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BMW: LEADING

TOWARDS THE PATHOF EXCELLENCE

A CLOSE EXAMINATION OF BMWS

CORPORATE STRATEGYBy:

NAME

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CONTENTS

INTRODUCTION .......................................................................................................................... 3AUTOMOBILES IN THE UNITED KINGDOM: AN INDUSTRY OUTLOOK ........................ 4CORPORATE DILEMMA 1: TO COLLABORATE V/S COMPETE ......................................... 6

CURRENT STRATEGY ............................................................................................................ 6PROPOSED STRATEGY .......................................................................................................... 7

Strategy 1: Collaboration V/S Competition ............................................................................ 7Strategy 2: Creating A Strategic Center To Manage A Web Of Partners .............................. 9

CORPORATE DILEMMA 2: THE PARADOX OF COMPLIANCE & CHOICE .................... 11CURRENT STRATEGY .......................................................................................................... 11PROPOSED STRATEGY ........................................................................................................ 11

Strategy 1: Adopting Blue Oceans Strategy to Inculcate Environment Regulations ............ 11Strategy 2: Prioritising BMWs Competencies Over Industry Trends ................................. 13

CONCLUSION ............................................................................................................................. 14REFERENCES ............................................................................................................................. 15APPENDIX ................................................................................................................................... 17

APPENDIX 1: SWOT ANALYSIS.......................................................................................... 17APPENDIX 2: UNITED KINGDOM AUTOMOBILE INDUSTRY: HOUSEHOLD

EXPENDITURE ON VEHICLES ............................................................................................ 18APPENDIX 3: THE COMPETITIVE STATUS OF THE UK AUTOMOTIVE INDUSTRY 19APPENDIX 4: THE AUTOMOTIVE REGULATORY FRAMEWORK OF THE NEXT 10

YEARS ..................................................................................................................................... 20

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INTRODUCTION

Bayerische Motoren Werke (BMW) is one of the leading manufacturers of premium passenger

cars and motorcycles. The company has a strong focus in research and development (R&D),

which enables to develop innovative products to market and maintain technological leadership,

which in turn enables the company to expand its customer base and generate incremental

revenues. However, increased competition may lead to lower vehicle unit sales and increased

inventory, which may result in a further downward price pressure and adversely impact the

company's financial condition and results of operations. BMW has a strong focus on research

and development (R&D). It operates a research and innovation network, which consists of 12

locations in five countries.

BMW is focused on expanding its product portfolio and to improve the functionality, quality,

safety, and environmental compatibility of its products. The company's main R&D center, BMW

Group Research and Innovation Centre, serves as the central interface for all technical and

design-related activities in BMW's R&D. Its two subsidiaries, BMW Forschung und Technik and

BMW Car IT are focused on developing new technologies for use in the automobiles. In

addition, BMW Group's Innovation and Technology Centre in Landshut is focused on the

development of lightweight technologies and innovative materials and appropriate production

methods. The company's R&D expenditure for FY2011 was E3,373 million ($4,696.6 million),

which represented 4.9 % of total sales. In addition, the company has an extensive distribution

network, which consists of around 3,200 BMW, 1,400 MINI and 90 Rolls-Royce dealerships. In

FY2011, the company sold 1,668,982 automobiles and 113,572 motorcycles. Hence, the

extensive production and distribution network allows BMW to support its customers needs in an

effective way on a global basis, while leveraging a low cost manufacturing and engineering

footprint.

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AUTOMOBILES IN THE UNITED KINGDOM: AN INDUSTRY

OUTLOOK

The automotive industry is a key contributor to the European economy and society. The ongoing

economic turmoil we have been facing over the last years has shown the importance of

maintaining a strong manufacturing base in the EU because of its strength as a source of growth

and jobs. The European vehicle manufacturers are global players, driving innovation towards

cleaner, safer, and more sustainable transport. In an increasingly fierce global environment, it is

crucial that our industry retain and improve its competitiveness both in the EU and worldwide.

The European regulatory framework, as well as industrial and trade policy, plays a decisive role

in this respect. ACEA maintains a continuous dialogue with policy makers and other

stakeholders in the EU, and provides expert knowledge and industry statistics.

