, is an important source of brand equity as well as it’s the German car. According customer based brand equity pyramid (Figure 4.1), the BMW is equally strong on the left and right sides, and also from bottom to top.

pynamid.png

Figure 4.1 Customer