Sucess Of Rover-BMW

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CONTENTS CONTENTS 1 INTRODUCTION 2 HISTORY OF BMW 3 HISTORY OF ROVER 5 SUCCESS OF BMW-ROVER 7 OPTIONS FOR FUTURE 12 STRATEGIC DIRECTION OF COMPANY 14 CONCLUSION 17 BIBLIOGRAPHY 18 INTRODUCTION The Global Car Industry has many major collaborative and ownership links. Within these links there are many factors that affects the market share of a car company, which include trying to enter into the International Market, the role of technology in the industry; e.g. how technology has changed over the years and what the effects of that change have resulted in; the impact of social and legislative requirements that have to be followed and how the buyers of cars will change and how it has varied over the years. In the case of BMW-Rover, given the increasing dynamics of the car industry, the question was whether this company had the resources to stand the competition and the competitive position to achieve the aims that were set.

HISTORY OF BMW The company of BMW began back in 1916 in Munich when the Bayerische Flugzuegwerke (Bavarian Aircraft Works) was set up to produce aero engines. BMW was founded shortly after that where they made motorcycle engines and later proceeded to make completed motorcycles with the famous flat-twin engine. The next step was the introduction of the prototypes of a very advanced front-wheel-drive car, with a pre-selector gearbox and integral bodywork, which were built but then abandoned. In 1928 the company of BMW bought the Dixi-Werke factory in Eisenach. The Dixi car (the Latin for "˜I speak') had never been a big seller, but when an agreement was reached with Sir Herbert Austin to build Austin Sevens at the plant, BMW cars were launched. The original 3/15DA progressed to the 3/20DA but the cars were unmistakably Austin Seven based.

The first brand of BMW was the 326 and 328 sports car, which were later joined by the 335. These cars were regarded in the immediate pre-war period as the ultimate in engineering design. These cars were imported into this country as Fraser Nash-BMW's.

In the aftermath of World War2, the company of BMW had major problems. Eisench was in the hands of the Soviet Union and the plant was eventually told to produce the two-stroke Wartburg. This meant that BMW in Munich had no factory. Their motorcycle production was restarted, with cars being made from 1952.

In 1960 BMW was under new management and things had started to move. There were 500 saloons replaced by the elegant 3200cs whilst the little 700 was being updated. The new arrival of the new 1500 was the big news and after some major teething problems the Neue Klasse BMW took off.

BMW had remained faithful to the front-engine, like the Mercedes-Benz in Stuttgart, the rear-drive layout for its mainstream models. There was one exception, however, the short-lived mid-engined and hugely expensive M1. There was just 456 built in 1970-80 before BMW decided to cut its losses. The DOHC six-cylinder engine was later used in the McLaren F1.

BMW over the last 35 years has built up a very special place in the motoring world, with its elegant design, outstanding building and quality and in recent times the innovative engineering. BMW offers an extensive range from the 3-series Compact, through 3-series, recently launched 5-series, 7-series and flagship 800-series coupe with sales of 55,000 cars in 1997.

For BMW the crisis year was 1959 when car production had only restarted five years before but the range was a marketing nightmare. At the top were the luxury 501/502 saloons and the V8 503 and 507 coupes. At the opposite end of the scale the company of BMW was making a modified version of the Isetta bubble car. At that point Mercedes-Benz looked like they were ready to overtake he BMW company financially when Herbert Quandt stepped in to ensure the company's future in the short term.

HISTORY OF ROVER Rover's origins are in bicycle manufacture. Although over the years the materials have changed the most extensive mountain bike today owes its origin to John Kemp Starley. In 1884 the rover tricycle was made. Two years later those and the ordinary model was made which rendered the famous penny-farthing obsolete. The diamond shaped frame and geared-up chain drive top the rear wheel on virtually every cycle sold today can still be seen today.

