The goal of the cost leadership approach is to reduce costs in order to acquire a competitive edge. Cost management is the
- The main goal of employing this tactic is to maintain market leadership by effective
- By focusing on the middle class, this strategy enables BMW to increase its market share, making the
greatest share of the whole mix of the consumer markets in most of the nations. generic middle class customers
give great weight to the cost-effectiveness element, and cost leadership is the greatest approach to meet the needs of
- BMW places a strong emphasis on making its products widely accessible and affordable, which results in
toward high brand recognition and sales growth, and it offers a solid foundation for competitive advantage.
- Besides charging less by reducing production costs and enhancing supply chain effectiveness,
BMW routinely provides discounts and coupons to meet sales goals and contend with the marketplace
pressure from its main rival. These discount and advertising efforts hope to raise awareness of
Many advantages provided by this general approach have been described in the discussion of BMW’s cost leadership strategy.
approach, such as boosting brand recognition quickly, growing the clientele, promoting consumption, and
accomplishing sales goals by focusing on the cost and accessibility of the goods. however, the examination of
BMW Cost leadership is emphasized as the primary tactic of BMW’s competitive advantage plans, the
Additionally, the business employs cost leadership and the differentiation approach to lay the groundwork for sustainable
In This Article...
BMW’s Differentiation Strategy
No of the industry, a company’s success depends on its capacity to provide value to its customers. Customers should be able to identify this value, and it should stand out from the rest of the market. There are several brands in the auto industry, and each of them uses a distinct approach to market penetration. Due to the current occurrence of the global crisis, various brands have planned to provide low cost, highly fuel efficient vehicles. These businesses are able to achieve enormous global sales thanks to this strategy, which also equips them to take advantage of the expanding marketplaces in developing nations. However, because it doesn’t offer a brand-new or distinctive product, this strategy is really only one of differentiation. Automobile manufacturers merely enter the competitive market where brands compete on the basis of price leadership. The majority of people in today’s culture can replace their vehicles frequently because of the way they currently live. Automobiles are no longer regarded as a fixed asset or a long-term investment. Cost, however, is not the only issue affecting the sales of automobiles globally. Modern culture has evolved to become high-tech and environmentally sensitive. They desire cars that not only have the newest technical advancements, but also have environmentally friendly technologies. Due to this tendency, the majority of auto manufacturers worldwide are investing in next-generation vehicles, which has resulted in breakthroughs like electric cars (Motavalli, 2012). The long-term success of the global automakers is based on innovation rather than cost strategy, and well-known brands like BMW have widened their global markets using this method.
BMW’s capacity to provide cutting-edge automobiles has been the main factor in its success on the global market. Due to its emphasis on being the first to market with cutting edge technology, the company has been able to set itself apart from the rest of the rivals. The management of BMW thinks that an automobile must develop and change much like a person does, and that ongoing technical developments are crucial to this process. The business thinks that the most practical plan for long-term growth is the advancement of technology. Consumers have grown more price sensitive as a result of the market’s current financial predicament, which has…
BMW’s Strategic Decisions
The BMW Group’s ability to position its BMW, MINI, and Rolls Royce brands as vehicles that provide users with “leading edge technology” in addition to distinctive designs that set the cars apart from other conventional vehicles (Rolls Royce 2010). With the use of this tactic, BMW, MINI, and Rolls Royce may demand a high market price for their masterpiece. Porter (1985, p. 11) explains that “Sustainable competitive advantage is a basic underpinning for above-average long-term performance” for the business. In other words, the BMW Group’s capacity to sell its cars for more than the going rate gives the business a competitive edge over its rivals. This element, in one way or another, increased the company’s success throughout the previous five years.
It is feasible to pinpoint the strategic decisions made by BMW Group using Porter’s general tactics. Due to its differentiation methods, BMW Group was able to gain a competitive edge over its rivals across a wide market scope (Porter 1985, p. 11). As part of the BMW Group’s differentiation strategy, the business invests in innovative technologies including hybrid and electric motors in addition to Efficient Dynamics to produce distinctive luxury and high performance vehicles (BMW Group PressClub Global 2010 b). The company’s goal statement, which reads that “In 2020, the BMW Group will be the world’s leading supplier of luxury products and sophisticated mobility services,” clearly includes this particular plan (BMW Group PressClub Global 2010 b).
BMW Group also had a competitive edge over other automakers thanks to cost leadership or low cost competency. Accordingly, the management of the BMW Group is producing and marketing distinctive BMW, MINI, and Rolls Royce vehicles produced with cutting-edge technologies at a premium market price (Rolls Royce 2010). In addition to increasing its manufacturing facilities in China and Germany to take advantage of low wages and salaries, the company successfully manages its direct material and operational expenses by working with its approved suppliers and business partners (BMW Group PressClub Global 2010 b). Additionally, the corporation was able to lower production costs by adhering to industry standards for auto parts and reducing the number of car models on the market (Porter 1985, p. 12).
BMW Group was able to establish a strong market segmentation strategy that focuses on selling BMW, MINI, and Rolls Royce automobiles to an elite group of people throughout Europe, America, South Korea, South Africa, and Asia, particularly in China and Japan, to gain a competitive advantage over its rivals within a constrained market scope (BMW Group PressClub Global 2010). The corporation is able to preserve the grandeur of its brand equity without compromising its yearly corporate sale and profitability by restricting the sale of BMW, MINI, and Rolls Royce automobiles to the top market segment in each of its target nations.