Exhibit 1: Production output for the motor vehicles (ONS, 2013)

Leading up to the 2008-09 economic downturn, output was broadly flat in both motor vehicle

production and manufacturing. Between February 2008 and February 2009, however, motor

vehicle output more than halved as the escalating global economic downturn and the uncertainty

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it created led households and firms to postpone large purchases both in the UK and abroad.

Manufacturing output also fell, albeit by a smaller proportion.

Following the initial economic downturn, both the motor vehicle sector and the manufacturing

sector more broadly returned to growth. Motor vehicle output started to rise in March 2009,followed by the manufacturing sector as a whole several months later. However, while the motor

vehicle sector has grown fairly steadily since the beginning of 2009, manufacturing output as a

whole has suffered a fresh reversal since the end of 2011. The most recent data suggest that

while motor vehicle manufacturing has largely recovered to the pre-recession level of output,

manufacturing as a whole is still 10% below the level attained at the beginning of 2008.

Total household expenditure on transport has three components - expenditure on operating

personal transport, the purchase of vehicles, and the use of transport services each accounting

for around a third of the total. It accounted for 14.5% of total household expenditure in Q1 2013.

In aggregate, household spending on all transport has been on a broadly downward trend since

2008 reflecting the pressure on households real disposable incomes from slow earnings growth

combined with higher rates of consumer prices inflation. Households may also substitute away

from more expensive goods and services towards cheaper alternatives. Set against these

economic constraints, two factors may have helped to boost household expenditure on vehicles.

The car scrappage scheme was introduced in 2009, offering the owners of cars which were more

than ten years old a financial incentive to exchange their vehicle for a new one. This scheme

ended in 2010.

A more recent influence on purchases of cars may be the compensation payouts to consumers

made as a result of payment protection insurance (PPI) mis-selling, amounting to a cumulative

total of just over 10 billion since the start of 2011. The relatively large size of these payments

offers households the potential to make large purchases, such as new cars, which they might

otherwise have deferred. The timing of payments corresponds quite closely with the renewed

pick-up in car purchases that began in 2011.

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CORPORATE DILEMMA 1: TO COLLABORATE V/S

COMPETE

It is common to start reports like this with statements about increasingly competitive markets

and the impacts of globalisation. While we cannot ignore the wider global trends that shape all

industry sectors in the UK, all too often these terms are being used to suggest that the industrial

decline in the Western World is merely an inevitable consequence of a trend at global level. This

sentiment is generally amplified at times of economic contraction, when proponents of

protectionism find an increasing audience. Yet the above statements are only partially true while

competition in a mature industry, such as automotive, is bound to be dominated by unit cost

(putting developed countries at a disadvantage), it is also driven by incremental innovations

(putting emerging countries at a disadvantage). Furthermore, the global shift in manufacturing

footprint (often called offshoring or Eastshoring) has not had an equal impact on all

countries alike. We hence argue that policy decisions taken in support of the automotive and

manufacturing industries in the Western World can make that vital difference, and it is in this

spirit that we have compiled this study (Dev, 1996). Our objective is not to promote the industry

as a whole, nor to highlight its many achievements, but on the contrary to provide a

nononsense analysis of where the UK industry stands, where it is headed and what its likely

future challenges will be.

CURRENT STRATEGY

BMWs core competitive advantage is providing luxury cars with an excellent technological

product that too at affordable prices. Despite the fact that BMW is one of the pioneer brands in

the automobile industry, it however, faces stiff competition from its closes competitors like

Mercedes Benz, Volkswagen and Peugeot. The underlying corporate problem was that BMW

adopted a competitive approach and started competing upon prices. This resulted in dilution of

prices in the automobile industry (marked with entry of low budget car brands like KIA and

Dacia) which resulted in loosing competitive advantage as a result the company succumbed to

intense competition.

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PROPOSED STRATEGY

Leaders and organizations are acknowledging that even their best individual efforts can't stack up

against today's complex and interconnected problems. They are putting aside self-interests and

collaborating to build a new civic infrastructure to advance their shared objectives. It's called

collective impact and it's a growing trend across the country. (de Wit B and Meyer R., 2004).

