Contents History of BMW………………………………………………………………. Milestones of success………………………………………………………….. BMW innovations…………………………………………………………….... Current situation at the t he company………………………………………………. Competitors……………………………………………………………………. Future of the company…………………………………………………………. Personal attitude to the company……………………………………………….
BMW GROUP Introduction Nowadays BMW Group Company Compan y is powerful international inte rnational company represented all over the world with more than 94.000 employees and over one million vehicles sold every year. Importers in 120 countries represent the BMW and worldwide sales organization comprised 24 sales subsidiaries. BMW has worldwide subsidiaries and manufacturing plants in Germany, Austria, the UK, the USA, Mexico, Brazil, South Africa, Egypt, Thailand, Malaysia, Indonesia, the Philippines and Vietnam. The activities of the business fields of the BMW Group are broken down into the segments BMW automobiles, Rover Automobiles, BMW motorcycles and Financial Services.1 BMW automobiles and Rover automobiles account for the larger part of activities within Group. These business fields manufacture, assemble and sell automobiles, spare parts and accessories. The BMW Motorcycles segment develops, manufactures, and sells motorcycles as well as spare parts and accessories. The Financial Segment focuses on the leasing of automobiles and financing credit for customers and dealers. Miscellaneous and consolidated companies segment include Aero Engines business, Software and other intra-segment activities.
2
Contents History of BMW………………………………………………………………. Milestones of success………………………………………………………….. BMW innovations…………………………………………………………….... Current situation at the t he company………………………………………………. Competitors……………………………………………………………………. Future of the company…………………………………………………………. Personal attitude to the company……………………………………………….
BMW GROUP Introduction Nowadays BMW Group Company Compan y is powerful international inte rnational company represented all over the world with more than 94.000 employees and over one million vehicles sold every year. Importers in 120 countries represent the BMW and worldwide sales organization comprised 24 sales subsidiaries. BMW has worldwide subsidiaries and manufacturing plants in Germany, Austria, the UK, the USA, Mexico, Brazil, South Africa, Egypt, Thailand, Malaysia, Indonesia, the Philippines and Vietnam. The activities of the business fields of the BMW Group are broken down into the segments BMW automobiles, Rover Automobiles, BMW motorcycles and Financial Services.1 BMW automobiles and Rover automobiles account for the larger part of activities within Group. These business fields manufacture, assemble and sell automobiles, spare parts and accessories. The BMW Motorcycles segment develops, manufactures, and sells motorcycles as well as spare parts and accessories. The Financial Segment focuses on the leasing of automobiles and financing credit for customers and dealers. Miscellaneous and consolidated companies segment include Aero Engines business, Software and other intra-segment activities.
2
Background
BMW was was founded in 1916 as an aircraft-engine factory factor y in Munich. In 1923 BMW builds first fi rst motorcycle. In 1928 BMW bought the th e car factory at Eisenach, Thuringia Thurin gia with the license to build a small car called the Dixie. This first BMW car was developed in Munich, like all other BMW products. In 1932 BMW 3/20 was developed in Munich, in 1933 - 6 cylinder's BMW 303. Until Second World War BMW showed active growth in all three branches: automobile, automobil e, aero engine and motorcycles motorc ycles industries. o
o
o
o
o
In 1973 the first BMW subsidiaries were created in France and North America. In 1979 BMW developed first digital engine electronics and began R&D on hydrogen engines. In 1984 the first European models with catalytic converters appear. Computers and robots revolutionize work in planning and production. In 1989 in the year the Iron Curtain fell, BMW has another first by producing half a million cars. The company also has a turnover of DM 20.000 million, and acquires Kontron GmbH, a specialist in process engineering. The BMW Group is the most successful premium manufacturer in the automotive industry. One of the fundamental prerequisites for this success was and is ongoing leadership and innovation in the construction of cars perceived and acknowledged as leaders by the customer. Innovation upgrades the product in its substance, and only attractive product substance can secure the long-term success of a company in sales. A further point is that innovation is the right tool to clearly stand out from the competition in an increasingly competitive premium market. Modern premium cars today have reached a comparably high level of technology in many respects, the customer taking features such as passive safety and quality quali ty for granted right from the th e start. A few examples: - Jet-guided High Precision Injection direct gasoline injection technology significantly reduces fuel consumption and increases engine output at the same time. - Runflat tyres save space and weight by omitting the spare wheel and at the same time offer a significant enhancement of safety. - Active Steering offers the driver supremacy on the road on fast straight-ahead stretches, outstanding agility in a rapid succession of bends, and comfortable steering behaviour when parking. In addition, the BMW Group will successively introduce the Auto Start/Stop Function feature to their range of models, starting with the BMW 1 Series. This innovation automatically switches off the engine as soon as the vehicle stops moving and starts it again extremely quickly as soon as the driver wishes to continue the journey. This technology can help to save a great deal of fuel, especially in urban stop-and-go driving conditions.
3
BMW GROWTH POLICY
The fundamental objective of the BMW Group is to continue the process of profitable growth by concentrating on high-profit market segments. Precisely, this is why the BMW group will use the potential of the BMW brand to an even greater success in a future.
In the first half of the year 2000 BMW has already achieved best sales results ever in the history of the company. Worldwide deliveries have increased by almost 9% to 421 000 units; the turnover was approximately 15% above the corresponding figure in the first half of previous year.
The production of BMW Group is developed to satisfy different customer’s needs, providing
a variety of models for luxury, middle and low segments of market. Company constantly works out new technological decisions and improvements and nowadays sets new standards in production.
BMW has already achieved in individual requests fulfilling. Now it’s ambiguous objective is to provide every customer with his individual, personalized car on a defined date agreed in advance. Moreover, BMW Group is setting a new benchmark to process the time required for a new car in distribution and production to 10 days.
BMW Company continues to develop the concept of hydrogen engine automobile which according specialists’ estimations will dominate in the future automotive market because of
the limited natural resources. First experimental cars with hydrogen engines already exist.
In the future BMW heavily relies on the big E-commerce project, which supposed to increase the number of employees and customers five times within the next three years.
BMW Group will bundle its e-business activities in a new company named nexolab. With nexolab, BMW Group creates a platform that will support the entire process chain - from the buying to the sales process for the manufacturing industry.
Company has well-defined personnel policy. BMW treats people who works for the company not like corporate funds, but rather the key to its’ success. This concept leads to lower cost and economic growth.
Nevertheless, the commonwealth of big multinational company strongly depends on successful performance of all its’ segments and divisions.