Cost management and pricing strategy
Despite the fact that BMW concentrates on producing expensive vehicles, many people cannot buy them due to their extraordinarily high costs. The business should make the decision to implement the cost leadership strategy in order to improve its performance in the market (Steinmann & Schreyogg 2005). This can be done through reducing costs and streamlining all operational tasks.
This can be done by contracting out manufacturing tasks, using the most up-to-date production technologies, and laying off extra workers. By doing this, the business will be able to reduce its operating expenses, increasing its profit margins (Bradley 2005). The corporation will be able to cut prices as a result, which will also have a substantial impact on pricing. This strategy will make the products more accessible to customers, increasing sales and profits.
BMW And BMW: BMW’s Differentiation Approach
BMW uses a strategy of differentiation that offers distinctive traits that are desired by customers. In the auto manufacturing sector, rivals might be distinguished by their safety, style, or efficiency. The two leading automakers, Nissan and BMW, vary in many respects, including brand image and values. BMW charges more for its goods because buyers value their excellent quality and innovation. BMW’s value, as stated by Calne, J. (2015), is the product’s exclusivity, which permits them to demand a premium price for it. BMW has the following internal strengths and succeeds in its differentiating strategy. The reputation of BMW in the automotive industry is a result of their top-tier scientific researchers and innovative team… show more content However, there is a subset of buyers that view BMW vehicles as weekend recreational vehicles. as well as the desired region in Europe, Africa, America, and Asia. In order to compete with rivals in that market sector, BMW focuses on the target market segment where the company hopes to establish itself. BMW occupies a unique position in the luxury car market with a distinct advantage based on high performance and originality. A status symbol with great performance, power, and design is the BMW brand.
Because Nissan targets a thin segment and BMW targets a broad segment, both organizations achieve either a cost advantage or distinction, which explains why BMW and Nissan both place a strong emphasis on focus strategy. According to Johnson, G. and Whittington et al. (2014, p. 199), Nissan and BMW both employ a focus strategy that allows them to please their customers. Nissan adopts a focus approach with a smaller size and less negotiation leverage with their suppliers due to their little market focus.
According to the BMW Annual Report (2015), BMW follows a hybrid approach, allowing them to pass along higher costs to their customers due to their lack of competitiveness. Focused businesses can adapt a wide range of product development and market segment strategies to outperform their competitors.
I Inside the BMW.
As the driver increasingly becomes a passenger and enjoys more “me time,” technologies like electromobility and autonomous driving open up new design options for the interior of the car. Visions and concepts for the future of automotive interior design are displayed in the BMW I Inside Future sculpture, which was unveiled at CES 2017. The interior of the car can be used as a retreat, an office, or a space for entertainment depending on what is required. Additionally, this broadens the range of functions that are offered in the car, particularly in terms of digital services.
Who is BMW’s primary rival?
Bayerische Motoren Werke AG was established in 1916 and initially produced aircraft engines before launching their first motorbike, the BMW R 32, in 1923. The manufacturer started making cars in 1928, and as time went on, sales of cars became the group’s primary source of income, bringing in little about 80.8 billion euros in revenue in 2020. BMW was among the top 15 most valuable brands in the world a year later. Mercedes-Benz and Toyota, its principal rivals, were the only automakers to rate higher.
In 2020, Bayerische Motoren Werke AG generated around 99 billion euros in revenue, including the sectors MINI and Rolls-Royce. The company’s revenue decreased by around 5% during the coronavirus pandemic, while deliveries decreased by roughly 8%. Despite this, BMW continues to be one of the world’s top manufacturers of luxury automobiles.
How much does it cost to own a BMW?
When calculating the total cost of ownership for BMWs, like with any other car, truck, or SUV, it’s critical to account for the expenses for routine maintenance. Examining the overall reliability rating of the vehicle can be one technique to assist you in determining the possibility of potential problems. A car is more likely to need maintenance and experience breakdowns if its score is lower. BMW is rated as the 30th most reliable car brand out of 32 by RepairPal, receiving a score of merely 2.5 out of 5.0.
BMW, nevertheless, was rated as the seventh most trustworthy automaker in the United States in 2020 by the J.D. Power Vehicle Dependability Study. BMW was ranked higher than other high-end manufacturers including Cadillac, Audi, Mercedes-Benz, Jaguar, and Chrysler. With such contradicting scores, we advise researching the individual BMW model you now own or are considering buying to see what common maintenance and repair difficulties they may experience.
BMW is the most expensive brand to service in addition to these varying reliability ratings. In fact, throughout the course of ten years of ownership, BMW owners can anticipate spending $17,800 on average. Mercedes-Benz is the second most costly brand, costing over $4,900 more than BMW.
With Supreme for Highline Vehicles, you may discover comprehensive coverage for a number of BMW models as well as a number of other luxury automakers’ models, including Porsche, Audi, Mercedes-Benz, Jaguar, Land Rover, and more. This inclusionary addition to our all-inclusive Supreme plan will assist in covering the expense of breakdowns and repairs for your luxury car, allowing you to save money and quickly get back on the road.