2. Situational Analysis in the Marketing Planning Process96 Case 2 BMW Motorcycles The German motorbike company is evaluating their key competences – The BMW Group The BMW Group is one of the most successful manufacturers of automobiles and motorcycles in the world with its BMW, MINI and Rolls-Royce brands. As a global company, the BMW Group operates 24 production facilities in 13 countries and has a global sales network in more than 140 countries. The BMW Group achieved a global sales volume of approximately 1.29 million automobiles and over 87,000 motorcycles for the 2009 financial year. Revenues for 2009 totalled 50.68 billion euro. At 31 December 2009, the company employed a global workforce of approximately 96,000 associates. BMW notes that the overall above 500cc motorcycle market (which eliminates the majority of small-displacement machines sold in the still robust Asian market) has seen a massive 40 % decline from a 1.5 million unit high in 2007 to 900,000 units in 2009 – with a more than 30 % decline last year alone. BMW posted sales of 87,306 for 2009, a 14,379 unit drop from 2008. According to BMW PR the 14.1 % drop not only reached the target it has set itself, but also achieved the second-lowest decline in sales amongst the competition. Only British Triumph has shown better sales results in this difficult market. The competition on the world motorbike market – The upand downturn of the Japanese manufacturers’ market shares In 1981 Japan’s motorbike industry was in a state of blissful ignorance. Its manufacturers had managed to dominate the world in not much over a decade and annual production had hit 7.4 million units. Although they did not know it, this was to be their best year. While they still loom large on the global motorbike market, 1981’s record domestic production has declined to just 2.4 million. This serves as a stark reminder of a painful trend for all types of Japanese manufacturers as their domestic costs have risen, their markets have matured and their rivals have sharpened their game. In 2001 two Japanese manufacturers – Suzuki and Kawasaki – joined forces to jointly produce and develop new bikes, marking the end of the ‘big four’ in Japan, where they ruled alongside much bigger rivals Honda and Yamaha. Kapitel_2.indd 96 03.08.2010 12:46:38 Uhr Case 2 97 The ‘hollowing out’ shift to overseas production through joint ventures and wholly owned plants has also cut into domestic production in Japan. The Suzuki – Kawasaki tie-up also serves as a symbol for what has happened to Japan’s motorbike industry in the last two decades. Once lazy and inefficient rivals such as Ducati, BMW and Harley-Davidson have found a way of replying to the competitive threat from Japan and are clawing back market share. In Europe, for example, Japan’s market share has fallen from 80 per cent to 50 per cent over five years, although numbers have risen. And in the vital US market its share has fallen by 10 per cent over the past decade. The rise of the Japanese motorbike manufacturers owed as much to luck as to design. Manufacturers were servicing a huge domestic market for many years, which generated the profits that financed the export drive. It also gave the Japanese a finely honed design and production machine that churned out faster, more reliable and better-looking bikes – and did so every year. The weak yen also made Japanese exports intensely competitive. In addition, they were up against severely weakened domestic manufacturers in the West. Triumph, BSA and Norton in the United Kingdom, for example, were spent forces, and the country was in the middle of labour disputes that generated a lazy attitude towards design and technology, producing machines that looked old-fashioned in comparison to their Japanese rivals. But the Japanese manufacturers, perhaps complacent in their success, failed to spot a key change in the motorbike buying world. They were too obsessed with technology and assembly quality and did not recognize that motorbikes had become consumer goods, which had a brand value. Harley-Davidson led the way here with branded goods ranging from desk clocks to women’s thongs, feeding hugely into profits. Japanese manufacturers based their bikes on racing models. Undoubtedly Japanese bikes are lighter and faster, but it takes a lot of skill to ride them. Western manufacturers have been designing for people who like to ride normal bikes in a normal environment. As Japan’s rivals have caught up with the technology they have also managed to inject something extra. Ducati conveys on two wheels the kind of image its Italian counterpart, Ferrari, has on four. Triumph has capitalized on its Britishness and the appeal of the marque’s previous incarnation with such models as the Bonneville. Harley-Davidson has built up an appeal for weekend rebels with $70,000-plus salaries. BMW has combined engineering excellence with design flair. But to talk of the demise of the Japanese motorbike industry would be unwise. Honda remains the largest manufacturer of motorbikes in the world. However, the Japanese are removing themselves