SMU,School of Business : Part I: Case study ? Each case has 15points = 30 Marks ? You are supposed to answer the questions that follow each case. It is a group work ? Submission Date 09 Mar 2021 (Tir 30): through the email : [email protected] CASE 1: BMW is the ultimate driving machine. Manufactured by the German company, Bayerische Motoren Werke AG, BMW stands for both performance and luxury. The company was founded in 1916 as an aircraft-engine manufacturer and produced engines during World War I and World War II. It evolved into a motorcycle and automobile maker by the mid-20th century, and today it is an internationally respected company and brand with €53 billion (about $76 billion) in revenues in 2008. BMW’s logo is one of the most distinct and globally recognized ever created. The signature BMW roundel looks like a spinning propeller blade set against a blue sky background— originally thought to be a tribute to the company’s founding days as an aircraft engine manufacturer. Recently, however, a New York Times reporter revealed that the logo, which features the letters BMW at the top of the outer ring and a blue-and-white checkered design in the inner ring, was trademarked in 1917 and meant to show the colors of the Free State of Bavaria, where the company is headquartered. BMW’s growth exploded in the 1980s and 1990s, when it successfully targeted the growing market of baby boomers and professional yuppies who put work first and wanted a car that spoke of their success. The result: sporty sedans with exceptional performance and a brand that stood for prestige and achievement. The cars, which came in a 3, 5, or 7 Series, were basically the same design in three different sizes. The 1980s was also a time when yuppies made Beemer and Bimmer, slang terms for BMW’s cars and motorcycles, popular names that are still used today. At the turn of the century, consumers’ attitudes toward cars changed. Research showed that they cared less about the bragging rights of the BMW brand and instead desired a variety of design, size, price, and style choices. As a result, the company took several steps to grow its product line by targeting specific market segments, which resulted in unique premium-priced cars such as SUVs, convertibles, roadsters, and less expensive compact cars, the 1 Series. In addition, BMW redesigned its 3, 5, and 7 Series cars, making them unique in appearance yet remaining exceptional in performance. BMW’s full range of cars now include the 1 Series, 3 Series, 5 Series, 6 Series, 7 Series, X3 SUV, X5 SUV, X6 SUV, Z4 (Roadster), and M. The redesign of the 7 Series, BMW’s most luxurious car, targeted a group called “upper conservatives.” These wealthy, traditional consumers traditionally don’t like sportier cars, so BMW added an influx of electronic components such as multiple options to control the windows, seats, airflow, and lights, a pushbutton ignition, and night vision, all controlled by a point and click system called iDrive. These enhancements were created to add comfort and luxury and attract consumers away from competitors like Jaguar and Mercedes. BMW successfully launched the X5 by targeting “upper liberals” who achieved success in the 1990s and had gone on to have children and take up extracurricular activities such as biking, golf, and skiing. These consumers needed a bigger car for their active lifestyles and growing families, so BMW created a high-performance luxury SUV. BMW refers to its SUVs as sport activity vehicles in order to appeal even more to these active consumers. BMW created the lower-priced 1 Series and X3 SUV to target the “modern mainstream,” a group who are also family-focused and active but had previously avoided BMWs because of the premium cost. The 1 Series reached this group with its lower price point, sporty design, and aspiration to own a luxury brand. The X3 also hit home with its smaller, less expensive SUV design. BMW introduced convertibles and roadsters to target “post-moderns,” a high-income group that continues to attract attention with more showy, flamboyant cars. BMW’s 6 Series, a flashier version of the high-end 7 Series, also targeted this group. BMW uses a wide range of advertising tactics to reach each of its target markets but has kept the tagline “The Ultimate Driving Machine” for over 35 years. During that time, U.S. sales of BMW vehicles have grown from 15,000 units in 1974 to approximately 250,000 in 2009. BMW owners are very loyal to the brand, and enthusiasts host an annual Bimmerfest each year to celebrate their cars. The company nurtures these loyal consumers and continues to research, innovate, and reach out to specific segment groups year after year. Questions 1. What are the pros and cons to BMW’s selective target marketing? What has the firm done well over the years and where could it improve? 