Following discussion would outline how BMW can adopt an inside out approach.

Strategy 1: Collaboration V/S Competition

Hamel and Prahlad (Hamel and Prahlad, 1989) once quoted as saying there is no limit to what

can be accomplished if it doesnt matter who gets the credit. This is a complete paradigm shift

in thinking. What Stone talks about in her article on collaboration is that young entrepreneurs

and social entrepreneurs understand and live out the idea that collaboration is more powerful and

effective than competition. She sees social entrepreneurs as innovators who do not view other

organizations as competitors but rather as innovators of change. There are two central things to

these groups success: an endemic commitment to collaboration and a refusal to accept the small

audience theory. The New Guard, shares without hesitation knowing that collaborating creates a

better model, knowing that they can make a greater difference and contribute to true

transformational change.

Collaboration is often confused with colluding the market, it is however not the case and requires

careful planning of strategic decisions keeping in mind best interests of the peer group and

consumers. BMW can adopt following steps can be implemented to foster a culture of

collaboration:

1.) Clearly define what you can do together: Many organizations find collaboration to bemessy and time consuming. From the very beginning, companies like BMW must

develop clarity of purpose and articulate, "What can we do together that we could not do

alone?" Often, this means thinking beyond individual projects to whole solutions and big,

bold ideas. Focusing on the region's growing transit system, the effort aims to accomplishwhat none of the groups could achieve on their own expanding access to jobs and transit

service for the region as a whole, with particular focus on unlocking supplier

management for designing advanced technological vehicles.

2.) Transcend parochialism: Even the most well intended collaboration is often crippled byparochialism. Individual organizations earmark their participation and resources for

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activities that perfectly align with their own work or they use the collaboration platform

as a way to get other participants to fund their own priorities. Senior leaders often have a

"balcony view" of the core issue, understanding the needs of the field and the inherent

limitations of their own organization's approach. The most effective of these leaders will

put aside their organization's short-term interests in pursuit of the goals of the group.

3.) Adapt to data: The complex, multidisciplinary problems that many collaborativeprojects tackle do not have easy fixes. BMW would need continuous learning

atmosphere and innovation and the use of real-time data to help participants understand

what is and isn't working. Adjustments must be made on the fly. For example, multi-

sector partnerships based on the Strive Together model have formed in more than two

dozen cities to reengineer educational systems that are failing kids, from cradle to career.

Unlike previous efforts, they have set specific goals along this entire continuum, and are

committed to data-informed decision making. This model requires partners to

continuously track and publish progress and results; and to collectively reflect on, re-

evaluate, and refine their work. Indeed, the Striving Together report card serves as a

catalyst for discussion in communities about the current state of education. By reviewing

trends over time, partners can highlight where they are having the greatest impact and

where they may need to focus more energy ( Clyde, 1988).

4.) Support the backbone: In real time corporate problems it is observed that progress isbest achieved when a "backbone organization," keeps the group's work moving forward.

Staff of BMW must ensure that work is completed between meetings, track data, enable

adaptation, disseminate knowledge, and build buy-in and ownership from all participants.

Implementing aforementioned steps would help BMW to integrate its operations with learning

practices (Storey, 1994). These learning practices can arise either from peer group or from self

experience. Collaboration with your customers, and sometimes even with apparent competitors,

creates stronger businesses. Most importantly, collaboration often leads to the discovery of the

biggest and best of innovations, the ones that address unknown latent opportunities.

While pure competitors are slugging it out often anguishing over new ways to make the same

mousetrap better, or ways to do the wrong things faster, better and cheaper there are

http://www.strivetogether.org/about-the-partnershiphttp://www.strivetogether.org/about-the-partnershiphttp://www.strivetogether.org/about-the-partnershiphttp://www.strivetogether.org/education-results-resource/striving-together-report-cardhttp://www.strivetogether.org/education-results-resource/striving-together-report-cardhttp://www.strivetogether.org/about-the-partnership

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collaborators in the wings actually innovating and finding solutions to problems many people

didnt realize they even had (Shah, 1994).

