Section 2 Analysis on international business strategies of BMW
III. BMW's international business strategies: Transnational strategy
By conducting comprehensive research on BMW's value chain, examining the cost reduction and local responsiveness pressures it faces, and conducting a VRIO analysis to assess its competitive advantages, we find out that the company seeks a combination of together the localization and global standardization strategy techniques through its transnational strategy to achieve both global efficiency and local responsiveness (Russel, 2022). Transnational strategy is recognized with various characteristics such as low cost, developing different competencies and skills at foreign branches, understanding and realizing the differences of each market systematically and sharing this knowledge in the whole system.
BMW has been implementing a transnational strategy for several decades. The company has a long history of international operations and has embraced globalization to expand its market reach and improve its competitive position. It began adopting this approach in the 1970s when it established production facilities outside of Germany. The company recognized the importance of entering foreign markets to tap into new customer bases and leverage local resources. In the 1980s and 1990s, BMW significantly expanded its global presence by setting up manufacturing plants in various countries, including the United States,
South Africa, and China. This allowed BMW to produce vehicles closer to regional markets, reducing costs and
responding more effectively to local customer preferences. While the company had begun expanding its international operations earlier, it was in the 1990s that BMW significantly increased its global presence and embraced a more pronounced transnational strategy. Up to now, the company still adoptsadopt this strategy and has succeeded in many markets around the world.
Concerning two determinants leading to the chosen international business strategy, we can see that BMW faces great pressure on both cost reduction and local responsiveness. The brand manages to optimize its production yet ensures competitive pricing in the global automotive market. Additionally, BMW strives to meet the requirements of different markets by understanding each culture, preference, purchasing habits, etc.
Taking into consideration BMW’s supply chain, it clearly illustrates that BMW follows a transnational strategy. BMW's approach of efficient procurement processes, collaboration with global suppliers, and leveraging economies of scale aligns with the global standardization aspect of a transnational strategy. This allows BMW to ensure a reliable supply of high- quality materials and components on a global scale. At the same time, BMW's emphasis on local procurement, incorporation of local components and materials in production, and partnerships with local suppliers demonstrate the localization aspect of a transnational strategy. BMW recognizes the importance of adapting to local market demands and regulations, such as customs procedures and tax requirements, which is evident in their production facility in Chennai, India.
BMW Group pursues a transnational business strategy through various key elements. Firstly, the company strategically locates its production facilities in different regions, such as Germany, the United States, and China, to meet specific market demands. This regional production approach enables BMW to customize its products according to customer preferences, respond quickly to market needs, reduce transportation costs, and minimize trade barriers. Additionally, BMW focuses on key automobile and motorcycle markets worldwide, particularly Germany, France, and the United States, aligning its operations with high-demand
regions to capture market share and maintain a competitive advantage. The company's profitable segments, including automotive and financial services, demonstrate successful utilization of its global operations to generate profits. With operational stores and production facilities worldwide, BMW establishes a strong global presence, accessing diverse markets, leveraging local resources, and building strong customer relationships. These factors collectively indicate BMW's adoption of a transnational strategy, allowing the company to effectively navigate international markets and maximize its business performance.
BMW's global distribution network indicates its focus on reaching customers worldwide and providing a consistent brand experience. This aligns with a global standardization strategy, which aims to offer standardized products, services, and customer experiences across different markets. The extensive dealership network allows customers to conveniently purchase, service, and maintain their BMW vehicles, reflecting a standardized approach to customer support and after-sales services. At the same time, BMW recognizes the importance of adapting to local market needs and preferences. The company's manufacturing facilities are located in various regions, and it utilizes different transportation methods to deliver vehicles to dealerships and distribution centers globally. This localization approach enables BMW to efficiently cater to the demands of customers in different countries. Additionally, BMW's partnerships with logistics companies, such as DHL, demonstrate its commitment to addressing the complexities of the global supply chain and ensuring timely and reliable delivery of vehicles.
The sales and marketing strategies of BMW has proved that BMW is pursuing a transnational business strategy. BMW strategically adapts its sales and marketing strategies to cater to the specific needs and preferences of local consumers in different countries or regions. While maintaining a consistent brand identity and product lineup globally, BMW localizes its sales and marketing approaches by tailoring advertising campaigns, messaging, and promotional activities to align with the cultural nuances and values of each market. The company collaborates with local dealerships, distribution partners, influencers, and
celebrities to enhance brand visibility and connect with target audiences. Moreover, BMW offers region-
specific vehicle options or features to cater to local regulations, infrastructure, and customer preferences. This combination of localization and consistency in brand positioning, product lineup, quality focus, innovation, and engaging marketing campaigns reflects BMW's transnational approach in adapting to different markets while maintaining a strong global brand presence.
BMW adapts its sales and marketing approaches to the specific needs and preferences of local consumers in different countries or regions. The company localizes its production facilities to respond quickly to market demands and reduce transportation costs.
Additionally, BMW engages in strategic partnerships with local influencers, celebrities, and sports teams to enhance brand visibility and connect with target audiences. These strategies indicate a focus on tailoring operations to local markets while maintaining a strong global brand presence and consistency in key areas like brand positioning, quality, and innovation.
By combining local responsiveness and global integration, BMW aims to capture market share, maintain a competitive advantage, and strengthen its presence in different regions worldwide. This aligns with the objectives of a transnational strategy, which seeks to balance global efficiency with local adaptation to gain a competitive edge in multiple markets.
Overall, the company seeks to balance global standardization to achieve efficiency and consistency with local responsiveness to address diverse market needs and preferences.
From our perspective, pursuing a transnational strategy is the right direction for BMW because it aligns with market trends in the continuously developing automotive industry and the increasing customer demand for mobility. By implementing a transnational strategy, BMW can optimize production and reduce costs through economies of scale, leveraging its advantages such as modern technology, a reputable brand, customer convenience, and a well- organized supply chain. Additionally, the transnational strategy allows BMW to meet diverse customer needs in each market, thereby enhancing the company's competitive advantage and position in the eyes of consumers.
CONCLUSION
BMW has adopted a transnational strategy that combines both localization and global standardization techniques.
In comparison to its rivals, BMW's adoption of a transnational strategy provides it with a competitive edge in the automotive industry. One of its key competitors, Mercedes-Benz, also employs a transnational strategy but with a greater emphasis on global standardization.
While Mercedes-Benz focuses on offering standardized products and experiences across different markets, BMW strikes a better balance between global efficiency and local adaptation.
In contrast, BMW's transnational strategy allows it to customize its products and adapt its sales and marketing strategies to meet the specific needs and preferences of local consumers in different regions. This localization aspect gives BMW an advantage in connecting with target audiences and building strong customer relationships.
Overall, The company has strategically positioned its production facilities in different regions to meet specific market demands and reduce costs. BMW has embraced globalization and expanded its global presence through the establishment of manufacturing plants in various countries. This approach has enabled the company to respond effectively to local customer preferences while tapping into new customer bases and leveraging local resources. BMW's supply chain reflects the transnational strategy with its focus on efficient procurement processes, collaboration with global suppliers, and incorporation of local components and materials. The company's global distribution network and sales and marketing strategies further demonstrate its commitment to reaching customers worldwide while adapting to local market needs. By pursuing a transnational strategy, BMW aims to achieve both global efficiency and local responsiveness, thereby strengthening its competitive advantage and position in the automotive industry.
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