CHAPTER 1 CASE STUDY

The BMW Group is facing a changing market landscape

Dr Ralf Wilden, University of Newcastle
All stakeholder groups within the automotive industry have been affected by the global
financial crisis, leading to consolidation of manufacturers, suppliers and other mobility
service providers. To prepare for the next decade, organisations in the automotive industry
need to evaluate their existing strategies on all levels: corporate, business and functional.
Organisations need to spend time and effort to identify opportunities, make necessary
investments and change their business operations accordingly. They have to answer three key
questions: What are the new market dynamics? How will demand for vehicles and mobility
services evolve? How will products and services need to adapt?
In addition to financial distress, the car industry has been especially affected by
increasing cost pressure, new technologies such as the Internet of Things (the
interconnection of embedded computing devices) and changes in consumer behaviour and
expectations. Some of the latter include increasing urbanisation; consumers not
considering cars as status symbols anymore and thus putting less importance on car
ownership; and customers’ increased awareness of their environmental footprint. Industry
responses to these trends can be seen, for example, in the increasing number of hybrid cars
on Australian roads, as well as the increasing popularity of car-sharing schemes.
The BMW Group serves as an example in how its market orientation led to new
strategies and a revised product portfolio to respond to these challenging developments.
Key factors have been the establishment of non-traditional departments within its
organisational structure, for example the Marketing Innovation department, as well as
the subsidiaries BMW i Ventures and BMW Group Research and Technology. These
have moved the BMW Group’s internal focus to a market orientation to help stay ahead
of the competition. This department and the subsidiaries are used to conduct structured
and frequent market sensing through, for example, collaborations with universities and
interactions with start-ups. Results include the introduction of mobile marketing
platforms (e.g. BMW TV and podcasting), the generation of new customer leads and an
increase in BMW’s marketing return on investment.
Traditionally car manufacturers offered cars in various shapes and forms. This
tangible product-centred approach restricted organisations in allocating research and
development resources, typically only leading to incremental innovation in their
offerings, that is, their vehicles. Through its new market orientation the BMW Group
identified the need to diversify its value creation activities away from only selling
vehicles and motorbikes, which ultimately led to the establishment of BMW i Ventures.
This venture-capital firm provides early- and mid-stage funding to high-potential ideas
in the area of mobility-related services. Through these investments the BMW Group
aims to create new, smarter and more efficient mobility services. These investments in
long-term partnerships focus on, for example, e-mobility, navigation, parking and car
sharing. Thus, the BMW Group recognised the importance of new business models such
as Airbnb, through which individuals rent out rooms or apartments to other individuals
and businesses. BMW saw the potential for a similar model for the mobility industry and
invested in Justpark. This mobility service connects home and business owners who

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would like to earn money from renting their space with drivers in need of a convenient,
safe and cost-effective location to park.
Through BMW Group Research and Technology the BMW Group conducts non-
traditional research and development to identify new technological developments and
future mobility concepts. Various projects are set up to identify technological
opportunities. These are assessed and, if considered relevant, may result in improvements
to BMW Group’s technological capabilities through, for example, hiring experts in hybrid
and hydrogen engines (CleanEnergy and EfficientDynamics). Such activities have
resulted in the introduction of the revolutionary BMW i3 and i8 electric cars, together with
new business models that are leading the firm into the future. These new services and
vehicles respond to the aforementioned growing market demand for ‘green’ products.
Furthermore, car manufacturers following a market orientation approach have to
carefully monitor and understand the shifting market dynamics in the global car industry.
The growing demand from emerging economies has led the BMW Group to redirect its
marketing efforts to these markets and the design of its core products to be appropriate
for these customers. Furthermore, some of its research and development was relocated
to China, where internet-connected car technologies are heavily used due to heavy road
congestion. Over the next decade, internet-enabled technologies are expected to cause
another revolution in the automotive industry. In emerging markets like China and India,
about 20 per cent of motorists have been using connected car services since 2012. Sales
of passenger vehicles in emerging economies are predicted to more than double by the
end of this decade. For example, research forecasts that China will account for about
one-third of annual new worldwide vehicle sales by 2020. Accordingly, shipments of
connected car systems are expected to grow by up to 400 per cent in the same time
period.
Summing up, organisations at various levels of the automotive value chain need to
carefully monitor these and future market developments and respond appropriately; these
responses will lead to changes in corporate, business and marketing strategies.

QUESTIONS
1. How will emerging players from so-called BRIC countries affect Western and Japanese
car manufacturers?
2. How can marketers within the BMW Group help to address these and other future
challenges?
3. More generally, which mega trends will affect the way we do business in the future and
how customer value is defined?

REFERENCES
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BMW, BMW connected drive, 2014,
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BMW, BMW research and technology, 2014,
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BMW, BMW i Ventures announces strategic investment in the largest family mobile app company—
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