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INTRODUCTION

Bayerische Motoren Werke (BMW) (English: Bavarian Motor Works) is a German automobile, motorcycle and engine manufacturing company founded in 1916. It also owns and produces the Mini marque, and is the parent company of RollsRoyce Motor Cars. BMW produces motorcycles under BMW Motorrad and Husqvarna brands. In 2010, the BMW group produced 1,481,253 automobiles and 112,271 motorcycles across all its brands. BMW entered existence as a business entity following a restructuring of the Rapp Motorenwerke aircraft engine manufacturing firm in 1917. After the end ofWorld War I in 1918, BMW was forced to cease aircraft engine production by the terms of the Versailles Armistice Treaty. The company consequently shifted to motorcycle production in 1923 once the restrictions of the treaty started to be lifted,[3] followed by automobiles in 192829. By the year 1959, the automotive division of BMW was in financial difficulties and a shareholders meeting was held to decide whether to go into liquidation or find a way of carrying on. It was decided to carry on and to try to cash in on the current economy car boom enjoyed so successfully by some of Germany's ex-aircraft manufacturers such as Messerschmitt and Heinkel. The rights to manufacture the Italian Iso Isetta were bought; the tiny cars themselves were to be powered by a modified form of BMW's own motorcycle engine. This was moderately successful and helped the company get back on its feet. The controlling majority shareholder of the BMW Aktiengesellschaft since 1959 is the Quandt family, which owns about 46% of the stock. The rest is in public float. Chief designer Chris Bangle announced his departure from BMW in February 2009, after serving on the design team for nearly seventeen years. He was replaced by Adrian van Hooydonk, Bangle's former right hand man. Bangle was known for his radical designs such as the 2002 7-Series and the 2002 Z4. In July 2007, the production rights for Husqvarna Motorcycles was purchased by BMW for a reported 93 million euros. BMW Motorrad plans to continue operating Husqvarna Motorcycles as a separate enterprise. All development, sales and production activities, as well as the current workforce, have remained in place at its present location at Varese.

Shareholders structure
By types

Strategic investors: 46.7% Institutional investors:


North America: 15.8% United Kingdom and Ireland: 11.8% Other Europe: 5.7% Germany: 4.8% Rest of the world: 2.5%

Other investors: 12.7%

PLANNING
In 2007, managers at BMW's power-train plant in Dingolfing, Southern Bavaria, contemplated the sobering fact that the average age of the workforce was set to rise from 39 to 47 over the next ten years. The company could do little to reverse this trend because the plant had committed to guaranteeing employment to its extremely loyal workers, rather than forcing them into early retirement and replacing them with younger people. As BMW was the largest employer in a region with high unemployment, backing out of this deal was politically unfeasible. On the other hand, because the plant's strategy called for ambitious productivity improvements, the demographic shift seriously threatened its goals. In October 2007, the plant staffed an existing 38-person production line for rear axle gearboxes with a worker mix that reflected the projected age distribution of the plant in 2017. No one volunteered for this "weird" pilot of the "2017 production line"; the plant management had to assign older workers who were skeptical and even afraid of operating the line at a regular production pace of 560 gear boxes per day. But within just three months, managers working with the production line were able to improve its productivity by 7%, bringing it into line with younger workforces. The line's initial absenteeism rate was halved. The line's defect rate dropped to zero, where it has since remained. As with many of the most compelling operations stories, this turnaround was not the result of some big expensive change but rather from the accumulation of lots of small, inexpensive changes: better seats, new workbenches that could be adjusted to an individual's height, wooden flooring that provided better cushioning and insulation. In concert, the small adjustments vastly improved workplace ergonomics, making the workers healthier and more productive. BMW is treating the Dingolfing 2017 production line as a model for how to manage the challenges of an aging workforce. It's an example many other companies could follow as well.

Strategic Planning at BMW


The BMW Group, with its head ofce in Munich,Germany, manufactures and sells BMW, MINI, andRolls Royce cars. Its products cover the full rangeof size classes and car types but consist exclusivelyof premium-class cars. In 2004, it sold 1.25 millioncars. Currently, BMW produces cars in eight plantsin Germany, the United Kingdom, the United States,and South Africa, and its external partner, MagnaSteyr, has a plant in Austria (Figure 1). Moreover, itmanufactures engines at four further sites, and completely knocked down (CKD) assembly takes place atsix sites. The product program is expanding steadilyIn the last three years (2001 to 2004), nine new models have been launched, among them the 6 series witha coup and a convertible, the X3, a sports activity vehicle, the Mini convertible and, most recently,the 1 series. This dynamic development will certainlycontinue in the future.