4
History of BMW company Bayerische Motoren Werke AG (BMW), (English: Bavarian Motor Works) is an independent German automobile manufacturer founded in 1916. BMW is a worldwide manufacturer of high-performance and premium automobiles and motorcycles, and is the current parent company of both the MINI and Rolls-Royce car brands.
1916 – Founding of Bayerische Flugzeug-Werke. The new company incorporated OttoWerke. BMW acquired the BFW site in 1922, but Bayerische Motoren Werke continues to regard BFW’s establishment as its date of founding.
1917 – Rapp-Motoren Werke was renamed Bayerische Motoren Werke GmbH. The company constructed a large plant and built engines for military aircraft there till 1918.
1918 – Bayerische Motoren Werke GmbH was converted into a stock corporation with a share capital of 12 million Reich marks. BMW GmbH becomes BMW AG.
After World War I, BMW (and Germany) were forced to cease aircraft (engine) production by the terms of the Versailles Armistice Treaty. The company consequently shifted to motorcycle production in 1923 once the restrictions of the treaty started to be lifted, followed by automobiles in 1928.
The circular blue and white BMW logo or roundel is often alleged to portray the movement of an airplane propeller, an interpretation that BMW adopted for convenience in 1929, which was actually twelve years after the roundel was created. In fact, the emblem evolved from the circular Rapp Motorenwerke company logo, from which the BMW Company grew. The Rapp logo was combined with the blue and white colors of the flag of Bavaria to produce the BMW roundel so familiar today.
By 1959 the automotive division of BMW was in financial difficulties and a shareholders meeting was held to decide whether to go into liquidation or find a way of carrying on. It was decided to carry on and to try to cash in on the current economy car boom enjoyed so successfully by some of Germany's ex-aircraft manufacturers such as Messerschmitt and Heinkel. Therefore the rights to manufacture the tiny Italian Iso "Isetta" were bought using a modified form of BMW's own motorcycle engine. This was moderately successful and helped the company get back on its feet. The dominating shareholder of the BMW Aktiengesellschaft since 1959 is the Quandt family. Stefan Quandt, Johanna Quandt and 5
Susanne Klatten (born Quandt) together own about 46% of the stocks. The rest is in public float.
BMW AG purchased the British Rover Group (which at the time consisted of the Rover, Land Rover, MINI and MG brands as well as the rights to defunct brands including Austin and Morris) in 1994 and owned it for six years. By 2000, Rover was making huge losses and BMW decided to sell the combine. The MG and Rover brands were sold to the Phoenix Consortium to form MG Rover, while Land Rover was taken over by Ford. BMW, meanwhile, retained the rights to build the new MINI, which was launched in 2001.
6
BMW innovations 1. BMW's reputation for innovation can be traced to its equally innovative lateral management techniques. "At lunch and breaks everyone is discussing ideas and projects all the time. It's somewhat manic. But it makes things move faster," says BMW chief designer Adrian van Hooydonk. Companies such as BMW that leverage workers' tacit knowledge through networks (cross-functional teams) "are widely ahead of their competitors. BMW is one of a handful of global companies including Nokia (NOK ) and Raytheon (RTN ) that have turned to networks to manage day-to-day operations, superseding classic hierarchies.
2. Lightning-Fast Changes BMW figures some 90% of the innovations in its new models are electronics-driven.
3. Mobile-Phone Messages To reach a younger crowd of potential buyers for its new 1 Series launch in 2004, BMW used mobile-phone messages as the main source of buzz, directing interested people to signups on BMW's Web site for pre-launch test drives in August that year — something unheard of in the industry at the time. The experimental tactic worked: BMW sparked responses from 150,000 potential customers — and sales of the 1 Series took off when it was launched in September, 2004.
4. Ideas First Workers at the Bavarian automaker are encouraged from their first day on the job to build a network or web of personal ties to speed problem-solving and innovation, be it in R&D, design, production, or marketing. Those ties run across divisions and up and down the chain of command. BMW's complex customized production system, the polar opposite of Toyota's (TM ) standardized lines, is easier to manage if workers feel empowered to drive change. Like Dell Computer (DELL ), BMW configures its cars to customers' orders, so each auto moving down the production line is different.
7
Current situation at the company
o
o
o
BMW brand - has stood for one thing: sheer driving pleasure. Sporting and dynamic performance combine with peerless design and exclusive quality, resulting in the unique appeal of BMW automobiles. The MINI brand wins hearts and turns heads. MINI is refreshingly different: extroverted, spontaneous and in every respect something out of the ordinary. Ideal for a society, the MINI Classic became a cult vehicle in the sixties and seventies. MINI is part of a lifestyle that is cosmopolitan and confident, ready for everything. Rolls-Royce is one of the most fascinating and well-known brands in the world, the luxury motor car par excellence. For over 100 years, motor cars of the Rolls-Royce brand have stood for truly outstanding engineering, quality and reliability. Premium is the key word for BMW Group motorcycles as well. BMW group sets standards with regard to technology, environmental protection and safety, and provides outstanding customer service in the pre- and after-sales phases. Financial services are a key factor for success in today's mobile world. They have established an extensive product portfolio which supplies expert information and advice for situations and questions relating to the finance sector. They provide the following services: financing and leasing, asset management, dealer financing and company car pools.
German luxury car group BMW said its third quarter results 2008 were hit by the global financial crisis despite a rise in sales.
"The financial crisis worsened and the consumption climate grew dark again." In October 2008 the sales volume of one of the biggest producer of premium-class automobiles fell on 8.3% in comparison with October 2007 till 113005 cars. It is connected with the decrease of demand on developed markets. The sales in Western Europe fell on 12%, in the USA – on 5%, in Japan – on 29%. Sales in developing countries have risen: in India – on 10%, in China – on 36%, in Russia – on 40%.