from the big bike category. Honda, Yamaha and Suzuki are concentrating on 100-500 cc bikes for mass production in the developing countries of Asia. The bulk of Japanese-made bikes are small and service the growing economies of Asia, where having a 50cc or 100cc bike is the first step on a transportation ladder that eventually leads to a Toyota Corolla. India and China are huge and growing markets for the Japanese and Suzuki says it hopes its new link with its smaller rival will help its efforts in China. Kapitel_2.indd 97 03.08.2010 12:46:38 Uhr 2. Situational Analysis in the Marketing Planning Process98 The alliance between Suzuki and Kawasaki has more to do with these markets than the competition in the superbike league. It allows them to pare costs considerably by jointly procuring parts and joining forces on product design, development and production. It also matches similar moves by Honda, which has reduced the number of its Japanese motorcycle production lines from five to two in recent years. While Japanese manufacturers may be facing competition at the top end of the market, motorbikes are a high-volume game – and in this game the Japanese are still the winners. Motorcycle Production 2009 – Japan The Japanese Automobile Manufacturers Association (JAMA) reported their statistics on the number of motorcycles produced during the 2009 calendar year. 644,901 motorcycles were produced in calendar year 2009 (January 2009 – December 2009). Compared with the 1,226,839 units total recorded for 2008 (see chart below) this is a decrease of 581,938 units or 47.4 %. This represents a production decrease for four consecutive years. Domestic sales (factory shipment) for Calendar Year 2009 stood at 380,777 units, a decrease of 27.1 % and this is now a decrease for four consecutive years. Motorcycle exports were down 45.7 % from 2008 levels. 2009: Japan Motorcycle Production Figures by Class (compared to 2008) 50cc or under 108,417 units, down 54,511 units or 33.5 % 51-125cc 57,424 units, down 70,957 units or 55.3 % 126-250cc 125,384 units, down 67,479 units or 35.0 % Over 250cc 353,676 units, down 388,991 units or 52.4 % 2009 Motorcycle Domestic Sales in Japan: Figures by Class (compared to 2008) 50cc or under 255,561 units, down 13.6 % 51-125cc 65,888 units, down 45.5 % 126-250cc 37,180 units, down 33.2 % Over 250cc 22,148 units, down 55.5 % Motorcycle Production Figures by Manufacturer – Japan Calendar Year 2009 Make Units Change from Previous Year ( %) Honda 196,179 -41.8 % Suzuki 163,865 -53 % Yamaha 161,640 -53.8 % Kapitel_2.indd 98 03.08.2010 12:46:38 Uhr Case 2 99 U.S. Motorcycle Sales 2009 and Totals for 1992 – 2009 The chart below is showing U.S. motorcycle sales figures, which covers 1992 to 2009. These are gross numbers, including motorcycles (street bike, dual-sport and off-road) and scooters. The numbers were compiled from various public sources but most of the sources probably trace back to the Motorcycle Industry Council, who tracks motorcycle sales in the U.S.A. Note that motorcycle and scooter sales are now just about back to where they were in 1999, fully 10 years ago, a dramatic decrease by any measure. Here are the US gross sales figures for 2009 and a comparison to 2008: Kawasaki 123,146 -35.6 % Total 644,830 -47.4 % Sales (Motorcycles and Scooters) Motorcycle Sales by Year 1992–2009 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0 1.1 mill. 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 US sales of motorcycles 2008 Totals Units 2009 Totals Units Unit Change % Change Dual Sport 45,250 26,257 -18,993 -42.0 % Off Road 146,779 105,103 -41,676 -28.4 % Street Bikes 611,133 357,691 -253,442 -41.5 % Scooters 76,748 31,451 -45,297 -59.0 % Totals 879,910 520,502 -359,408 -40.8 % Kapitel_2.indd 99 03.08.2010 12:46:38 Uhr 2. Situational Analysis in the Marketing Planning Process100 In related news, Harley-Davidson reported a loss in Q4 2009. The company has been reorganizing by laying off staff, closing factories, ending Buell and selling MV Agusta, only purchased last year. Shipments of H-D motorcycles fell 27 percent in 2009 to 223,023, a level not seen since around 2001. Harley said it expects shipments to fall 5 -10 percent to as low as 200,000 in 2010. The global competitive situation today (more than 500cc) The competitive market situation (more than 500cc) in the three main regions of the world is shown in Table 1. While the world market for motorcycles above 500 cubic centimetres was still approximately 1.5 million vehicles in 2007, it shrank to about 90,00 units in 2009 (See Table 1). This corresponds to a market drop of around 40 % in two years. In the crisis year of 2009 alone the world market declined by more than 30 %. Market trends In industrialized wealthy economies such as Japan, the United States and Europe motorcycles were often purchased for recreation in addition to basic transport. In developing economies and others with low income per capita, motorcycles or North America Europe Asia/Pacific Total industry (1,000s) 400 400 100 Market share % % % Harley-Davidson/Buell 48 9 25 Honda 14 