The Initial Situation


For BMW, long-term strategic planning of productsand production is a fundamental task. BMW had awell-elaborated strategic-planning process when westarted our project in 2000. In this planning process, the horizon extends to 12 years, divided intoyearly periods, so that it contains the full life cycle ofthe products starting in the next ve years. Planners aggregate the products to the level of the derivativesof the product series, for example, sedan, coup, touring car, or convertible. They revise the 12-year plansseveral times a year, and the board of directors mustapprove of the results.Naturally, within the planning process, BMW plansits products and sales before planning production capacities. In these two initial steps, which we do notconsider in detail, the rm decides on the set of futureproducts and, for each existing or future product, theyear or even the month of start-up and shutdown,and estimated sales gures during its life cycle, for different geographical markets. The results of thesesteps and the exibility reserves the rm considersnecessary based on its experience are available as data for the third step, plant loading, in which planners allocate the products to the plants and determine therequired production capacities. We focus on this third planning step.

Originally, planners performed this step manually using Excel sheets that expressed the load and the capacity per plant as the number of cars produced per day and the number producible per day summed up over all products. They transformed the resulting load plans for all the plants into diagrams (Figure 2). Planners allocation of products to plants was restricted for technical reasons, by the personnel skills available at every location, and because of general policy. For only a few products were there alternative production locations, from which planners either made an appropriate choice or tried each one. They had a further degree of freedom for split products, those produced at two or more plants, for which they decided the volume to be produced at each plant, usually to utilize the plants properly.

Marketing
Since the competition started to imitate BMWs advertising messages of outstanding quality, BMW decided to come up with a unique way of reaching its target audience. The company did so by hiring Fallon Worldwide, and advertisement agency based in Minneapolis, MN, to come up with a new campaign. Fallon developed the concept The Hire series. Fallon's responsibility also included the way in which these movies were to be delivered to BMW's target audience. It was also questionable whether the campaign should be the same throughout the world, or if it should be localized to adapt to language and consumer taste differences. In order to attract highly recognized directors, as well as actors, BMW was willing to spend a large amount of money. In addition to coming up with a unique advertising campaign, BMW also wanted to change their image. One of the goals was to make BMW look, not only cool, but likeable, which the brand needs to do to combat negative perceptions some people have based on old associations with the 80s style yuppie arrogance. Company Profile BMW (Bayerische Motoren Werke Aktiengesellschaft) was founded in

1916 and has been publicly traded since 1969. The company produces, and markets, a varied range of higher end sporty cars and motorcycles. BMW has also manufactured the first passenger car running on hydrogen ready for common use, although the production figures are limited by the lack of a respective filling station net. In addition to cars and motorcycles, BMW operates an aircraft engine division under the brand name of Rolls Royce. The company has worldwide subsidiaries and manufacturing plants in Germany, Austria, the UK, the USA, Mexico, Brazil, South Africa, Egypt, Thailand, Malaysia, Indonesia, the Philippines and Vietnam. The company also operates its own financing company, which offers financing for vehicles. Automobiles accounted for 78% of 2000 revenues; vehicle finance leasing, 18%; motorcycles, 3% and other, 1%.

SWOT ANALYSIS
The BMW Group is the only manufacturer of automobiles andmotorcycles worldwide that concentrates entirely on premium standards andoutstanding quality for all its brands and across all relevant segments. With the brands BMW, MINI andRolls-Royce Motor Cars, the BMW Group has been focussing on selected premiumsegments in the international automobile market since the year 2000. In thesucceeding years, the launch of the BMW 1 Series meant an expansion of themodel range in the premium segment of the lower middle class and the BMW 6Series did likewise in the segment of the large Coups and Convertibles. TheMINI marque was launched and production began in the Oxford plant in 2001. In2003, the BMW Group assumed marque responsibility for RollsRoyce Motor Cars.At the same time, the Worldwide Head Office and Manufacturing Plant inGoodwood, GB, was built. ( AnInternal and corporate analysis in terms of strength, weaknesses, opportunitiesand threats (SWOT) will assist in gaining an understanding of where BMW iscurrently in terms of strengths and where improvement is required within thebusiness and what outside environmental threats it may face as well as what newopportunities are available to the company in the short and medium term.

Figure 1:BMW SWOT Analysis STRENGTHS


OPPORTUNITIES

Diverse ranges of Products - BMW, MINI and Rolls-Royce Strong Cash Flow Position Increase turnover and trading profits Strong Balance Sheet World's leading Premium Quality Automobile Manufacturer Brand Awareness Human resources Capabilities to turn resources into advantages

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

WEAKNESSES

THREATS

Perception of High Prices Customer disinterest Environmental issues: Pollutions Buyer sophistication and knowledge Substitute products or technologies

New & existing competition Volatility in Price of Fuel New legislations Consequences of the oil crisis September 11th Economic recession Market shift to globalisation Takeover bids Far-East Automobile companies expansion Extremely high competition for customers and resources