After the powered tricycle in 1901, the first four-wheeler appeared in 1904. The company at this point quickly built up the reputation for quality, especially within the fourteen and sixteen models, which were both built before and immediately after the Second World War. One unique feature of the company of Rover was the free wheel, which gave, according to contemporary advertisements, "˜silent coasting and easy-free gear changing.' The famous Viking badge was first used in the 1920's.

In 1949 the P4 came about which with various engines would be Rover's mainstay until the arrival of the 3.0 litre P5. Rovers were large cars in what would today be called the executive sector, and by this time they were resolutely the choice of the professional middle classes. The car's reputation was solid, reliable, well engineered, comfortable and unexciting. The Rover company however, was still technical highly capable and if its production models had achieved a rather staid 'auntie' image, the experimental ones were almost light years ahead of their rivals.

In 1945 the gas turbine or jet engines had only been used in military aircrafts "" and they were still at their early stages. Rover had already set up a unit to see if they had a future in road vehicles. In 1950 the wraps came off Jet1, the worlds first gas turbine-powered car. This remarkable vehicle had a 230bhp engine in a P4 chassis with an experimental convertible body. Two years later this car was timed at over 152mph. A rover-BRM raced at Le Mans in 1963 and 1965, but the engine proved seriously uneconomical, and the problem of noise was considered to make it an uneconomical pursuit. This was the end of the company of Rover's affair with the gas turbine.

There was the production of a new model, the elegant P5, which was to challenge the Jaguars place in the luxury car market. However, it needs a better engine. In 1962 it was rovers managing director William Marin-Hurst that discovered the all-aluminium V8 engine whilst he was visiting Mercury marines experimental department in Wisconsin. Buick had used this engine in its Special but had dropped it in favour of a new thin-wall cast iron engine that was more appropriate to the US market. The 3.5 weighed just over 12lb more than the rover's 3.0 in-line six, and that was just half an inch longer than a typical four cylinder engine. The company of rover acquired it at once and it became the ubiquitous Rover V8. The basic design of the car proved so sound that the same V8 although hugely modified is still in use today.

In 1963 the P6 was launched which was an outstandingly advanced car. It used a separate "˜skeleton' body ""chassis frame, with non-stressed wing, door, boot and bonnet panels. The 2.0 later known as the 2.2-litre four was joined by the 3.5V8 which was comfortable, fast, safe and stylish which further advanced the company of Rover's reputation for technically superior, high quality cars.

SUCCESS OF BMW-ROVER The acquisition BMW-Rover is no longer in existence so this company as a whole could be classified as a failed company. Company failure can be defined as: A company that is unsuccessful if it fails to meet objectives set for it by its stakeholders, or if it produces outputs which are considered undesirable by these associated."� John L Thomson Srategic management Awareness and change 3rd edition International Thomson business press There are many symptoms of decline, which vary from falling profits to lack of planning or strategic thinking that reflects a lack of clear direction.

The causes of decline include: inadequate strategic leadership which includes poor management, acquisition which fail to match expectations, mismanagement of big projects, poor financial management which includes poor financial control, cost disadvantages and competitive forces which includes the effect of competitive changes, resource problems and inadequately or badly directed marketing.

Poor management can be manifested in a number of ways. The company could be controlled by one person who will follow their particular way of leadership and follow the objectives that they feel should be achieved, which is not actually the objectives that are set to be achieved. If an organisation does not set new corporate or competitive strategies then the previous levels of performance and success will not be maintained when particular products, services are strategies go into decline. Another issue may lie in the hands of the strategic leader.

"The strategic leader must build and lead a team of manager "" and establish the goals or objectives."� James C Craig & Robert M Grant Strategic Management Resources-Planning-Cost Efficient-Goals Amed Publishing If the strategic leader does not build appropriate organisation this might mean that key issues of success or factors of success are ignored and not given the attention that is needed.

A company, which seeks growth or diversification, may take over other companies or merge with time. Any research that has been done proves that any profits or successes that are anticipated by the company fail to materialise in an acquisition. This could be the result of a bad strategic leader who overestimates the potential of the acquisition.