12 17 Yamaha 9 13 12 Kawasaki 7 11 13 Suzuki 12 16 10 BMW 2 15 5 Ducati 2 8 5 Triumph 2 7 4 Others 4 9 9 Total 100 100 100.0 Source: Adapted from BMW Financial Report 2009, Harley-Davidson.com, and other public sources. Table 1: The three main market areas for heavyweight motorcycles (more than 500cc) number of registrations 2001 Kapitel_2.indd 100 03.08.2010 12:46:38 Uhr Case 2 101 smaller two-wheelers were purchased primarily for basic transport, and the market was distinctly different. Historically large touring bikes, cruisers and racers sold almost exclusively in the wealthy economies while motorcycles with small engine displacement and mopeds made up the vast majority of sales in the developing nations. Decreasing trends in the overall market in some nations were due in large part to replacement of two-wheeled vehicles by automobiles as the countries became more affluent. The BMW Motorcycle business BMW Motorrad is a brand used by German company BMW for its motorcycles, which have been manufactured since 1923. BMW Motorrad is a business unit within Corporate and Brand Development division of BMW. BMW Motorrad builds fascinating, dynamic motorcycles for every purpose. Whether a trip to the ends of the earth or a training session on the race track, whether an exclusive luxury touring motorcycle or a cool urban bike: every motorcyclist will find just the right machine here. But there’s more to riding fun than this: BMW Motorrad offers a comprehensive program going well beyond the bikes themselves, from highly functional and fashionable rider equipment to top-quality touring holidays and training trips all over the world. BMW Motorrad has been developing innovative solutions since 1923. Comprehensive service and a dense network of highly committed dealers guarantee exclusive BMW motorcycling pleasure virtually everywhere in the world. Originally an aircraft engine manufacturer in the early 20th century and through World War I, BMW introduced the first motorcycle under its name, the R32, in 1923. Although BMW motorcycles have been long associated with their original engine configuration, the flat-twin boxer engine, the company today manufactures motorcycles in a variety of engine and riding configurations. All BMW Motorrad’s motorcycle production takes place at its plant in Berlin, Germany, although some engines are manufactured in Austria, China and Taiwan. BMW Motorrad achieved sales of 101,685 motorcycles in 2008, with the most popular model being the R1200GS. In 2008, the company introduced the DOHC Boxer HP2 Sport. In 2008, BMW entered the serious off-road competition motorcycle market with the release of the BMW G450X motorcycle. Current production of BMW motorbikes includes a variety of shaft, chain and belt driven models from 450cc to 1300cc with models designed for off-road, dual-purpose, sport and touring activities. Motorcycles are produced in product families each with a different letter prefix. Kapitel_2.indd 101 03.08.2010 12:46:39 Uhr 2. Situational Analysis in the Marketing Planning Process102 History of the Plant The history of Bayerische Motoren Werke (BMW) started in 1916 with the production of aircraft engines in Munich. The first BMW car, however, was built in Berlin: on 22 March 1929 the first BMW 3/15 PS’s – also referred to colloquially as the ‘Dixie’ – left the production hall rented by BMW near Berlin-Johannisthal Airport. The first BMW motorcycle, the R 32 featuring an air-cooled twin-flat engine and shaft drive, was presented a few years earlier in 1923 at the German Car Show in Berlin. And ever since this ingenious design and construction principle has remained the typical feature of most BMW motorcycles over a period of more than 80 years all the way to the new Boxer generation. The BMW Plant Berlin was part of the team almost from the start: Like in Munich at BMW’s original plant, the history of BMW AG started with the production of aircraft engines in Berlin, too. Ever since merging with Brandenburgische Motorenwerken (Bramo) in 1939, BMW employees had been working in the red brick halls at Juliusturm – producing, among other power units, the aircraft engines for the legendary Ju 52. The first BMW motorcycle built in Berlin – a BMW R 60/2 – came off the assembly line in 1967, but the motorcycle of the Berlin Plant in the former aircraft engine plant started much earlier back in 1949 with production of the first parts for motorcycles still built in Munich back then. Over the years, motorcycle production was shifted step-by-step from Munich to Berlin, the Frame Production Shop, for example, going on line in 1958 and the Motorcycle Assembly Shop being opened in 1967. The last step in this process of moving to Berlin was in 1969, the establishment of Engine Assembly and the production of the successful BMW R75/5 making the Berlin Plant a fully-fledged motorcycle plant once and for all. And to this day, incidentally, Berlin remains the only production plant for BMW motorcycles the world over. Leading the development of motorcycle technology, motorcycle production at the Berlin Plant has developed