o
o
The performance of the BMW Group in the third quarter 2008 was perceptibly influenced by the economic downswing in the wake of the financial crisis. Ongoing consumer reticence in the main sales markets, the weak state of the used car markets as well as increasing refinancing costs had a substantial negative impact on the earnings of the BMW Group. Earnings for the nine-month period reflect the ongoing effect of the various adverse external factors described above. In the third quarter 2008, the BMW Group increased the cumulative amount of expense recognised for additional risk provision for residual value and bad debt risks to a total of euro 1,037 million. On top of this, expenditure in conjunction with previously announced measures to reduce the workforce reduced nine-month earnings by euro 258 million. The BMW Group continues to aim to achieve a return on sales of at least 6 % in 2010. The corresponding EBIT margin in the Automobiles segment would then be just under 6 % or better. This does, however, depend on the markets recovering 8
Competitors The current situation in the market is a growing and heavily competitive one. It has blossomed into a full-scale war between mostly the up-scale automobile manufacturers. BMW competitive landscape includes:
Daimler
Toyota
Volkswagen DAIMLER
Daimler AG with its businesses Mercedes-Benz Cars, Daimler Trucks, Daimler Financial Services, Mercedes-Benz Vans and Daimler Buses, is a globally leading producer of premium passenger cars and the largest manufacturer of commercial vehicles in the world. The Daimler Financial Services division has a broad offering of financial services, including vehicle financing, leasing, insurance and fleet management. Daimler sells its products in nearly all the countries of the world and has production facilities on five continents. The current brand portfolio includes the world’s most valuable automobile brand, Mercedes-Benz, as well as smart, Maybach, Freightliner, Sterling, Western Star, Mitsubishi Fuso, Setra, Orion and Thomas Built Buses.
TOYOTA COMPANY Toyota Motor Corporation, Japan's №1 carmaker. The company makes a hybrid powered (gas and electric) sedan -- the Prius -- that is being snapped up in US and European markets. Its gas-powered cars, pickups, minivans, and SUVs (Sport Utility Vehicle) include such models as Camry, Corolla, Runner, Land Cruiser, Sienna, the luxury Lexus line, the Scion brand, and a full-sized pickup truck, the V-8 Tundra. Toyota also makes forklifts and manufactured housing, and offers consumer financial services. Once a dark horse in the global automotive game, Toyota has already passed Chrysler and Ford and is closing in on General Motors.
9
THE VOLKSWAGEN GROUP Volkswagen (VW) is one of the world’s leading automobile manufacturers and the largest car producer in Europe. In 2007, the Group increased the number of vehicles delivered to customers to 5.734 million, corresponding to a 9.7 percent share of the world passenger car market. In Western Europe, the largest car market in the world, nearly every fifth new car (19.9 percent) comes from the Volkswagen Group. The Group consists of eight brands: middle class – Volkswagen; luxury class – Audi, Bentley, Bugatti, Lamborghini; family cars SEAT (Spain), Skoda (the Czech Republic). It also holds 68% of the voting rights in Swedish truck maker Scania and about 30% of MAN AG. The product range extends from lowconsumption small cars to luxury class vehicles. The Group operates 44 manufacturing facilities in 12 countries in Europe and in a further six countries in America, Asia and Africa. VW also offers consumer financing.
Company BMW
Daimler AG
Toyota Motor Corporation
Volkswagen Group
Goods
Services
Premium class cars (MINI) Financing and leasing, asset Luxury class automobiles management, dealer (BMW, Rolls-Royce) financing and company car Motorcycles pools Luxury cars (Mercedes-Benz Daimler Financial Services: Cars), vehicle financing, leasing, Trucks (Daimler Trucks), insurance and fleet Vans (Mercedes-Benz Vans), management. Buses (Daimler Buses) Luxury cars (Lexus, Scion) Consumer financial services: Premium cars (Camry, auto loans and leases and a Corolla, Sienna) full lineup of factory-backed Pickups insurance services and Minivans (Runner, Land products Cruiser, RAV) Truck (V-8 Tundra) Low-consumption small, family cars (Volkswagen, SEAT, Skoda); Premium cars (Audi, Volkswagen); Luxury class automobiles (Bentley, Bugatti, Lamborghini) Trucks (Scania, Man)
Consumer financing services: vehicle financing, direct bank business, insurance products, leasing, fleet management
10
Products & Services
The BMW Group is one of the most successful multi-brand premium car manufacturers in the automobile industry. The BMW and Rolls-Royce brands of the company serve the premium and ultra premium segments of the automobile market. The BMW brand includes Sedans, Coupes, Touring’s, Compacts, etc. The company sells small cars through its Mini premium brand. The following table illustrates key vehicle ranges under each of the Group’s automobile
BMW Brand
BMW 1 Series
BMW 3 Series models • Sedan • Convertible • Coupé • Compact • Touring
BMW 5 Series • 525i Sedan • 530i Sedan • 545i Sedan
BMW 6 Series models • Coupé • Convertible • BMW Individual 6 Series
Convertible • BMW Individual 6 Series
Coupé BMW 7 Series models • Sedan • Security vehicle
BMW X3 Series (X3)
BMW X5 models • X5 11
•
Security vehicle
BMW Z4 (Z4)
BMW M models • M3 Coupé • M3 Convertible
Mini Brand
MINI One
MINI One D
Rolls-Royce Brand
Rolls-Royce Phantom
Rolls-Royce 100EX
MINI Cooper
Rolls-Royce Phantom
(Centenary model), limited
MINI Cooper S
MINI One Cabrio
MINI Cooper Cabrio
MINI Cooper S Cabrio
M5
M5 Individual
M6
12
The Result Of Ordinary Business Activity In The BMW Automobile Segment Was Up By 5.1% To 2.106 Million Euro. Generated By BMW Automobile Roi Has Increased From 20.46% In 1998 To 20.83% In 1999. This Branch Also Generates The Highest Earnings On Sales 8.56% In 1999. Sales In Bmw Motorcycles Segment Rose Significantly By 17.8% To 769 Million Euro. This Allowed An Improvement Of The Operating Result Up By 12.5% Comparing To The Previous Year. Sales In The Rover Automobiles Was Up By 2% Over The Previous Year To 8 368 Million Euro. The Losses In The Rover Automobiles Due To The Market Conditions And Currency Effects Were Up By 250 Million Euro To 1 207 Million Euro Or 26.1%. The Roi Drops From – 16.77 % In 1998 To – 19.23% In 1999. The Return On Sales Declines From -11.30% In 1998 To -13.97% In 1999.
The BMW segments performance assets, BMW segment million euro
BMW automobiles Rover automobiles BMW motorcycles Financial Services
1999 10108 6277 313 20530
sales million euro 1998 9792 5705 303 15287
1999 24610 8638 769 6153
1998 21980 8466 653 5771
result from ordinary Bus. Activities, mil. euro 1999 1998 2106 2003 -1207 -957 18 16 316 298
BMW segments ratios BMW segment BMW automobiles Rover automobiles BMW motorcycles Financial Services
return on investment, % 1999 1998 20.83% 20.46% -19.23% -16.77% 5.75% 5.28% 1.54% 1.95%
return on sales,% 1999 1998 8.56% 9.11% -13.97% -11.30% 2.34% 2.45% 5.14% 5.16%
The Financial Services division was successful; sales increased by 6.6% to 6 153 million euro. The result in this segment of the BMW Group increased by 6% to 316 million euro.