2. BMW’s sales slipped during the worldwide recession in 2008 and 2009. Is its segmentation strategy too selective? Why or why not? Case 2 HSBC Wants to be known as the “world’s local bank.” This tagline reflects HSBC’s positioning as a globe-spanning financial institution with a unique focus on serving local markets. Originally the Hong Kong and Shanghai Banking Corporation Limited, HSBC was established in 1865 to finance the growing trade between China and the United Kingdom. It’s now the second largest bank in the world. Despite serving over 100 million customers through 9,500 branches in 85 countries, the bank works hard to maintain a local presence and local knowledge in each area. Its fundamental operating strategy is to remain close to its customers. As HSBC’s former chairman, Sir John Bond, stated, “Our position as the world’s local bank enables us to approach each country uniquely, blending local knowledge with a worldwide operating platform.” Ads for the “World’s Local Bank” campaign have depicted the way different cultures or people interpret the same objects or events. One TV spot showed a U.S. businessman hitting a hole-in-one during a round in Japan with his Japanese counterparts. He is surprised to find that rather than paying for a round of drinks in the clubhouse, as in the United States, by Japanese custom he must buy expensive gifts for his playing partners. In another international TV spot, a group of Chinese businessmen take a British businessman out to an elaborate dinner where live eels are presented to the diners and then served sliced and cooked. Clearly disgusted by the meal, the British businessman finishes the dish as the voice-over explains, “The English believe it’s a slur on your hosts’ food if you don’t clear your plate.” His Chinese host then orders another live eel for him as the voice-over explained, “Whereas the Chinese feel that it’s questioning their generosity if you do.” HSBC demonstrated its local knowledge with marketing efforts dedicated to specific locations. In 2005 it set out to prove to jaded New Yorkers that the London based financial behemoth was a bank with local knowledge. The company held a “New York City’s Most Knowledgeable Cabbie” contest, in which the winning cabbie got paid to drive an HSBC-branded Bank Cab fulltime for a year. HSBC customers could win, too. Any customer showing an HSBC bank card, checkbook, or bank statement was able to get a free ride in the BankCab. HSBC also ran an integrated campaign highlighting the diversity of New Yorkers, which appeared throughout the city. More than 8,000 miles away, HSBC undertook a two-part “Support Hong Kong” campaign to revitalize a local economy hit hard by the 2003 SARS outbreak. First, HSBC delayed interest payments for personal-loan customers who worked in industries most affected by SARS (cinemas, hotels, restaurants, and travel agencies). Second, the bank offered discounts and rebates for HSBC credit card users when they shopped and dined out. More than 1,500 local merchants participated in the promotion. HSBC also targets consumer niches with unique products and services. It found a little-known product area growing at 125 percent a year: pet insurance. The bank now distributes nationwide pet insurance to its depositors through its HSBC Insurance agency. In Malaysia, HSBC offered a “smart card” and no-frills credit cards to the underserved student segment and targeted highvalue customers with special “Premium Centers” bank branches. In order to connect with different people and communities, HSBC sponsors more than 250 cultural and sporting events with a special focus on helping the youth, growing education, and embracing communities. These sponsorships also allow the company to learn from different people and cultures around the world. The bank pulls its worldwide businesses together under a single global brand with the “World’s Local Bank” slogan. The aim is to link its international size with close relationships in each of the countries in which it operates. HSBC spends $600 million annually on global marketing, consolidated under the WPP group of agencies. In 2006, HSBC launched a global campaign entitled “Different Values,” which embraced this exact notion of multiple viewpoints and different interpretations. Print ads showed the same picture three times with a different interpretation in each. For example, an old classic car appeared three times with the words, freedom, status symbol, and polluter. Next to the picture reads, “The more you look at the world, the more you realize that what one person values may be different from the next.” In another set of print ads, HSBC used three different pictures side by side but with the same word. For example, the word accomplishment is first shown on a picture of a woman winning a beauty pageant, then an astronaut walking on the moon, and finally a young child tying his sneaker. The copy reads, “The more you look at the world, the more you realize what really matters to people.” Tracy Britton, head of marketing for HSBC Bank, USA, explained the strategy behind the campaign, “It encapsulates our global outlook that acknowledges and respects that people value things in very different ways. HSBC’s global footprint gives us the insight and the opportunity not only to be comfortable, but confident in helping people with different values achieve what’s really important to them.” HSBC earned $142 billion in sales in 2009, making it the 21st largest company in the world. It hopes its latest campaign and continued position as the “World’s Local Bank” will improve its $10.5 billion brand value, which placed it 32nd on the 2009 Inter brand/ Business Week global brand rankings. Questions 1. What are the risks and benefits of HSBC’s positioning itself as the “World’s Local Bank”? 2. Does HSBC’s most recent campaign resonate with its target audience? Why or why not?