A Value Chain Analysis of the BMW Group

In this post, we are going to conduct a value chain analysis of the BMW group. The group is among the leaders in the automobile sector and known worldwide for making premium and luxury cars, SUVs and motorcycles. Apart from the BMW brand, it also owns the MINI and Rolls Royce as well as BMW Motorrad brands. It sold more than 2.5 million units of automobiles in 2023. The net revenue of the company reached 155.5 billion Euros in 2023 or 9% higher compared to the prior year. BMW is investing heavily in research and development to achieve faster growth and maintain its competitiveness in a fiercely competitive market environment.

The concept of value chain was given by Michael E Porter of the Harvard Business School. This model includes all the activities from procurement to production, sales and after sales services. It includes mainly two kinds of activities - primary and support. The primary activities are concerned directly with value creation whereas the support activities support the primary activities to increase their efficiency and effectiveness. By optimizing their value chains, companies can increase their productivity and achieve superior results. It can also help companies tap into new sources of competitive advantage. Let’s take a look at the primary and support activities in the value chain of BMW and how the company has optimized them.

Primary Activities:

The primary activities in the value chain are the activities that are concerned with the production directly.

Inbound logistics:

Inbound logistics concerns the inward flow of goods into the business. It refers to the activities and processes involved in receiving, storage and distribution of raw materials, components or finished goods. BMW works with a large number of supplier partners from across the globe. According to a 2019 report, the number of the company’s suppliers was higher than 12,000. The company also has more than 30 production facilities across the globe. Its leading logistics partner is DHL with which its partnership spans several regions. The company has a large part of its supplier base located in Germany and sourced around 32.5% of raw materials from Germany alone.

Operations:

BMW is a global brand of premium and luxury vehicles that sells its products across 140 countries. The company has its headquarters in Munich, Germany. It has 32 production plants across the globe. Its production plants located in Europe, South Africa, the USA and Mexico manufacture for the global market. The BMW company was founded in 1916 and since then it has grown into one of the world’s most successful manufacturers of premium and luxury automobiles. BMW started its North American operations in 1975.

The following table shows the manufacturing of automobiles by each plant for 2022 and 2023 based on the company’s 2023 annual report.

Plant	2023 (Units)	2022 (Units)	Change (%)
Dadong	420,586	395,021	6.5
Spartanburg	410,793	416,301	-1.3
Tiexi	307,972	279,645	10.1
Dingolfing	291,907	282,661	3.3
Regensburg	238,301	143,654	65.9
Munich	217,480	201,323	8.0
Leipzig	188,199	151,949	23.9
Oxford	185,400	186,301	-0.5
San Luis Potosí	117,576	63,600	84.9
Rosslyn	68,238	61,609	10.8
Chennai	15,264	9,960	53.3
Rayong	13,044	12,912	1.0
Araquari	10,608	8,208	29.2
Goodwood	6,179	6,239	-1.0
Zhangjiagang (Spotlight)	2,871	–	–
Born (VDL Nedcar)	120,235	99,126	21.3
Graz (Magna Steyr)	26,461	45,184	-41.4
Partner plants	20,808	18,612	11.8
Total	2,661,922	2,382,305	11.7

Outbound logistics:

Outbound logistics refers to the outward flow of goods from a business and includes the activities and processes involved in the storage, transportation, and delivery of finished products from the business to its customers. BMW has established a large and global network of dealers and retailers throughout the globe for sales of its products. The company has more than 5,000 dealerships across the globe. DHL as its leading logistics partner takes care of outbound logistics for the company in various regions across the globe. The company has also partnered with other logistics providers for taking care of outbound logistics for the company.

BMW marketing and sales:

Marketing and sales play a key role in the value chain of a company. The BMW company also places a strong focus on marketing and sales. It has a global sales network with representatives that covers more than 140 countries. The company maintains a strong focus on its brand image. Its strong brand image is a leading factor behind the company’s success in the global market. Apart from that, a consistent focus on customer experience has also helped the company establish itself as a leader in the global market. The company mainly depends on digital marketing channels for marketing and promotions of its brand and products. Apart from its websites, the company uses social media channels for engaging its customers. The global sales network of the BMW Group’s automobile business currently comprises more than 3,500 BMW, 1,600 MINI and 147 Rolls-Royce dealerships.

Products and Services:

The BMW group offers a vast range of products including cars, SUVs and motorcycles. The company also owns the Rolls Royce, and MINI brands as well as the BMW Motorrad brand of motorcycles. In 2023 the BMW Group sold almost 2.55 million cars and over 209,000 motorcycles around the world. The Rolls Royce brand owned by BMW caters to the ultra luxury segment. BMW group also caters to the electric cars segment through its i series. The company also has 41 sales subsidiaries and financial services locations worldwide.

Support Activities:

The support activities in the value chain are not related directly to value creation but mainly support the primary activities to improve the efficiency and effectiveness.

Technology:

Technology is playing a very important role in driving the efficiency of several functions including marketing and sales as well as production and supply chain management as well as various other key functions. The fierce competition in the automobile industry has also led to higher reliance on technology since it is a key driver of sustainable competitive advantage. The BMW group has heavily focused on digitalization to increase the effectiveness of its production and supplier network as well as marketing and sales. Moreover, the company is investing in other key technologies including electrification and autonomous driving. It spends a major sum each year in research and development to continuously improve its product range and processes. The company has established research and development locations across 17 countries worldwide. It spent 7,538 million Euros on research and development in 2023 or 13.8% higher compared to the prior year.

HRM:

Human resource management has become crucial for sustaining profitable growth in a highly competitive landscape in the automobile sector. As a leading automobile manufacturer, the BMW group also maintains a strong focus on human resource management. At the end of 2023, the BMW group employed 154,950 employees. The number of employees at BMW group had increased by 3.7% in 2023 compared to the prior year. BMW group spent around 469 million on employee training and development in 2023. The group maintains a heavy focus on maximizing employee satisfaction and therefore invests heavily in the training and development of employees.

Infrastructure:

BMW’s business is divided into two main segments including the automobile segment and the motorcycle segment. The company also has a finance segment. The current chairman of the BMW group and its CEO is Oliver Zipse. The various functions at BMW have their own leaders. Jochen Goller heads sales while Dr. Milan Nedeljkovic heads production at BMW. Dr Joachim Post heads the purchasing and supplier network at BMW.

Procurement:

BMW sources good quality raw materials from a vast pool of suppliers based in different regions of the world. The largest part of its supplier network is based in Germany from where the company sourced almost 32.5% of the total volume in 2023. It has established a purchasing and supplier network that takes care of procurement. Purchasing and supplier network at BMW is headed by Dr Joachim Post.

Conclusion:

The BMW Group has optimized its value chain to increase its efficiency and effectiveness. While optimizing the value chain helps improve productivity, it also helps improve the company’s competitiveness. The Automobile industry is marked by fierce competition. However, the BMW group has established itself as one of the leaders in the premium automobile sector. The company invests heavily in research and development and has managed an effective and resilient supplier network. It also invests in managing its human capital which is a crucial source of competitive advantage for the brand. To achieve faster growth, the company is investing in electric mobility as well as autonomous driving.