13
COMPARISON WITH THE FORD MOTOR COMPANY The main competitor of BMW Group takes the greater share of automobile market. The total balance sheet value of Ford Motor Company exceeds 7 times correspondent value of the BMW Group. Sales of Ford Motor Company counted 7220 thousand of vehicles (136973 million of dollars) against 1187 thousand of vehicles (34677 million of dollars) sold by BMW Group in 1999.2 See Exhibit 2 to compare financial performance of the companies.
INVESTMENT OVERVIEW The BMW ordinary share is listed since 1926. After the currency reform BMW shares were traded as shares with a par value of DM 50, DM 100 and DM 1000. In 1989 BMW introduced preferred shares – traded with a par value of DM 50. The preferred shares are in contrast to ordinary shares non-voting shares, but bear an extra dividend. In 1999 BMW Group introduced the 1 Euro per value share. As of December 31, 1999 the subscribed capital of BMW AG amounted to EUR 670,687,730 and comprised of 622,227,918 ordinary shares and 48,459,812 preferred shares.
During 1999 BMW ordinary and preferable share trends kept with market trends (See Figure 6). Uncertainty about development at Rover decreased the share price in the first half of the year. Then the successful development of the BMW brand and the market’s growing confidence in successful outcome of the restructuring measures at Rover pushed up the price. On the last day of the month year-end price was 30.65 euro and the BMW ordinary share lay 22 % above the price quoted in the previous year, beating CDAX automobile index. While the BMW preference share in contrast was enable to turn in the same result as the ordinary share. The closing price of 14 euro put the preference share 5% below the previous year price. In the course of a decade, investors who bought shares at the beginning of 1990 have achieved an average annual return of nearly 19 %. Over the past 5 years yields have been high as 24 % (yields on federal bonds only reached 7 % respectively). In the first half of the year 2000, BMW common stock showed a better development than the shares of any other German car manufactures. Compared with the value of 25.42 on 30 June 1999, stock value has increased in the meantime 24.7% to euro 31.70.
14
BMW AND FORD RATIOS IN COMPARISON , 1999
LIQUIDITY Current ratio DEBT Quantity (total liabilities/total funds) Quality (current liabilities/debt) ASSETS MANAGEMENT ASSET TURNOVER (sales/assets) DAYS collection period credit period SALES (sales 99 - sales 98)/sales 98*100% EXPENSES roduction cost/sales marketing and administration cost/sales total expenses/sales MARGIN AND PROFIT ROS (profit/sales) GROSS PROFIT ( gross profit/sales) ROI (EBIT/assets) DUPONT ANALYSIS /ROI (EBIT/sales x sales/assets) ROE (net profit/equity) before extraordinary result ROE (after extraordinary result)
BMW
FORD
2.13
1.98
89% 39%
90% 17%
0.92
0.50
25.64 23.74
10.04 38.51
6.6%
15.0%
83.59% 13.66%
86.91% 6.97%
97.25%
93.88%
2.71% 16% 2.48%
6.12% 13% 3.03%
2.71% X 0.92 6.12% X 0.50 16.86% 26%
-63.25%
15
BMW Marketing Innovation Since the competition started to imitate BMW’s advertising messages of outstanding quality, BMW decided to come up with a unique way of reaching its target audience. The company did so by hiring Fallon Worldwide, and advertisement agency based in Minneapolis, MN, to come up with a new campaign. Fallon developed the concept ―The Hire‖ series. Fallon's responsibility also included the way in which these movies were to be delivered to BMW's target audience. It was also questionable whether the campaign should be the same throughout the world, or if it should be localized to adapt to language and consumer taste differences. In order to attract highly recognized directors, as well as actors, BMW was willing to spend a large amount of money. In addition to coming up with a unique advertising campaign, BMW also wanted to change their image. One of the goals was to make BMW look, not only cool, but likeable, which the brand needs to do to combat negative perceptions some people have based on old associations with the 80’s style yuppie arrogance.
BMW's Revenue Sources 80% 70% 60% 50% 40% 2000 Revenue
30% 20% 10% 0% Auto
Motor Cycles
Finance Leasing
Other
16
CHAPTER 6: SWOT ANALYSIS
Strengths Worldwide, the Bmw Group Is One Of The Most Successful Multi-Brand Premium Car Manufacturer In The Automobile Industry. The Rolls-Royce Phantom Holds The Number One Position In The Super-Luxury Car Segment. Moreover, Bmw Is The Only Automobile Manufacturer Possessing Three Non-Overlapping Premium Car Brands In Its Portfolio. The Bmw Group On An Average Spends Around X% Of Its Revenues On R&D, Which Is One Of The Highest In The Industry. The Keen Focus On R&D Is Evidenced By The Number Of New Models The Group Has Released Over The Past Few Years. Thanks To Its R&D Efforts, Bmw Has Also Developed An Innovative Array Of Engines Such As The Hydrogen – H2r Hydrogen Combustion Engine, The Straight-Six Petrol Engine – 3 Etc.
Weaknesses BMW’s Heavy Cost German Base Might Affect The Profitability Of The Company In The Long Run As More And More Competitors Shift Product Development Activities To Lower Cost Countries. Bmw Might Be Forced To Negotiate A Way To Maintain Cost Competitiveness And Its Reputation For German Engineering Excellence.
Opportunities The Expansion of the European Union (Eu) To Xx Countries from Xx Countries In May 2004 has converted the Eu into the World’s Biggest Trading Bloc with a Combined Population of Million. This Offers Ample Opportunities For Bmw To Leverage Its Strong Around European Position In The Premium Car Segment To Garner More Market Share Across New And Expanding Markets. BMW’s Concerted Forays into the Chinese Luxury Car Market Portends to an Increase In The Earnings of the Company over the Coming Years. China Already Ranks As the ThirdLargest Market For BMW’s 7 Series Luxury Limousines. Bmw Predicts That Robust Growth Will Place China among the Company’s Seven Largest Markets in A Few More Years. This is A Significant Improvement over the 12th Position Held by the Chinese Market for BMW In 2002.
