Bmw in China: from Entry to Dominance

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BMW in China: From Entry to Dominance

Introduction
"In the next five to 10 years, China will be the biggest market for all brands and become a big area of competition," said Christoph Stark, president and CEO of BMW Group Region China to the China Daily reporter. "The most important thing is to be highly flexible and take chances, but also be prepared for some possible downturns in the market," Stark said. "For us the most treasured thing is the brand," he concluded. Hours later, while sitting in his study, overlooking the Shanghai skyline at night, Stark thought back to his comments earlier. As head of the China operations, it was up to him to ensure that the company preserves its market dominance. However, he realized that the challenges the company now faces are inherently different than those of the past. While in the past they needed to identify their consumer base, localize their brand to meet the Chinese consumers’ needs and build their production and service network, they now had to maintain all these, but also deal with legislation limiting the number of new cars, as a means to deal traffic congestion; legislative proposals to raise tax on cars with large engines – from the 660 Yuan maximum tax to 3600-5400 Yuan per year, to reduce greenhouse emissions; increased competition from local brands that are gaining fast the know-how and expertise needed and are steering themselves into the luxury car market as they build their brands; international competitors biting into their market share; the development, production and perfection of more fuel efficient engines, due to rising gas prices; etc. The fact that China has become BMW’s third largest market world-wide after Germany and the U.S., meant they had to work that much harder to maintain their dominance, as in this cut-throat market there are no guarantees. Stark fully understood that the Chinese market was imperative to sustain the company’s profitability and that it already has become the most profitable market, in terms of volume growth and product mix. BMW’s mission is "To become most successful premium manufacturer in the car industry” and its vision is “Uniqueness through diversity, Leadership and taking Risks”. Stark thought about these statements and realized that BMW’s Chinese presence is no less than crucial to achieve both. The past 20 years that he’s spent in China are of help, as well as the fact that he speaks the language fluently, but all these are simply not enough. For the first time he understood that China’s monstrous development rate is forcing every company to act as a living organism and grow with it. Their biggest challenge yet will be to “provide the ultimate driving experience” but still maintain a certain fluidity and flexibility that is imperative to survive in this unique market. Failing to do so could mean a blow they may not be able to recover from. He decided to look back at the company’s journey and perhaps derive some new understandings from it…

Background
BMW AG started out with the combination of three companies, Rapp Motorenwerke and Bayerische Flugzeugwerke (BFw) in Bavaria, and Fahrzeugfabrik Eisenach in Thuringia. In 1916, Rapp Motorenwerke became Bayerische Motorenwerke. Later, they were purchased by BFw. The merger of the two companies formed BMW and they became a successful engine and motorcycle manufacturing company. In 1929, BMW started to produce automobiles. World War Two significantly dented BMW and almost destroyed the company. However, in the early 1950s, Herbert Quandt stepped in and purchased a controlling interest in the company to revitalize the company. Under the new leadership, BMW changed its production line and introduced the highly successful BMW 700 and BMW New Six. The BMW 700 was available as a sedan or a coupe, and featured options that appear on sport cars. The success of the BMW 700’s started BMW’s reputation of a manufacture of fine, luxury sports sedans. In the 1960s and 70s, BMW...
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