The Five Forces Model Figure2: Five Forces Model - ACCA Paper 3.5 (2001)

Threats from Potential entrants Suppliers Bargaining power Competitive Rivalry Threats from Substitutes Porterexplains that there are five forces inherent in a market, which will jointlydetermine the intensity of competition and profitability of BMW and theautomobile industry. The first is the threat posed by new entrants, the highcapital expenditure and confidence of customers represent significant barriersto entry and the market is also sensitive to reputation. However, the emergentof low cost manufactures do pose a significant threat (as illustrated by figure2). There is an opportunity in the low price/ low economy (fast) sector. MaybeHyundai or Daewoo could consider introducing a low cost sport saloon. The second is the threats from substitutes, as thereare many make and model of other premium branded cars, hence, Jaguar, MercedesBenz, Audi etc. The third force is the threats from the bargaining power ofbuyers, is this strong for both BMW and the entire automobile industry with alarge number of alternative suppliers, hence, the aggressive pricing strategy.This results in a very strong competitive rivalry in the industry. This isintensified as a result of little or no differentiation in the basic productoffered. Finally the threats from the suppliers bargaining power, this isfairly low in the automobile industry, due to dual sourcing strategies, using arange of alternative sources of supply for parts. The five forces analysis gives an improved understandingof the degree of competition within the business environment. The analysisshows that the automotive industry is highly competitive, with buyerspossessing and exerting a very powerful influence to the large number ofsubstitute brands available to them. Buyers Bargaining power

BMW Human Resources Policy

In response to a changing business environment BMW isbeing more business and service focus. In the past decade the organisation hasbecome much more proactive, dealing with new concepts to become more serviceand customer focus oriented. The structure of the organisation has beenredefined to deal with the new ways of operating. Organisational structuredefines important relationship within the business for achieving businessobjectives. At the same time it helps to define the new business culture withinBMW. Culture exists with the minds and hearts of BMW's employees andcontributes to business strategies of the organisation. Therefore, BMW's humanresources policies are critical in the organisations structure, conduct andperformance. Competitive pressures on BMW and national economies haveincreased markedly in recent decades. Therefore, organisations are constantlychanging, as powerful entities have arisen at the international level, theEuropean Union being a good example and multinational corporations increasinglydominate particular sectors such as cars. New competitions are emerging andforcing older companies to adopt or reform to survive. Different structuresaffect the way in which human resources are managed. BMW like all otherbusinesses require the same basic human resources activities like recruitment,development and training, appraisal and reward systems, and control andfeedback mechanisms. Organisational structures are influenced by culture.Employees have strong feelings towards the organisations they work for. Germanfirms have inherently a flat, less rigid structures. The McKinsey 7 'S' modelis often used to identify all the areas that make up an organisation.Structure, Style, Staff are three such areas. BMW has an equal opportunities none sexual discriminatingculture within its organisation. BMW actively supports young female executivesand gives females insight into the field of technology. BMW also offersextensive training for all level of staffs; BMW Group's Trainee PromotionProgramme (TPP) provides the perfect combination of theoretical studies andpractical work. BMW Group trainees receive many benefits in addition to theirpay, other social payments such as holiday and Christmas bonuses, meal andtravelling expenses subsidies, health programme and PC training. BMW claims that it does not see its staff as a cost factorbut as an essential performance factor. Also the employees are referred to as'associates' rather that

works. BMW in its human resources policy states thatany policy that is not oriented towards its associates will lead to negativecost effects in the long-run. As a future-oriented company, we seek to pursue anexemplary, creative and associate-oriented human resources policy, makingsignificant contributions to business success through our human resourcesactivities. The human resources policy of the BMW Group is an integral featureof our overall corporate policy in both strategic and operative decisions. (Corporate appraisal (or SWOT analysis) consists of the internal appraisal ofthe organisation's strength and weaknesses and an external appraisal of theopportunities and threats open to organisations in competition within industry.

Conclusions We improved long-term load planning, an essential step in BMWs strategicplanning process, by extending it to an integral view of the global supply chain. The new model optimizes the allocation of products to production sites and investments in additional capacity, taking into account corporate-policy restrictions. The model makes the planning process more transparent, and it has been accepted by the many departments concerned, which provide the necessary data. We modeled operations in the supply chain and cash ows in appropriate detail to include the essential effects of product-allocation decisions and to permit optimization with a standard MIP solver. The optimization model produces load plans for various scenarios quickly. It reduces planning effort and allows planners to investigate various scenarios more frequently than they could in the past. All in all, the model greatly improves the decision support for BMWs overall strategic planning. Based on our early tests of the new model, we can realistically expect a reduction in investments and costs for materials, production, and distribution of about ve to seven percent. BMW intends to imbed the new MIP model in a graphical user interface, which still needs to be developed. Planners with little knowledge of operations research will then be able to use the model.