consistently in recent decades: Back in 1967 30 workers in assembly were enough for 40 motorcycles a day, assembling the motorcycle by hand at 12 assembly stations on the line. Nearly all parts and components required for this purpose were manufactured at the Plant, with a total workforce of not quite 400 employees working in motorcycle production back then. Apart from consistently modernizing the facilities, motorcycle production as a whole was substantially expanded in 1983 upon the introduction of the K-Series, BMW AG investing some DM 500 million in an entirely new assembly building and system, as well as a highly automated production line for engine components. Ten years later the Company modernized and expanded the Assembly Hall and the Machining Shop for engine and chassis components upon the introduction of the new Boxer generation. And to assemble the single-cylinder F 650 models built at the Berlin Plant since spring 2000, an additional assembly line was installed to provide the capacity required. Today a total of 1,861 employees build up to 550 motorcycles a day in BMW’s three model series – motorcycles with a single-, two- or four-cylinder power unit. On 6 February 2001 this story of success reached a further highlight when the millionth Kapitel_2.indd 102 03.08.2010 12:46:39 Uhr Case 2 103 BMW motorcycle from Berlin, an elaborately painted R 1150 RT, came off the assembly line and was auctioned on behalf of UNICEF in the internet. To achieve the growth targets set by the company in the highly competitive motorcycle market, the BMW Group invested a total of more than Euro 117 million in the expansion of motorcycle production in the years 2001-2003. In February 2002 the Berlin Plant opened a brand-new production building for motorcycle assembly which, with its ‘intelligent’ C-hook system, is absolutely unique throughout the worldwide motorcycle industry. Ultra-modern five-directional machining centres, a high-tech 10-directional laser cutting system, and a valve seat force-fit machine developed exclusively by BMW for production purposes are further examples of truly outstanding efficiency and flexibility – and, at the same time, serve to guarantee premium quality. The same premium quality is ensured by the new Engine Assembly Shop with its highly flexible assembly system and high-tech testing equipment, which successfully entered operation in September 2003. Since November 2003 the BMW Plant Berlin has been painting motorcycle parts in a new paintshop, using trendsetting technologies and working to the highest standards of environmental protection. In all, this makes BMW’s Motorcycle Plant in Berlin one of the most modern motorcycle plants in the world: High-tech testing and verification systems such as the combined cold and transmission test, as well as a test unit optimising the engines for the possible risk of leaks, round off the production process and improve the quality of the engines delivered to an even higher standard. And last but not least, five robots increase the degree of automation in engine assembly, serving, for example, to apply the sealant. Working in two shifts, the production specialists need about 90 minutes to build a flat-twin power unit. Assembly of a straight-four engine, in turn, takes about 120 minutes. Apart from motorcycles, the Berlin Plant has been manufacturing components such as brake discs for car production ever since 1979. Accordingly, Berlin plays an active role within the BMW Group’s production network, supplying automotive parts to the plants in Munich, Dingolfing, Regensburg, Leipzig, Steyr (Austria), Rosslyn (South Africa), and Spartanburg (USA). BMW motorbikes in the 2009 world market BMW Motorrad can look back on a successful year in 2009 in spite of a very difficult market environment marked by the global financial and economic crisis. Last year 87,306 (previous year: 101,685) BMW motorcycles were delivered to customers which is equivalent to a comparatively moderate drop of 14.1 %. BMW Motorrad has thus not only reached the target it set itself, but also achieved the second-lowest decline in sales amongst the competition. Despite the downward tendencies in the motorcycle markets, BMW Motorrad was able to grow in the European markets Great Britain and Eastern Europe, in the Asian markets of Korea, Thailand, Malaysia, as well as in the Middle East and Brazil. Kapitel_2.indd 103 03.08.2010 12:46:39 Uhr 2. Situational Analysis in the Marketing Planning Process104 Due to its continued powerful product offensive, the white and blue brand performed outstandingly on other export markets, often expanding its market share considerably. In the seven important motorcycle markets of Great Britain, Italy, France, Spain, the USA, Japan and Germany, BMW Motorrad increased its market share throughout. This was achieved even though market sales dropped by 32 % in the segment above 500 cubic centimetres. Compared to the competition, which lost between 20 % and almost 50 % of its sales, BMW Motorrad sales dropped by only 16 %. In Germany, which is still the biggest market for BMW