Technology management Essays - BMW, Convertibles, Sedans, City Cars

London School of Commerce Time Constrained Assessment - MBA 1 TMIA, May 2010 Maximum Marks: 70Duration: 48 hours Instructions: 1.This assessment has seven questions. 2.All questions must be answered and they carry equal marks. 3.Answer the questions, applying all the relevant concepts and theory learnt. 4.Any additional research done on the organization must be referenced. 5.This assessment must be answered in the question and answer format, the length of each answer must be 500 750 words. 6.The answers must be submitted through turnitin. BMW (This has been adapted and modified from a term paper on BMW from http://ivythesis.typepad.com) Introduction BMW is one of the best-managed brands in Europe, if not the whole world. Its consistent work over the years has led to a very strong position in the automobile industry, a clear message as well as a distinct identity. All encapsulated in 'the ultimate driving machine'. The only challenge for the brand seems to be to keep on track and to continue to develop (2003). In 1959 BMW was on the edge of bankruptcy, however, the company recovered to become one of the world's most profitable automobile manufacturers. Background of the Automobile Industry Though the car industry worldwide is replete with so-called national champions, it is probably the most globalized industry in the world with the three triad groups of the USA, Japan and Western Europe accounting for almost 90 per cent of total output. Additionally, it employs around 4 million direct workers with a further 10 million involved in material and component manufacture. When those involved in the selling and maintenance of vehicles are included, the total figure swells to around 20 million (1998). Apart from merger, almost all the automobile industry producers in Europe sought to improve their position in world markets by improving relations with their suppliers and bringing about radical improvements in supply chain management. The tradition in dealing with component suppliers virtually throughout Western Europe was extremely adversarial and based on short-term contracts which was in sharp contrast with Japanese practice. Successive reports indicated that the automotive components industry was the weak link in the European car industry. Initially, car makers simply tried to force component suppliers to cut costs and so place the responsibility for cost reduction and rising quality on to the suppliers. However, a report prepared by the Boston Consulting Group on behalf of the European Commission in 1996 highlighted Europes problems. The report pointed out that there was an alarming competitive gap with Japan and that unless drastic action was taken, this gap would continue to widen. The European components industry employed 942,000 people in 1992 with annual output worth 22 billion. It recommended that if Japanese productivity levels 2.5 times greater than European were to be achieved then 40,000 jobs or 54 per cent of the workforce would have to go. But even this swinging cut of itself would not guarantee reaching Japanese productivity levels. Such a change demanded radical policies and a strong move towards the Japanese system of tiers with the number of direct suppliers falling by two-thirds by 1997. The report recognised that the greatest challenge to improve productivity lay in the second tier suppliers consisting primarily of small and medium-sized enterprises where awareness of need to improve competitiveness is least advanced. It noted that individual car makers had already taken action to cut the number of direct suppliers from 1,280 on average in 1988, to 900 in 1994, and to an average of 400 by 1997. Central to this across Europe was the role of Germany which accounted for 47 per cent of the independent components industry and for 53 per cent of the sectors value added. France accounted for 19 per cent of output, the UK for 12 per cent, Italy for 11 per cent and Spain for 7 per cent. Crucial to success was concentration of ownership. Indeed, the process of consolidation was driven by the lack of competitiveness of many suppliers in an extremely fragmented industry and by changes in vehicle makers policies towards: more outsourcing with more design work being transferred to suppliers; the sourcing of components to come from single rather than multiple suppliers; the purchasing of whole systems rather than individual components; the formation of strategic business alliances. Context It has been stated