The mismanagement if big projects include the lack of forecasting potential revenues. This may include the misjudging of costs of market entry, the start-up difficulties that many companies experience or the underestimation of capital requirements. A company should be careful not to stretch their financial and managerial resources.

Poor financial control includes the failure to manage cash flow and the incidence of temporary liquidity as a result of overtrading. A company must budget and prepare a realistic budget that can be met or else they could experience financial difficulties.

Cost disadvantages include the problem of breaking even and covering overheads, which are cost disadvantages. Poor operating management can mean low productivity and higher costs than ought to be incurred and cause decline. The cost problems of a company affect all competitiveness.

A competitive force can be described by Porters model of the forces, which determines industry profitability.

Determining industry profitability "" the five forces.

Adapted form Porter, ME (1980) Competitive Strategy: Techniques for Analysing Industries and Competitors Free Press The effect of competitive changes means that a company can find itself in a decline situation if their products cease to be comparative. This means that a decline can result from a loss of clear differentiation and in turn a failure to maintain competitive advantage.

A company can experience cost problems as a result of currency fluctuation if it fails to buy forward appropriately to offset any risks. Other resources controlled by strong cost problems can have a similar effect.

Badly directed marketing can be the result of failure to achieve adequate sales due to inadequate advertising.

The failure of BMW-Rover was the result of many of the factors that were listed above.

In 1994 BMW made a pre-emptive strike and bought Rover from British Aerospace. The company Honda that had previously bought the company was taken by surprise and the strategy that they had developed was destroyed. This meant the end of a technical co-operation with the Japanese, although production agreements were honoured for the lifetime of the existing models.

Under BMW all did not go well for Rover. The German company had bought a subsidiary with production larger than its own. Whilst BMW was more of a niche manufacturer than Rover, the products that were produced were largely competing in the same market segments. The strategy for BMW under their management of the new company was confused and the subject of internal conflict in Munich. Over the years of BMW-Rover a number of senior employees left both rover and BMW.

Rover under the management of BMW failed to meet the challenges they had set in the early 1990's. By 1995 the new Rover 400, which was originally a Honda joint project, set new standards of ride comfort for a car of its size and it was well received to the consumer market. The new Rover 200 was designed completely in-house and although it was criticised for being small it was praised for its engineering.

When there was a newly renamed Metro called the 100, the sales volume dropped dramatically. The larger 600 and 800 series were also showing their age. Whilst Rover was working on a new model to replace existing models their rivals caught up with them. They designed a new 25 and 45 series for the 600 and 800 series and lowered the price whilst a project to replace them was in process.

The new car was launched in 1999 called the new Cowley-built Rover 75 and it was praised. The launch of the car was undermined due to the timing of the BMW's public wrangling with Rover's major problems.

With the low and dropping value of the euro, this made matters worse for the problems that Rover had and this made exports and increasing costs to the BMW investment. BMW threatened to sell the acquisition and move all production to Hungary but they were promised money from the British Government. However, within months BMW did sell.

OPTIONS FOR FUTURE The options for the future now remained clear for both of the companies. Rover had to try and solve their problems that they had and BMW had to try and re-establish them after losing financially with the deal with rover.

The rover group continued after it was sold by BMW. Land Rover had strong sales in the US and was sold easily to ford, but the original deal that was proposed to Rover cars was with the venture group called Alchemy, which spelled the end for Rover. The name Rover was to be dropped leaving just MG branded cars to be produces in reduced number. There was much delight by the unions and political commentators however when the deal collapsed.

In May of 2000 a consortium known as Phoenix formed a deal with BMW. The company of Phoenix was formed to challenge the Alchemy bid for Rover and planned a business plan and international financing in a few short weeks. Although BMW lost the money whilst in coercion with Rover they had to pay Phoenix to take the less attractive parts of the business off its hand by providing cash and guarantees. The strategy that the company had planned failed and the German company was glad to be rid of the problem.

Recently BMW has retained the new Mini and the Cowley factory. The new Minis are seen as a premium product with their engine being made with joint venture Delmer Chrysler in South America. Cowley's future may have something to do with BMW's other British asset: the Rolls Royce name.

