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Hitt 13e Case Teaching Notes

Case 3: Future of the Autonomous Automobile: A Strategy for BMW

Case Synopsis

In business for more than 100 years, BMW began as an aircraft engine manufacturer but turned into a car and motorcycle manufacturer in 1928. Since then, the iconic brand has become recognized the world over for its exceptional, award-winning engineering and forward-thinking design. Like many other automotive and technology firms, BMW is now looking to the future, particularly at developing autonomous vehicles. Norbert Riedheim, head of BMW’s Future Car group, is charged with leading this project, which is so important that it is expected to change BMW’s business model over the next 20 years. In fact, BMW’s top-level executives have told shareholders they intend to lead in the self-driving car industry.

The technology for autonomous driving ranges from self-parking, which is already commercially available, all the way up to complete autonomy, in which the “driver” would actually be more like a passenger, free to talk, work, read, and relax while being transported. Among experts, there seems to be some debate whether cars will ever become fully autonomous, and yet several major automotive brands are pursuing that goal. BMW, Audi, Mercedes-Benz, and Chevrolet, for example, all have fully autonomous cars in development, and other firms, including Google, are investing in R&D in this space.

Given the advanced technology involved, it is not surprising that numerous alliances and acquisitions have sprung up between automobile manufacturers and technology companies. Google is currently looking for a prospective automotive partner, GM acquired the creator of a self-driving accessory that can be added to existing cars, and BMW is working with Chinese search engine giant Baidu, just to name a few.

BMW, like its rivals working in the same arena, faces a number of uncertainties in six key areas: social—who will use these vehicles and how; technological—the cost of the finished product will influence how quickly they are adopted; economic—differences in consumer spending and legislation in various countries will mean self-driving vehicles are adopted at different rates; environmental—how these vehicles will affect pollution emissions and gasoline; legal—numerous serious questions surround responsibility and accountability in the use of self-driving cars; and ethical—privacy and protection from hacking are two major concerns.

Despite the uncertainties and other obstacles, BMW is forging ahead with the development of autonomous vehicles with the aim of becoming a leader in this new industry.

Explain the differences among five types of business-level strategies. (Chapter 4)

Discuss the risks associated with using each of the business-level strategies. (Chapter 4)

Describe how strategic actions and tactical actions drive competitive rivalry between firms. (Chapter 5)

Explain factors affecting the likelihood a firm will respond to actions its competitors take. (Chapter 5)

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