Threats The Continuing Decline of the Dollar against the Euro Threatens to Undercut BMW’s Top line. Thereby Tempering Its Profitability. The Rising Price of Raw Materials Such As Steel Threatens to Offset the Company’s Earnings. 17
BMW: THE PRODUCT LIFE CYCLE ―BMW’s strategy is to keep its products in the introduction and growth stages by periodically introducing new models in each of its product lines. In fact, in contrast to many auto manufacturers who launch a new model and then leave it unchanged, BMW works continually to improve its existing products. Explains McDowell, ―Anyone can sell a lot of cars the first year, when a car is new. It is our challenge to constantly improve the car and to continuously find new innovative ways to market it.‖
BMW started in 1916 as a manufacturer of airplane engines. ―When you look at our roundel, the BMW symbol, it is a blue-and-white circle,‖ says McDowell, ―that is meant to represent the spinning propeller on a plane, to remind us of our heritage.‖ Since then the compan y has added motorcycle and automobile production. Today, BMW is one of the preeminent luxury car manufacturers in the world. BMW produces several lines of cars including the 1, 3, 5, 6, and 7 series, the Z line of roadsters, the X line of ―sport activity vehicles,‖ and the M line of ―motor sport‖ sedans. Currently, the U.S., Germany, and the United Kingdom are BMW’s largest markets. BMW recently introduced its 1 series — a compact car designed to compete with the Volkswagen Golf in Europe and the Rabbit in the U.S. — to attract a new younger audience. In addition BMW owns the MINI and Rolls-Royce brands. Combined sales of BMW, MINI, and RollsRoyce exceed $59 billion and are expected to increase 40% by 2020. Reasons for the growing popularity of BMW include high-performance products, unique advertising, an awardwinning website, innovations such as smart technologies that learn what the driver prefers, and new vehicles such as the V-series — which will compete with popular minivans. BMW cars typically have a product life cycle of 7 years. To keep products in the introductory and growth stages, BMW regularly introduces new models for each of its series to keep the entire series new. For instance, with the 3 series, it will introduce the new sedan model one year, the new coupe the next year, then the convertible, then the station wagon, and then the sport hatchback. That’s a new product introduction for five of the seven years of the product life cycle. McDowell explains, ―So, even though we have seven -year life cycles, we constantly try to make the cars meaningfully different and new about every three years. And that involves adding features and other capabilities to the cars as well.‖ How well does this strategy work? BMW often sees its best sales numbers in either the sixth or seventh year after the product introduction. As global sales have increased, BMW has become aware of some international product life cycle differences. For example, it has discovered that some competitive products have life cycles that are shorter or longer than 7 years. In Sweden and Britain, automotive product life cycles are 8 years, while in Japan they are typically only 4 years long.
18
BMW uses a system of ―product advocates‖ to manage the marketing efforts of its product lines. McDowell explains that a series advocate would actually use and drive that series and would constantly be thinking ―How can I better serve my customer?‖ In addition to modifying each model throughout the product life cycle, BMW modifies the markets it serves. For example, during the past 10 years BMW has expanded its market by appealing to a much larger percentage of women, African Americans, Asians, and Hispanics. BMW’s positioning strategy is the same worldwide and that is to offer high-performance, luxury vehicles to individuals. ―You won’t find it as a taxi or a fleet car,‖ says McDowell. Generally, once a model is positioned and introduced, BMW avoids trying to reposition it. The Z, X, and M series don’t quite fit in with this system. BMW had a tradition of building experimental, open-air cars and calling them Zs, so when one of them was selected for production, BMW decided to continue with the Z name. For the sport activit y vehicles BMW also used a letter name — the X series — since the four-wheel-drive vehicle didn’t fit with the sedan-oriented 1, 3, 5, 6, or 7 series. The M series has a 20-year history with BMW as the line with the luxury and racing-level performance. The lettered series now includes the Z4, X3, X5, M3, M5, and M6. Compared to the evocative names many car manufacturers choose to garner excitement for their new models, the BMW numbers and letters are viewed as a simple and effective branding strategy.
The ultimate extravagance in buying a car is having everything customized to the owner’s preferences. Today, 80% of European buyers and 30% of U.S. buyers use the BMW website to choose from 350 model variations, 500 options, 90 exterior colors, and 170 interior trims to create their perfect vehicle!
19
McKinsey 7S Framework McKinsey's 7S Model that was created by the consulting company McKinsey and Company in the early 1980s. Since then it has been widely used by practitioners and academics alike in analyzing hundreds of organizations. The paper explains each of the seven components of the model and the links between them. It also includes practical guidance and advice for the students to analyze organizations using this model. At the end, some sources for further information on the model and case studies available on this website are mentioned. The McKinsey 7S model was named after a consulting company, McKinsey and Company, which has conducted applied research in business and industry (Pascal & Athos, 1981; Peters & Waterman, 1982). All of the authors worked as consultants at McKinsey and Company; in the 1980s, they used the model to analyze over 70 large organizations. The McKinsey 7S Framework was created as a recognizable and easily remembered model in business. The seven variables, which the authors term "levers", all begin with the letter "S":
McKinsey's 7S Model These seven variables include structure, strategy, systems, skills, style, staff and shared values. Structure is defined as the skeleton of the organization or the organizational chart. The authors describe strategy as the plan or course of action in allocating resources to achieve identified goals over time. The systems are the routine processes and procedures followed within the organization. Staff are described in terms of personnel categories within the organization (e.g. engineers), whereas the skills variable refers to the capabilities of the staff within the organization as a whole. 20
Description of ‘7 S’s Strategy: Strategy is the plan of action an organization prepares in response to, or anticipation of, changes in its external environment. Strategy is differentiated by tactics or operational actions by its nature of being premeditated, well thought through and often practically rehearsed. It deals with essentially three questions (as shown in figure 2): 1) where the organization is at this moment in time, 2) where the organization wants to be in a particular length of time and 3) how to get there. Thus, strategy is designed to transform the firm from the present position to the new position described by objectives, subject to constraints of the capabilities or the potential.
Structure: Business needs to be organized in a specific form of shape that is generally referred to as organizational structure. Organizations are structured in a variety of ways, dependent on their objectives and culture. The structure of the company often dictates the way it operates and performs (Waterman et al., 1980). Traditionally, the businesses have been structured in a hierarchical way with several divisions and departments, each responsible for a specific task such as human resources management, production or marketing. Many layers of management controlled the operations, with each answerable to the upper layer of management. Although this is still the most widely used organizational structure, the recent trend is increasingly towards a flat structure where the work is done in teams of specialists rather than fixed departments. The idea is to make the organization more flexible and devolve the power by empowering the employees and eliminate the middle management layers (Boyle, 2007).
