BMW Company’s Control Planning Strategies

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Introduction

Bavarian Motor Works (BMW) is an independent German car manufacturer that was founded in 1916. It is a global manufacturer of luxury automobiles as well as high-performance automobiles. The company also has manufacturing plants for motorcycles, and it has subsidiaries such as the Rolls-Royce car brands and the Mini. The company began with the manufacturing of aircraft engines, after which it switched to motorcycles in 1923 before embarking on the manufacture of automobiles in 1928. (Friedman, 2008)

The most important achievement of the company in its early stages was the formation of the aircraft power plant BMW IIIa which was mostly preferred by many customers for its performance in high altitudes. In 1994 the company, through its acquisition strategies, bought the British Rover Group that consisted of the Land Rover, Rover, and the MG marques. Due to persistent losses from Rover, the company decided to sell the combine. The greatest shareholder of the BMW is the Quandt family since 1959, which owns 46% of the shares, with the rest being in public float. (Grahl, 2006),

Capacity planning

The company anticipates increasing its plant’s production capacity from 160,000 units to over 240,000 units by the year 2012. This is to be done through its expansion plans which will cost the company over $750 million. Due to this, the Spartanburg plant is expected to start its operations with the production of the sports activity vehicles (SAV), and it is also anticipated that the plant will necessitate the manufacture of the hybrid version of the X6 SAV.

By the year 2010, the production of the X3 SAV is also expected to be shifted from Austria to Spartanburg in order to allow for a wider customer base and easy entry into the market. According to the capacity plans laid down by the company’s management, the United States is unlikely to get in the near future supply of Minis. This is because the company does not have any plans to increase the production of Minis in the United States. (Hurst, 2006)

However, the Oxford plant in England where the Mini is still manufactured is at its full capacity, and therefore no need to increase more plants because while it seems to make sense fiscally to build as many cars, the task is not simple. According to the report that has been published about the company’s capacity planning, the mini dealers who are short of inventory will not get relief because the company does not anticipate increasing the production of the mini brand.

According to the Company’s North America vice president of corporate communication, despite the high record sales and high demand that has been recorded on the small fuel-saving hatchback, BMW is not likely in the near future to approve any more production of the mini brand in the United States. This is due to the fact that any increased capacity will necessitate an increase in costs, and this will trickle down to the forecasting accuracy.

Since the mini manufacturing plant is at its full capacity, then it means that an expensive undertaking in the expansion of the plant is required in order to accommodate any additional manufacture of the brand, something that has been strongly opposed by the company’s management. The company is anticipating increasing the price of its luxurious vehicles by a small margin that may not be felt greatly by its consumers. The German production capacity is anticipated to remain the same, and the company expects to have vehicles produced in German plants reach 1.8 million by the year 2012, and by the year 2020, the number is expected to be 2 million.

According to the company’s spokesman, the important issue is not about shifting the capacity out of the country, but it is about ensuring that the production capacity increases in the country. Through its capacity planning, the company expects to increase its production capacity in the Spartanburg plant from 140,000 to 240000 vehicles by 2012. Without additional investments, BMW expects to increase the capacity of the Mini plant in England to two hundred and sixty thousand per year. In China, the company expects to increase capacity from 30,000 to 44,000 per year.

Control planning

In its efforts to ensure that the company’s operations are up to date and working effectively, BMW anticipates adopting new technology in order to improve its ability to carry out its numerous operations in the most cost-effective manner as well as more securely and efficiently with the aim of managing its PC fleet effectively.

Being the world’s largest manufacturer of premium automobiles and owner of world-class vehicles and Rolls-Royce BMW will use the new Intel®Active management technology in order to be able to manage its 100000 PC’s in all of its global operations. The company’s core information technology department has increased its control system in order to boost its technical staff efficiency.

The company’s remote management ability is set to improve significantly with the new technology integration into the company’s operations. This is seen as an important step forward into strengthening the security of the operations in the company. The impact of the control planning that the company has adopted is an increase in the security of the company’s PC fleet and an increase in the cost-effectiveness of the company’s operations.

The relentless of the company in pursuit of manufacturing excellence, innovation, and engineering precision through its control planning strategies has enabled the company to emerge with remarkable success as compared to its competitors in the same industry. The manufacture of premium vehicles has been necessitated by the technological leadership which has been used to design its vehicles. (Morris, 2005),

As a result of this, the central information technology department in the company has relentlessly striven to improve the effectiveness and efficiency of the operations in the company and its performance. The information technology department has turned its attention recently in designing how best it can support and manage the 100000 PC’s which are being used by the company’s employees who are spread all over the company’s operational points in the world.

The central areas the information technology department wishes to address in its control planning strategies include increasing the efficiency in the deployment of the operations software because the current software has been a source of inconveniences since it requires to be switched on in order to receive updates on the happenings in the company’s operations. Using the new technology in its control planning, BMW has been able to significantly avoid user downtime through the deployment of software in all BMW’s company operation points.

