BMW - Production, Quality and Innovation
BMW (Bayerische Motoren Werke, or Bavarian
Motor Works)
Introduction
Founded in 1916 with its headquarters in Munich, BMW:
- makes quality cars and motorcycles.
- owns Rolls-Royce cars and the Mini (the only benefit of
its disastrous ownership of Britain’s Rover cars 1994-2000).
Its smaller (Series 1) cars complement its more luxurious models (Series 3, 5, 6 and 7), X3, X5 and X6 4x4’s,
the highly powered M3, M5 and M6 and the Z4 sports car.
Its brand has a global reputation, symbolized by its famous circular
logo with the blue and white colours of the Bavarian flag (pictured right).
What makes it
competitive?
Engineering excellence.
This is BMW’s key core competency which gives it the edge over its competitors:
Unlike them, it doesn’t have the financial muscle of a big company behind it, but the quality of its cars has
made it the world’s best car company according to Fortune magazine.
In 2013 it
- made €7,383 million pre-tax profit
- sold over 1½ million cars
- employed nearly 100,000 employees.
BMW’s key car factories and what they make
Leipzig, Germany (Series 1 and 3)
Munich, Germany (Series 3 and engines)
Regensburg, Germany (Series 1 and 3 and M3)
Dingolfing, Germany - BMW’s biggest factory producing the Series 5, 6 and 7 (pictured right),
M5 and M6.
Spartanburg, USA (X3,X5, X6, Z4)
Steyr, Austria (X3 and engines)
Oxford, England (Mini, pictured right)
Goodwood, England (Rolls-Royce cars)
Rosslyn, South Africa (Series 3)
Shenyang, China (joint venture) – Series 3 and 5.
Key people
Norbert Reithofer, chief executive 2006-15 (pictured right).
Harald Krüger, head of production (who became chief executive in 2015).
The Quandt family (which owns nearly a half of BMW’s shares).
Key quotes
We push change through the organization to ensure its strength. There are always better solutions,
- Norbert Reithofer
BMW, like no other brand, will still stand for vitality and driving pleasure in the future. But it will also
represent efficiency and environmental friendliness,
- Norbert Reithofer
The performance of the workforce depends on its skill, motivation and, above all, its health,
- 2010 Annual Report and Accounts.
When we ask customers why they chose a BMW, a Rolls-Royce or a Mini, their first answer is design. Performance
comes second, then quality.
- Adrian van Hooydonk (head of design, pictured right) in Financial Times
6/12/10).
BMW’s principles for perfect production
1. Leadership and purpose
BMW’s mission is to be:
“the world's leading provider of premium products and premium services for individual
mobility”.
So the top priorities of BMW’s management (led by its chief executive, Harald Krüger) are:
Its Strategy Number One (introduced in 2007) sets BMW profit targets and how it will
achieve them:
- exploiting new market opportunities (e.g. the market for
smaller, greener cars).
- efficiency improvements (through cost cutting, improving employee performance and the
effective use of technology).
Norbert Reithofer (pictured right) was a great leader – why?
a) managing change
When he took over as boss in 2006, Reithofer’s most difficult job was to introduce necessary changes in a highly
successful company.
His personal motto became instilling “a sense of urgency” to overcome any complacency.
Every new recruit is reminded how the company was saved from bankruptcy in 1959 by managers and employees
co-operating together to produce better cars.
b) motivation
Reithofer:
- was likeable and trustworthy.
- involved employees in decision making (a key management principle at BMW - see point
2) .
c) long-term thinking
His ability to plan and think long-term was helped by the Quandt
family’s near majority shareholding.
d) tough but tender
He was:
- tough (making difficult decisions like firing 8,100 employees in 2007).
- tender (sensitive to employees’ needs with the integrity to win their trust).
e) listening
He realized (like all BMW managers) that:
- management doesn't have all the answers.
- its responsibility is to ask the right questions.
Two other great chief executives laid the foundations for BMW’s success.
- Herbert Quandt (who saved it from bankruptcy in 1959 by producing quality cars) -
pictured right.