Systems: Every organization has some systems or internal processes to support and implement the strategy and run day-to-day affairs. For example, a company may follow a particular process for recruitment. These processes are normally strictl y followed and are designed to achieve maximum effectiveness. Traditionally the organizations have been following a bureaucratic-style process model where most decisions are taken at the higher management level and there are various and sometimes unnecessary requirements for a specific decision (e.g. procurement of daily use goods) to be taken. Increasingly, the organizations are simplifying and modernizing their process by innovation and use of new technology to make the decision-making process quicker. Special emphasis is on the customers with the intention to make the processes that involve customers as user friendly as possible (Lynch, 2005).
Style/Culture: All organizations have their own distinct culture and management style. It includes the dominant values, beliefs and norms which develop over time and become relatively enduring features of the organizational life. It also entails the way managers interact with the employees and the way they spend their time. The businesses have traditionally been 21
influenced by the military style of management and culture where strict adherence to the upper management and procedures was expected from the lower-rank employees. However, there have been extensive efforts in the past couple of decades to change to culture to a more open, innovative and friendly environment with fewer hierarchies and smaller chain of command. Culture remains an important consideration in the implementation of any strategy in the organization.
Staff: Organizations are made up of humans and it's the people who make the real difference to the success of the organization in the increasingly knowledge-based society. The importance of human resources has thus got the central position in the strategy of the organization, away from the traditional model of capital and land. All leading organizations such as IBM, Microsoft, Cisco, etc put extraordinary emphasis on hiring the best staff, providing them with rigorous training and mentoring support, and pushing their staff to limits in achieving professional excellence, and this forms the basis of these organizations’ strategy and competitive advantage over their competitors. It is also important for the organization to instill confidence among the employees about their future in the organization and future career growth as an incentive for hard work.
Shared Values/Superordinate Goals: All members of the organization share some common fundamental ideas or guiding concepts around which the business is built. This may be to make money or to achieve excellence in a particular field. These values and common goals keep the employees working towards a common destination as a coherent team and are important to keep the team spirit alive. The organizations with weak values and common goals often find their employees following their own personal goals that may be different or even in conflict with those of the organization or their fellow colleagues.
Skills: A detailed case study or comprehensive material on the organization under study is required to analyze it using the 7S model. This is because the model covers almost all aspects of the business and all major parts of the organization. It is therefore highly important to gather as much information about the organization as possible from all available sources such as organizational reports, news and press releases although primary research, e.g. using interviews along with literature review is more suited. The researcher also needs to consider a variety of facts about the 7S model.
22
PORTFOLIO ANALYSIS The objective of portfolio analysis is to help managers construct a balanced portfolio of businesses which will allow the organization to achieve its objectives.
BCG MATRIX Market share
High
Low
High
Stars
Question marks
Low
Cash cows
Dogs
Market growth
The original portfolio matrix was developed by the Boston consulting group and described by Johnson and Scholes. Note that the two parameters on the matrix are market growth and relative market share (defined as a company's sales in a particular market divided by the sales of its largest competitor). These parameters are derived from the experience curve with its emphasis on market share as a prime cause of superior profitability and the life cycle concept which divides markets into phases according to rates of growth. Most texts calibrate the axes as follows: on the vertical axis the midpoint is 10% per annum and on the horizontal axis the midpoint is x 1.5 with the far right as x. 1 and the far left x 10.
BCG or growth share matrix Stars – High growth / high share. Rapid growth using large amounts of cash to maintain position. Also generate large amounts of cash because they are business leaders. The products which comes under these: BMW 5 Series • 525i Sedan • 530i Sedan • 545i Sedan Coupé BMW 7 Series models • Sedan • Security vehicle 23
Cash cows – Low growth / high share. Should have a superior market position and low costs. Profits and cash flow should be high. The products which comes under these: BMW 1 Series BMW 3 Series models • Sedan • Convertible • Coupé • Compact • Touring BMW 6 Series models • Coupé • Convertible • BMW Individual 6 Series Convertible • BMW Individual 6 Series
Dogs – Low growth / low share. Poor competitive position and poor profits. Low growth means that there is little hope of building share. The products which comes under these: MINI Cooper Cabrio MINI Cooper S Cabrio M5 M5 Individual M6
Question marks – High growth / low share. Cash needs are high because of high growth but cash generation is low because of low share. The products which comes under these:
BMW X3 Series (X3) BMW X5 models • X5 • Security vehicle BMW Z4 (Z4)
24
THE INDUSTRY ATTRACTIVENESS-BUSINESS STRENGTH MATRIX
The Industry Attractiveness-Business Strength Matrix Industry Attractiveness High
h t g n e r t S s s e n i s u B
Medium
Low
h g i H
Invest/ Grow
m u i d e M
Selective Investment
w o L
Harvest/ Divest
Product Product Life Life Cycle Cycle Sales and Profits Over the Product’s Life From
Introduction to Decline Sales and Profits ($) Sales
Profits
Time Product Development
Introduction
Growth
Maturity
Decline
Losses/ Investments ($)
25
Grand Strategy General plan of major action by which a firm intends to achieve its longterm goals.
Growth Strategy Promoting internally by investing in expansion or externally by acquiring additional business divisions
to current product lines or that take the corporation into new areas: Joint Ventures Strategy of expanding operations into new business or industry and producing new goods or services PepsiCo’s diversification into snack food business Phillip Morris’s tobacco giant diversification with brewing industry with the acquisition of Miller Beer GE move into broadcasting with its acquisition of NBC
Stability
size or grow slowly and in a controlled fashion business growth, managers focus on a Stability strategy to integrate strategic business units & ensure that Org is working efficiently Example: Allied Tire Stores; motto is ― We just sell tires‖
Retrenchment
decline by either shrinking current business units or selling off or liquidating entire businesses
26
no longer seem central to the Corporation corporation were going through periods of retrenchment, also called downsizing cash value of assets, thus termination its existence usually done when the company is facing bankruptcy & needs to repay Loans.