The deployment of the software is usually undertaken overnight, and this depends upon whether the users have left their PCs switched on. Hence only a small portion of PCs miss the upgrading cycle in the initial stages. The second area that attracts the attention of the information technology department in its control planning strategy is improvement in security through undertaking measures that are directed to the protection of the company’s information by avoiding any misuse or access of vital company data.

Therefore the company seeks reliable methods which can ensure that the virus definition files and anti-virus software are up to date on all platforms. Control planning was undertaken by the information technology department also aims at reducing PC downtime and desk-side visits. This is because the much time wasted by the employee’s productivity in resolving the PC’s problems translates into great costs incurred by the company. (Slack et al. 2007)

Through its control planning strategy, the company is keen to reduce this wasted time due to software failure by speeding up the success of its software in its operations. The company has gone into the depths of acquiring more detailed, faster, and accurate hardware and software inventories in order to assist with virus protection as well as in troubleshooting and ensure more reliable maintenance contracts and software licenses as well as ensuring more compliance. The company has therefore been able to face out its manual inventory costs through its control planning that has enabled the adoption of the new Intel®vPro™technology.

Performance objectives

The first performance objective of BMW Company is to fully integrate the new technology in its operations all over the world in order to ensure that the operations are carried out more effectively and efficiently, thus reducing the time wasted in handling various problems that arise in the operations. The second performance objective of the company is to ensure that the company produces vehicles that are environmentally friendly, and this is true from the company’s objective of producing Mini in Oxford that is environmentally friendly according to the European Union requirement of reduction of carbon emissions. (Podobnik, 2008)

The next performance objective of the company is the increase in profitability of its cars by 2012 and this is to be achieved through saving six billion euros and also through selling two million more vehicles. In addition, the company expects to cut down its production, development, sales, and marketing as well as administration costs in the coming years. (Bird and Walker, 2005)

The next performance objective is keeping the production in Germany the same by increasing capacity in the country without shifting capacity out of the country. In addition, the company plans to step up production in North America, especially in the United States, in order to deal with the Euro that has been growing stronger with time.

The other performance objective is to increase the capacity of production in Spartanburg from 140,000 to 240,000 units by the year 2012. It also anticipates raising the Mini plant capacity in England to 260,000 units per year. Furthermore, it plans to increase units produced in China from 30,000 to 44,000 units because the market in China seems promising, and growth is expected to shoot up drastically due to the high demand for BMW vehicles in China.

Competitors’ actions

Mild to exotic modifications has been a worldwide market activity that has been going on through auto-tuning. Companies have been formed that modifies vehicles beyond the original manufacturing design. Alpina, Hamann Motosport, Dinan Cars, Hartge and Schnitzer are the major competitors who rival BMW. These companies have adversely affected the company’s capacity strategy because they modify new cars, thus reducing BMW’s market share, which has had trickledown effects on the number of vehicles the company is producing in its plants. (ZForums, 2007). It has also affected the number of units the company is selling in the market because the modified vehicles have gained a significant market entry because of their competitive prices.

DaimlerChrysler Company and Subaru manufacturers being some of BMW’s competitors, provides the same motorsports to the customer, which has also had detrimental effects on BMW’s capacity strategy. (Stiglitz and Charlton 2006). Audi is also another top competitor of BMW, which offers packages similar to those of BMW, and customers have taken these packages as optional equipment to those of BMW. As a result, BMW’s efforts to increase its capacity have been affected by the competitiveness of similar packages that originate from Audi and other competitors. (Bhagwati, 2004)

Effect of product life cycle on capacity planning

The strategy aimed at gaining the competitor’s customers and convincing the current customers to stay in the company is an uphill task that requires the company to offer its customers a product with a reasonable product life. To penetrate into a new market, the company needs to acquire the trust of its new customers so that they can, in turn, go back to the company in the future for more products. BMW has products that satisfy all different kinds of customers in the market, starting from products with a long lifespan to those that have a short lifespan.

This is done with the aim of necessitating market penetration and market expansion. Diversification of its products depending on the product life ensures that the company can satisfy the needs of the customers in all market segments. Vehicles with a long lifespan are manufactured and sold at high prices than those with a short product life. This is because the longer a product stays in the hands of a customer due to the long time it takes before it becomes obsolete, the less the company can sell in the market.

On the other hand, the less time the product takes in the hands of the customer, the more the company sells. To compensate for the time taken by the customers who purchase goods that have a long lifespan, BMW fixes prices with higher profit margins than it does with products that have a short lifespan. The company’s product recovery operations found in the reverse supply chains encounters rapid demand that is continuously changing due to the escalating number of product that are offered and which have reduced lifecycles.

The capacity planning strategy is, therefore, a vital tool for the company’s profitability of closed-loop supply chains. Product lifecycle affects BMW’s optimal policies in regard to contraction and expansion of manufacturing capacities as well as collection capacities. Numerical example results that have quite different return patterns and lifecycles have shown that the best possible collection, contraction, expansion, and contraction policies of remanufacturing depend upon the type of the lifecycle and the product’s usage time. This is in contrast with the expansion capacity policy on remanufacturing, which does not depend on these factors. The results have also indicated that remanufacturing capacity and collection capacity policies are not sensitive to product demand.