Motorrad, 15,833 (previous year: 18,112) BMW motorcycles were registered, representing a drop of 12.6 %. In spite of this environment BMW Motorrad was able to defend its market leadership in the once again shrinking overall market (-14.5 %) as well as in the segment above 500cc. The BMW share in the overall market was 17.7 % in December (previous year: 17.3 %). In the segment above 500cc the market share was 19.0 % (previous year: 18.1 %). Italy continues to be the second largest for BMW Motorrad. Here a total of 13,207 BMW motorcycles were registered (previous year: 15,342), a decline of 13.9 % (market as a whole: minus 20.0 %). The market share of BMW Motorrad in the segment over 500 cc increased to 14.3 % (previous year: 13.0 %). In the USA, too – BMW Motorrad’s third largest market – the market as a whole decreased by 41.6 %. Here 9,168 (previous year: 11,831) BMW motorcycles were registered, a drop of 22.5 % as compared to the previous year. However, it was possible to increase the market share over 500 cc by 2.0 % to 2.6 %. In 2009 once again, the most successful model overall was the large travel Enduro BMW R 1200 GS (15,864 units) along with its sibling model, the R 1200 GS Adventure (8,803 units). Outstanding sales figures were also achieved by the F 800 GS (10,974 units) and the F 800 R (5,828 units), where the conquest rate was especially pleasing. Husqvarna Motorcycles puts in a powerful sales performance Husqvarna Motorcycles, the historic Swedish/Italian marque seems resurgent under its German owner. In July 2007, Husqvarna was purchased by BMW in 2007 for a reported 93 million euros. Worldwide sales for 2009 nearly equalled 2008 (13,052 to 13,511). Husqvarna’s US sales actually rose 9 % in 2009, the only brand to boast positive growth in an otherwise negative sales year. The second motorcycle brand of the BMW Group, achieved worldwide sales figures of 13,052 units in 2009 (previous year: 13,511) – a decline of just 3 %. And in the seven major motorcycle markets the drop in sales was only 2 %. Sales in Australia, Germany and France developed very positively, with the previous year’s figures being far exceeded in each case. As mentioned Husqvarna Motorcycles even increased its performance in the heavily declining US market (-41.6 %). Now that the new model TE 250 has been so well received by the market, a model offensive is planned for 2010: in spite of a difficult market environment, this provides hope of a positive sales development. Kapitel_2.indd 104 03.08.2010 12:46:39 Uhr Case 2 105 BMW Motorrad in 2010 – a look ahead The 41 % total market drop from 2008 to 2009 has cast a pall over the motorcycle industry, yet BMW Motorcycles seems downright bullish about its 2010 prospects. Not many manufacturers have spun ’09 sales losses quite as enthusiastically as BMW (the only exception being British marque Triumph, which trumpeted an increase in market share in the US). In its latest series of press releases the Bavarian firm touts its market share increases, dealer growth and ambitious plans for 2010. The prospects for 2010 look promising: this is because BMW Motorrad was able to extend its market share across the board in 2009 and take on market leadership in several instances, thereby creating an excellent basis for future growth. With the new S 1000 RR, BMW Motorrad has a super sports volume model in its program for a full season for the first time. Questions 1. What are the core competencies of BMW Motorcycles? 2. Please perform a multilevel SWOT analysis, based on BMW Motorcycles: On corporate level and on the SBU level: Motorbikes 3. What type of marketing relationship would be most relevant for BMW Motorcycles to develop Sources: www.bmw.com www.harley-davidson.com Kapitel_2.indd 105 03.08.2010 12:46:39 Uhr 2. Situational Analysis in the Marketing Planning Process106 References Adcock, A. (2000) Marketing strategies for competitive advantage, Wiley Ajzen, I. and Fishbein, M. 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(1990) A new relationship marketing model and its application in the affinity credit card market, International Journal of Bank Marketing, 16 (1), pp. 39-44 Kapitel_2.indd 108 03.08.2010 12:46:39 Uhr 3Learning Objectives After studying this chapter you should be able to: understand the importance of strategic marketing planning• identify the main steps in strategic marketing planning• develop an appropriate business mission statement• describe the criteria for stating good strategic marketing objectives• understand how portfolio models are used to select alternatives• explain the advantages and disadvantages of using strategic models • like Ansoff’s growth matrix, the BCG and GE models understand the advantages of segmentation• describe the steps involved in segmentation• explain the STP-process• discuss criteria for successful segmentation in B2C and B2B markets• discuss ways of segmenting global markets• discuss possible barriers in implementing segmentation in the organi-• sation 3. Strategy Formulation in the Marketing Planning Process Kapitel_3.indd 109 03.08.2010 12:47:54 Uhr