SWOT Analysis of MINI A SWOT analysis conducts an external and internal scan of the potential business environment; it is an important part of the strategic planning process. Environmental factors internal to the firm usually can be classified as strengths (S), or weaknesses (W), and those external to the firm can be classified as opportunities (O) or threats (T). Such an analysis of the strategic environment is referred to as a SWOT analysis. The SWOT analysis provides information that is helpful in matching the firm's resources and capabilities to the competitive environment in which it operates. As such, it is instrumental in strategy formulation and selection. Strengths: The MINI is its own niche market. There is no other automobile that specifically rivals the MINI brand in its size and unique style. This is a strength that they have successfully executed in its initial launch in 2002. People that own MINIs are loyal consumers and enthusiasts. They take pride in the fact that their car is unique and original. The original flare comes from the outstanding amount of customizable options. In fact, there are over 2.7 billion different ways to customize a MINI. Weaknesses: A weakness of MI NI is and always will be the car’s size. Many people see the size and don’t feel confident in the performance of the vehicle. Also, the style of the car 27
can intimidate consumers and force them to believe that the car costs more than it actually does. This doesn’t mean that the car needs to be larger and cheap looking, but there should be improvements in the way people perceive the car. This boils down to marketing and advertising. This is a unique car, but that doesn’t mean cert ain people
should feel excluded from owning one. Opportunities: There is an opportunity to reach everyone while highlighting diversity and originality. These are things that define the MINI. MINI is not ―trendy‖ but a trendsetter. The car
is for anyone that wants to celebrate their differences and show they are original. The MINI also appeals to a wide range of people, for varying reasons. The MINI is diverse in design, function, and personality, which allows something for everyone. There is the opportunity to educate car buyers on the benefits of owning the MINI. This allows the mind set of the American public to change. Threats: The MINI has the threat of becoming too much of a trend in the eyes of consumers. It also could become a car that only a certain type of people buy, thus eliminating the rest of the population of potential car buyers. The way people view the current branding boxes MINI into a corner, and the owner of the MINI becomes a stereotype. Conclusion: We can conclude that due to the strengths of the company, there can be further increases in sales of MINI through effective promotional activities adopted by the new advertising agency selected by the company. The features and benefits of MINI can be highlighted further specifically and further effective advertizing by the new agency will lead to increased sales of MINI and increased market shares for BMW as well. There will be increased brand awareness among our target market.
28
HIERACH OF STRATEGY 1.2.1 CORPORATE – LEVEL STRATEGY As we noted earlier, strategy formulation activities occur at three basic levels: corporate, business and functional. This section focuses on the two dominant approaches to corporate strategy- grand strategy and the business portfolio. Grand Strategy Grand strategy is an overall framework for action developed at the corporate level. It is most commonly used when a corporation competes in a single market or in a few highly related markets. Hershey Foods, for example, competes only in the confectionery market. There are three basic grand strategies that corporations choose to pursue: growth, stability, and retrenchment. As term implies, a growth strategy calls for overall corporate growth. Growth can be generated internally by introducing new products, opening new outlets, and increasing market share. It can be induced externally through acquisitions of other businesses, mergers and joint ventures. Such growth is called related diversification when it is in the same or related businesses. Heinz’s purchase of Weight Watchers was related diversification. Growth into areas unrelated to current operations is called unrelated diversification. The Dial Corporation, makers of such personal care products a Brecks shampoo, Dial and Tone soaps, recently bought Premier Cruise Lines in a move toward unrelated diversification. Growth is most often appropriate when the corporation has ample resources to support it and when there is reasonable likelihood that growth is possible. For example, WalMart Stores, Inc., has been growing rapidly by expanding into parts of the country not currently served. Many firms today see much of their potential growth as coming from foreign markets. A retrenchment strategy (also called a turnaround strategy) calls for shrinking current operations, cutting back in a variety of areas, or eliminating unprofitable operations altogether. Such downsizing has been quite popular in recent years. A firm is most likely to downsize when it is unprofitable, has excessive operating costs, has excess capacity, or had diversified into markets it should never have entered. It may also be necessary after a bitter price war with a competitor or when the firm takes extreme measures to protect itself. For example, in an effort t remain independent and avoid being taken over. Avon incurred substantial new debt and reduced it contributions t retained earnings by increasing its dividend payout. As a result, the firm also reduced its work force and implemented several cost-cutting measures. A stability strategy calls for maintaining the status quo. A company 29
adopting such a strategy plans to stay in the businesses i t’s currently in, manage them as they’ve been managed, and try to protect itself from environmental threats. This approach is most often adopted by companies that lack the resources to grow or are in markets or whose managers simply aren’t interested in growth. Stability is also a useful strategy to adopt after a period of rapid growth or retrenchment .A few years ago, Mattel went through a period of retrenchment. The firm closed plants, laid off workers, reduced its product line drastically. Many observers wrote the firm off. But by adopting a strategy of stability, Mattel was able to gradually recover from its retrenchment trauma and has now started to grow again.