Globalization

BMW has been at the forefront in the expansion of its production activities throughout the world as compared to most of its competitors. Currently, the company has manufacturing plants in Africa, North America, Europe, Asia, and Australia. In Africa, the company has strategically set itself in South Africa, with most of its products being consumed by many people in Africa. (Daly, 1999).

Apart from its original home in Germany, BMW has also set its operations in England, where it has put up a manufacturing plant for the Mini brand. The company has also started its operations in Asia, especially in China, due to the potential market growth which has resulted from the growing demand for the company’s products. In North America, the company has established itself in the competitive United States market. Globalization has been one of the company’s expansion strategies that have enabled BMW to expand and increase its customer base. (Axel, 2007),

It has also been a source of security for the company in terms of profitability because when one market segment becomes unfavorable, the company has been able to continue with its operations in other market segments. The company intends to penetrate into new markets such as South America and many countries in Asia such as India, which is deemed to be a potential market for the company’s products. More countries in Europe such as France, Spain, and Switzerland are also easy targets that the company intends to capitalize on in the globalization of its operations.

Many supply chains have also been established in different parts of the world to enable the company’s products to reach areas that are hard to reach. In this perspective, the company has managed to distribute its products in 90% of the various parts of the world. Globalization has also enabled the company to compete effectively with other firms in the same industry, such as Hamann Motosport and DaimlerChrysler Company. Effective competition has been necessitated by large sales volumes that the company has recorded from its different market segments. As part of its delocalization plans, BMW has focussed majorly on increasing and expanding overseas production by putting up new plants and expanding the existing plant’s capacity. (Sheiley, 2003)

The company has also adopted the vision 2006 strategy aimed at accelerating globalization while at the same time bringing sustainability in market leadership, especially in Japanese markets. Globalization is also a company’s escape route from domestic problems such as choosy customers, excessive capacity, and surplus workforce, as well as intensified competition in the German market. From the profitability figures, it has been shown that 80% of the company’s profits originate from markets other than Germany, which is the reason why the company has intensified its globalization strategies.

BMW strategic fit

The company has at the forefront looking for partnerships in order to be able to penetrate new markets. As a result, the company has used the capability, compatibility, commitment, and control criteria to establish the type of partnership and the companies that can fit in its goals in order to complement its strengths and weaknesses.

Application of these criteria between potential buyers and BMW cars, the company has been able to identify new and reasonable partners who fit in its goals. The strategic fit between BMW and its future buyers has enabled the company to single out the most credible buyers than less credible buyers in regard to the traits which fit BMW’s cars. The fit has also been assessed in order to know whether a new buyer desires to be a manufacturer or not. This criterion has been used to single out a specific company out of a set that would be the most reasonable buyer.

Recommendation

In order to achieve the 50 percent medium-term expansion, the BMW management board should concentrate on carrying out the forward expansion by entering into unexploited markets in order to reduce competition. This will ensure quick penetration in these new markets. The board should also move quickly to ensure that proper infrastructures are put in place to enable the emerging market to operate at par with the already developed and established markets. In addition, to achieve 50 percent expansion in the medium term, the company should seek to partner with smaller struggling companies or even acquire them in order to take advantage of their presence in different markets, after which the company should move with speed to expand its wings in those markets.

Conclusion

Bavarian motor works (BMW) needs to strategically place itself in the ever-growing competitive market through capacity planning and control planning. This will enable the company to effectively overcome the stiff competition that it is currently facing from its competitors, such as Audi. The company’s management has to establish the competitor’s actions and their effects on its capacity strategies in order to set new performance objectives and look for new ways of achieving them through control planning. The company has to take advantage of globalization in its efforts to become a world-class company in the manufacture of vehicles. This again goes back to its control planning strategies that have to be adequate in the management of the company’s subsidiaries in the world.

References

Axel, D. (2007), measuring globalisation: Gauging Its Consequences in motor industry, (New York, New York Press).

Bhagwati, J. (2004), performance of BMW and its competitors, (Oxford, Oxford University Press).

Bird, J. and Walker, M. (2005), a sustainable future for BMW, (New York, New York Press).

Daly, H. (1999), “globalization versus Internationalization in BMW, (Karachi, Karachi Press).

Friedman, T. (2008), the reality of internal business with BMW, (New York, New York Press).

Grahl, C. (2006), BMW at its early stages of operations, (Oxford, Oxford University).

Hurst, E. (2006), capacity and strategic planning in the motor industry, (New York, New York Press).

Morris, D. (2005), control planning in BMW, (Berlin, Berlin Press).

Podobnik, B. (2008), BMW’s performance objectives, (Berlin, Berlin Press release).

Sheiley, L. (2003), globalization and BMW operations, (Oxford, Oxford University Press).

Stiglitz, J. and Charlton, K. (2006), the effects of competitor’s actions on BMW’s performance, (Oxford, Oxford University Press).

ZForums, C. (2007), what are the direct relationships between BMW and its competitors? (Oxford: Oxford University Press).

Slack, N. et al (2007), operations management, 5th edition, (Harlow, Prentice Hall).

BMW’sin relation to Subaru it core competitor. 2008. Web.

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