- Helmut Panke (Reithofer’s predecessor).
2. Excellent employees
BMW’s employees produce quality cars because they are:
a) talented
BMW can cream off the best people, because it's such a desirable employer.
b) highly trained
(with an excellent apprenticeship scheme).
c) empowered
(given the freedom to get things done as quickly and effectively as possible).
d) flexible
Being prepared to accept new technology and better ways of working (like flexible production - see point 4).
Temporary employees are used to respond to short-term increases in demand for cars
e) well motivated
This results from:
- mutual trust and give and take (between management and
employees)
- involvement in decision making.
Employee involvement is a legal requirement in Germany.
BMW’s supervisory board (which oversees the management team led by the chief executive)
has five employee and two union representatives.
Each of its German factories also has an employee elected works council which has to be
consulted by management.
Managers
- try to create a fun atmosphere
- act upon regular staff surveys (which suggest ways to increase job
satisfaction).
3. Product design
BMW’s cars are so popular because of their design as well as their performance and quality –
beauty is just as important as functionality.
“Cars are art”, says Chris Bangle (pictured right), BMW’s head of design until
2009.
The design team is renowned for its fanatical attention to minor details that give
customers maximum appeal (what BMW calls its “cup holder principle”).
4. Flexible production
BMW’s flexible production system (introduced by Norbert
Reithofer when he was head of production) is vital to its success.
This is:
- highly efficient (with robots amd mass production assembly lines)
- customized to meet individual customer requirements in terms of
colour, engine and interior fittings.
This requires close collaboration between the production, design, marketing and sales
departments.
Customers can change their minds as little as five days before production, and they love
it!
5. Continuous learning and improvement
BMW is a learning organization that constantly
learns from its successes and failures.
The near bankruptcy experience in 1959 is ingrained in the company’s psyche and still drives it to improve
today.
BMW also immediately responds to customer feedback – for example:
- the Series 5 range was improved in response to customer demands for more space and
better performance, handling and fuel efficiency.
- in 2001 Series 7’s computerized entertainment and information system,
iDrive, had to be modified immediately after a barrage of customer complaints.
BMW is also renowned for its ability to break down communication barriers between
different divisions and departments, so ensuring effective knowledge sharing and learning.
6. Quality management
BMW’s world-class quality comes from its effective implementation of total quality management based upon:
- a company-wide commitment to customer satisfaction.
- world class quality and continuous improvement.
- involvement by employees in decision making (acting upon their suggestions for
improvement).
- teamwork (particularly self-managing production teams who are
empowered to take responsibility for quality).
Every BMW factory carries out weekly quality audits at every stage of production
BMW also has award winning relationships with its suppliers to make sure they deliver the
best possible quality.
7. Innovation
BMW’s innovation rate is incredible with 14 product launches alone in 2010, resulting from:
a) challenging objectives
(see point 1)
b) prioritizing research and development
BMW's innovation priorities are:
- Efficient Dynamics (BMW’s fuel efficiency programme).
- Connected Drive (developing all the computerized gadgetry that customers love).
- environmentally friendly cars including the electric city car BMW i3
(launched in 2014) and the hybrid sports car BMW i8 (2013).
d) cross-functional teams
(of design, production and marketing people)
Such teams were vital in Rolls-Royce's development of the highly successful Phantom (pictured
right) in 2003.
e) questioning
Every employee is encouraged to question everything through:
- intense debate (what BMW calls “friendly fighting”)
- suggesting new and better ways to solve customers’ problems.
f) good management
Managers listen to people's new ideas and act upon the good ones.
8. Strategic alliances (or joint ventures)
Because BMW is a relatively small car maker, it has to enter joint ventures with other
companies to fully benefit from economies of scale.
For example it has partnerships with:
- Daimler (to boost its purchasing power).
- Peugeot Citroen (to develop engines and electric cars).
A big thank you
to...
This case study has been based upon lots of different articles. But the Financial
Times has been particularly useful.
|