BUSINESS-LEVEL STRATEGY After determining corporate strategy, managers must then develop business-level strategies for each SBU. A business-level strategy is concerned with how to best compete in a given market. Even if an organization competes in only one market, it must still develop its own competitive strategy for that market. The most common approaches to business-level strategy are the adaptation model, porter’s competitive strategies, and the product life cycle. Adaptation Model The adaptation model of business strategy argues that managers of a business should attempt to match the business’s strategy with basic condition in its environment. In particular, this model suggests that different levels of environmental complexity and change call for different forms of strategy. Defenders A defender strategy may be appropriate when the business operates in an environment characterized by relative stability and little uncertainty or risk. The defender attempts to carve out for itself a relatively narrow niche in the market and to direct a limited set of products or services at that niche. Although defenders may employ competitive pricing or high-quality production standards to guard their positions, they are likely to ignore trends and developments outside their chosen domains. For example, Hershey Foods pays little attention to what happens in the market for soups, meats, or soft drinks because it makes and sells only confectionery products. Defenders also tend to concentrate on the most efficient production and distribution techniques, with little concern for long-term effectiveness. The often maintain a rigid, bureaucratic form of organization to facilitate control and efficiency. Lands’ end is somewhat of a defender in that it has chosen a certain position in the environment and has as major goal maintenance of that position. ―Management in Practice‖ describes how another successful defender, Wrigley, remains firmly entrenched in the chewing gum market. Prospectors The prospector strategy is almost the exact opposite of the defender. The prospector approach usually works best when the environment is dynamic, growing, and characterized by uncertainty 30
and risk. Prospectors develop a knack for discovering and capitalizing on new-product locate and then systematically develop such opportunities. Because prospectors focus on new products and markets, they try to avoid a long-term commitment to any single type of technology, instead using several different technologies. This allows the organization to shift from one product or in a new plants and Management, Fourth Edition Copyright © Ricky W. Griffin, Houghton Mifflin Company University of North-West Graduate School of Business and Government Leadership MBA/MPA Programme ADM 007 equipment. Prospectors usually adopt flexible forms of organization, relying o decentralization and rewarding creativity, innovation, and risk taking. ITT is a good example of a prospector. The firm has operations in diverse industries including hotels (Sheraton), insurance (Harford), wood products, and auto parts. Analysers The analyser strategy is midrange approach appropriate when the environment is moderately stable but still offers some degree of uncertainty and risk. It attempts to identify and take advantage of new products and markets while maintaining a nucleus of traditional products and customers. The anal yser works to achieve a balance between the conflicting demands for flexibility and stability in its technology. Analysers are usually structured in such a way as to support the forces of stability associated with the nucleus of existing products and technologies while still accommodating the forces for dynamism stimulated by the organization’s some units and groups maintaining the traditional products and other units exploring and developing new products and markets. A prime example of an analyser is The Procter & Gamble Co. The firm has a core of traditional products, such as Crest toothpaste and Head and Shoulders shampoo, but it continues to search for new products to add to its list. Reactors A strategy that some firms inadvertently use is the reactor strategy. Essentially, reactors are strategic failures. They respond to their environment in appropriate ways, which resulting poor performance. Poor performance causes reactors to become less aggressive in the future. Several factors might cause organization to become reactors. First, top management may not have clearly articulated the organization’s structure to fit its chosen strategy. Or management may try to maintain the organization’s strategy-structure relationship despite major changes in environmental conditions. An excellent illustration of an organization employing the reactor strategy was W.T Grant, one of the largest retailers in the United States before its bankruptcy in 1976. In response to the success of K mart Corp.in the discounting area, Grant adopted the ill-conceived strategy of expanding rapidly without the necessary resources. Further, the 31
company had inadequate training programs for its managers and too few controls over day-to-day operations. The company simply tried to do too many things too fast, and then it refused to step back and retrench.
FUNCTIONAL STRATEGIES
Yet another basic level of strategic planning involves the development of functional strategies. These functional strategies focus on how the organization will approach its basic functional activities. Many organizations develop marketing, financial, production, research and development, and human resources strategies. Issues that these strategies typically address are summarized in Table 7.1 Marketing Strategy 32
For many organizations, the marketing strategy is the most important functional strategy. Some companies (like McDonald’s Corp. and the Coca-Cola Company) promote their products heavily. Their goal is to establish customer loyalty and make sure customers always remember their products. ToysRUs has achieved phenomenal success by promoting itself as a warehouse where you can find any toy a child wants for a reasonable price. And Kellogg Co. has increased its sales in a stable cereal market by promoting the health benefits of some of its cereals. A company needs a marketing strategy whether it wants one or not. Managers at Coors Brothers, for example, would prefer to not advertise- they think that they make the best beer in the market and people should buy it for the reason. However, heavy marketing has been necessary for it to grow into a national brewing company. The marketing strategy deals with a number of major issues confronting the organisation. One of these is the product mix. For General Motors Corp.’s Chevrolet Division, the product mix includes the various lines (Camero, Corsica, and Beratta) and different versions of each model. Other major issues in marketing strategy include the desired market position (Kmart and Wal-Mart Stores, Inc., compete for fist place in retailing), distribution channels ( a major reason for Timex’s initial success was its decision to sell watches in drugstores), sales promotion (such as an initially high price to skim off the ―cream‖ followed by planned price cuts), and public policy (dealing with legal, cultural, and regulatory constraints). International firms often find that they must tailor marketing strategies to each individual country where they do business. Financial Strategy Developing the right financial strategy is essential to an organization. An important part of this strategy is deciding on the most appropriate capital structure: what combination of common stock, preferred stock, and long-term debt (such as bonds) will provide the firm with the capital it needs at the lowest possible costs? Another element in financial strategy is debt policy: how much borrowing is allowed and in what forms? Assets management focuses on the handling of
current and long-tem assets: how should the firm invest a cash surplus to optimise both return and availability? Dividend policy determines what proportion of earnings is distributed to stakeholders and what proportion is retained for growth and development. Disney has adopted a financial strategy of low debt. It pays for most of its theme park additions from operating funds. The new European Disneyland outside Paris was paid for almost entirely by issuing special classes of stock rather than by borrowing money. In contract, Continental Airlines, I., borrowed so much money to finance its growth in the 1980s that today it is barely able to cover its interest expenses. International firms usually manage their financial strategy from a centralized corporate perspective. 33
Production Strategy In some ways, and organization’s production strategy stems from its marketing strategy. If the marketing strategy calls for promoting highquality, high-priced products, productions should naturally focus on quality, with cost only a secondary consideration. Several major issues still remain, however. For example, methods for improving productivity need to be developed. Production planning (when to produce, how much to produce, and how to produce) is especially important for manufacturers. Finally, production strategy must take into account the regulations of government bodies such as the Environmental Protection Agency (EPA) and the Occupational Safety and Health Administration (OSHA). Areas of major importance for the production strategies of many companies are automation, robotics, and flexible manufacturing systems. Some companies (such as General Electric, Nissan Motor Co. Ltd., and Toyota Motor Corp.) are investing large sums of money in automated technology; other manufacturers (such as Du Pont and Exxon Corporation) are proceeding more slowly. Nevertheless, contributing breakingthroughs in production technologies will ensure that these issues remain a major concern for managers. International firms often profit by locating production facilities in countries where labour or raw materials (or both ) are inexpensive.
Human Resource Strategy Organizations find it useful to develop a human resources strategy for a number of reasons. Human resources policies are required on such matters as compensation, selection, and performance appraisal. Another aspect of human resources strategy is labour relations, especially negotiations with organized labour. Government regulations, such as the Civil Rights Act of 1964, also need to be taken into account . And executive development usually warrants strategic attention. For example, if an organization anticipates opening eight new plants within the next six years, it must start now to locate and develop potential managers for those plants. We mentioned in Chapter Management, Fourth Edition Copyright © Ricky W. Griffin, Houghton Mifflin Company University of North-West Graduate School of Business and Government Leadership MBA/MPA Programme ADM 007 1 that some companies have developed training programs that are so good that they are thought of by some recruiters as second MBAs. Strong emphasis on management development, then, is also an element of some firms human resources strategy. Training managers for international assignment and adjusting to local labour market conditions are important issues for international firms to address in their human resources strategy. Research and Development Strategy 34