For the company of Phoenix the challenge of starting afresh is to prove that they can make a new commercial strategy that will help the company back onto its feet. The new rover 75 is highly regarded and was transferred to Phoenix at Long Bridge.

In the long-term a company like Rover will unlikely remain independent. Its immediate problem will be to provide replacement models for its aging 25 and 45 models and then to update the MGF. This can only be financially possible if the company is in partnership with another. This will be in the same sort of partnership as the one with Honda but it is likely to run a lot deeper and it will be harder to unravel.

STRATEGIC DIRECTION OF COMPANY "The planning era, if one may call it that, occurred some time ago, and has been discredited as we have been moved on to the greater belief in the development of the common values in the organisation and are rediscovering again the necessity to be close to the market."� (Sir John Harvey-Jones, past Chairman ICI, 1987) "Planning is one of the most complex and difficult intellectual activities in which man can emerge, not to do it well is not a sin; but to settle for doing it less than well is."� (Russell Ackoff, 1970) Every company must plan ahead and decide what the company wants to achieve. The strategic manager should be the person to do so. Strategic management can be defined as: "a process which needs to be understood more than it is a discipline which can be taught. It is a process by which organisation determine their purpose, objectives and desired levels of attainment; decide on actions for achieving these objectives in an appropriate timescale, and frequently in a changing environment; implement the actions; and assess progress and results. Whenever and wherever necessary the action may be changed or modified. The magnitude of these changes can be dramatic and revolutionary, or more gradual and evolutionary."� John L Thomson Strategic management Awareness and Change 3rd edition International Thompson Business Press The objectives of a company must be defined for the company to be able to proceed with any work. The objectives can be defined as: "Desired stated or result linked to particular time scales and concerning such things as size or type of organisation, the nature and variety of the areas of threat and levels of success."� John L Thomson Strategic management Awareness and Change 3rd edition International Thompson Business Press Once the objectives are set the strategy can then begin to be established for the company. A strategy can be defined as: "Means to ends, and these ends concern the purpose and objectives of the organisation. They are the things that businesses do, the paths they follow and the decisions they take in order to reach certain points and levels of success."� John L Thomson Strategic management Awareness and Change 3rd edition International Thompson Business Press The strategy of BMW-Rover obviously did not work and that is why there was failure with the acquisition. Bernd Pischetsreiders intention for the company was to transform Rover into an exclusive upmarket producer and involve development of new models. His plan was to turn the Rover brand into a strong one as exclusive as BMW and treble the sales. He realised that in order to do this he would have to transfer BMW's logistics technology into Rover to build the cars he wanted to produce.

I feel that the best direction the company was not to attempt to make Rover cars as exclusive as BMW due to the fact that it took a long time and a lot of money to transform the BMW name into a world exclusive one. Rover makes lower class cars for people who cannot afford a fancy car and that is the way it should have been left. Due to this change in strategy, although Rover had many problems before BMW bought it, BMW created more problems and that is why the acquisition dissolved. The strategy should not have been targeted at that particular market of the motor industry.

CONCLUSION To conclude although BMW-Rover did not succeed both the companies out with the partnership have progressed into developing profitable car companies. The Rover name is gradually being brought back from the ground and BMW still today has a very good name for itself.

BIBLIOGRAPHY Books · John L Thomson. (1997) Strategic Management: Awareness And Change 3rd Edition International Thomson Business Press · James C Craig & Robert M Grant. (1993) Strategic Management: Resources-Planning-Cost Efficiency-Goals Amed Publishing · Gerry Johnson & Kevin Scholes. (1989) Exploring Corporate Strategy: Text And Cases Prentice Hall · Frances Brassington & Stephen Pettitt. (1997) Principles Of Marketing Pitman Publishing · Stephen P. Robbins. (1998) Organisational Behaviour: Concepts, Controversies, Applications 8th Edition Prentice Hall Internet 1. 2. 3. 4. 5. 6. 7. 8.