BMW Human Resources Policy

Organisations, Analysis and Policy

REPORT

To: Senior Management

From: Group Accountant

Date: 2^nd May 2005

Subject: BMW Organisational Analysis andHuman Resources Policies

This report will provide a detailed analysis of BMW’scurrent corporate appraisal analysis. This will help to identify the company’scurrent strength, weaknesses, opportunities and threats. This will help thecompanies decision makers understand where the organisation is now. The reportwill also critically evaluate BMW’s human resources policy as a key area of theorganisation. We will highlight how BMW has strategically responded to thedrivers for change in terms of its structure, conduct and performance. Finally,offer recommendations for the future development and improvements in humanresource management, and how those will impact on its organisational structure,conduct and performance.

Company Background

The BMW Group is the only manufacturer of automobiles andmotorcycles worldwide that concentrates entirely on premium standards andoutstanding quality for all its brands and across all relevant segments. With the brands BMW, MINI andRolls-Royce Motor Cars, the BMW Group has been focussing on selected premiumsegments in the international automobile market since the year 2000. In thesucceeding years, the launch of the BMW 1 Series meant an expansion of themodel range in the premium segment of the lower middle class and the BMW 6Series did likewise in the segment of the large Coupés and Convertibles. TheMINI marque was launched and production began in the Oxford plant in 2001. In2003, the BMW Group assumed marque responsibility for Rolls-Royce Motor Cars.At the same time, the Worldwide Head Office and Manufacturing Plant inGoodwood, GB, was built. (

AnInternal and corporate analysis in terms of strength, weaknesses, opportunitiesand threats (SWOT) will assist in gaining an understanding of where BMW iscurrently in terms of strengths and where improvement is required within thebusiness and what outside environmental threats it may face as well as what newopportunities are available to the company in the short and medium term.

Figure 1:BMW SWOT Analysis

The Five Forces Model

Figure2: Five Forces Model – ACCA Paper 3.5 (2001)

Porterexplains that there are five forces inherent in a market, which will jointlydetermine the intensity of competition and profitability of BMW and theautomobile industry. The first is the threat posed by new entrants, the highcapital expenditure and confidence of customers represent significant barriersto entry and the market is also sensitive to reputation. However, the emergentof low cost manufactures do pose a significant threat (as illustrated by figure2). There is an opportunity in the low price/ low economy (fast) sector. MaybeHyundai or Daewoo could consider introducing a low cost sport saloon. The second is the threats from substitutes, as thereare many make and model of other premium branded cars, hence, Jaguar, MercedesBenz, Audi etc. The third force is the threats from the bargaining power ofbuyers, is this strong for both BMW and the entire automobile industry with alarge number of alternative suppliers, hence, the aggressive pricing strategy.This results in a very strong competitive rivalry in the industry. This isintensified as a result of little or no differentiation in the basic productoffered. Finally the threats from the suppliers bargaining power, this isfairly low in the automobile industry, due to dual sourcing strategies, using arange of alternative sources of supply for parts.

The five forces analysis gives an improved understandingof the degree of competition within the business environment. The analysisshows that the automotive industry is highly competitive, with buyerspossessing and exerting a very powerful influence to the large number ofsubstitute brands available to them.

BMW Human Resources Policy

In response to a changing business environment BMW isbeing more business and service focus. In the past decade the organisation hasbecome much more proactive, dealing with new concepts to become more serviceand customer focus oriented. The structure of the organisation has beenredefined to deal with the new ways of operating. Organisational structuredefines important relationship within the business for achieving businessobjectives. At the same time it helps to define the new business culture withinBMW. Culture exists with the minds and hearts of BMW’s employees andcontributes to business strategies of the organisation. Therefore, BMW’s humanresources policies are critical in the organisations structure, conduct andperformance.

Competitive pressures on BMW and national economies haveincreased markedly in recent decades. Therefore, organisations are constantlychanging, as powerful entities have arisen at the international level, theEuropean Union being a good example and multinational corporations increasinglydominate particular sectors such as cars. New competitions are emerging andforcing older companies to adopt or reform to survive. Different structuresaffect the way in which human resources are managed. BMW like all otherbusinesses require the same basic human resources activities like recruitment,development and training, appraisal and reward systems, and control andfeedback mechanisms. Organisational structures are influenced by culture.Employees have strong feelings towards the organisations they work for. Germanfirms have inherently a flat, less rigid structures. The McKinsey 7 ‘S’ modelis often used to identify all the areas that make up an organisation.Structure, Style, Staff are three such areas.

BMW has an equal opportunities none sexual discriminatingculture within its organisation. BMW actively supports young female executivesand gives females insight into the field of technology. BMW also offersextensive training for all level of staffs; BMW Group’s Trainee PromotionProgramme (TPP) provides the perfect combination of theoretical studies andpractical work. BMW Group trainees receive many benefits in addition to theirpay, other social payments such as holiday and Christmas bonuses, meal andtravelling expenses subsidies, health programme and PC training.

BMW claims that it does not see its staff as a cost factorbut as an essential performance factor. Also the employees are referred to as’associates’ rather that works. BMW in its human resources policy states thatany policy that is not oriented towards its associates will lead to negativecost effects in the long-run.

As a future-oriented company, we seek to pursue anexemplary, creative and associate-oriented human resources policy, makingsignificant contributions to business success through our human resourcesactivities. The human resources policy of the BMW Group is an integral featureof our overall corporate policy in both strategic and operative decisions. (Corporate appraisal (or SWOT analysis) consists of the internal appraisal ofthe organisation’s strength and weaknesses and an external appraisal of theopportunities and threats open to organisations in competition within industry.