Strategy 2: Creating A Strategic Center To Manage A Web Of Partners

Original Equipments Manufacturers like BMW outsource majority of its work and rely on smallsuppliers across the oceans to supply them parts needed for manufacturing. In the past, the size

of the corporation was largely determined by the transaction costs and transportation costs that

would arise if activities were conducted in separate firms (Stanworth, 1992). The

telecommunications revolution has reduced transaction costs among corporations, and has

facilitated the inter-corporate flow of information. To an ever-increasing degree, autonomous

business units will be able to integrate their planning without the need of a single hierarchical

organization. The transportation revolution has reduced shipment costs, as has the decrease in

physical components as a percentage of the final value of a good or service. The nature of

economies of scale has changed as a result of these transformations (Westhead, 1997). While

final assembly and marketing will still leave a key role for large corporations, success will

depend on stimulating and coordinating continuous improvement among a wide array of

individual business units.

Exhibit 2: A conceptual model of creative web (Lorenzoni & Baden fuller, 1992)

For much of the manufacturing sector, the corporate structure of the multinational corporation

(MNC) provides a nearly automatic shift of business activities out of high-wage developed

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countries to less developed countries with lower wage rates. The international product cycle

literature was developed to explain the growth of the MNC, in which production and trade are

linked to innovation and the international diffusion of new technology. For subsidiaries of

MNCs, the development of global mandates for new products and components has become a

continual necessity. While these rationalized production processes have been analyzed by

academics, the implications for the role of the creative web will attract increasing attention.

BMW needs to manage such a web of suppliers, peers and various other stakeholders. This web

would improve knowledge sharing practices of the company which would enable BMW to

flourish.

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CORPORATE DILEMMA 2: THE PARADOX OF COMPLIANCE

& CHOICE

Automotive industry is indeed one of the most industries of a country. But with the increasing

challenges from global warming, automobile sector is facing stringent regulations from the

government. The European Union and the existing community legislation, as shown in Appendix

4 establishes the limit values applicable to control the pollutant emissions such as particulate

matters or NOX from all heavy duty vehicles in the stages Euro IV (2006) and Euro V (2009).

The objective of the proposal which is the subject of this consultation is to lay down harmonised

rules for the next stage of emission limits (Euro VI) with a view to ensuring the functioning of

the internal market while at the same time providing for a high level of environmental protection

regarding atmospheric emissions. A second complication to the link between stringent national

environmental regulation and eco-competitiveness is the fact that each automobile company in

my set is a global manufacturer selling cars on multiple continents. This means that each

company is operating under a patchwork of significantly different standard (Cravens, 1993).

CURRENT STRATEGY

Currently almost all automobiles companies including BMW are suffering from such a paradox

i.e. providing unique technological product having latest features e.g. speed, extra comfort and

more power which are necessary but results in high emission. This case is almost with every

original equipment manufacturer (OEM) is sceptical about the potential benefits of going green

(Smith, 1987). The fact however, is that in longer term adopting an environmentally friendly

strategy would become a unique competitive advantage.

PROPOSED STRATEGY

Strategy 1: Adopting Blue Oceans Strategy to Inculcate Environment Regulations

Most automobile manufacturers in the world has not yet adopted a positive outlook towards the

environment sustainability. BMW, has been treading very cautiously over this path and has not

fully revolutionised its businesses. The latest trend in the automobile industry towards

environment sustainability is electric vehicles. BMWs closest competitor Nissan, recently rolled

out Leaf, worlds first commercial electric vehicle. It would however not be advised for BMW to

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roll out another electric leaf but any progress in this direction would yield positive outcomes for

the company.

Exhibit 3: Blue Oceans Strategy (Focus Towards Environment Sustainability & Service

Differentiation) Source: Kim, W.C.; Mauborgne, R. (2005)

The greening of management theory suggests that to ensure the environmental sustainability of

businesses, a paradigm shift is required away from valuing profit maximisation as the

fundamental objective of business, towards incorporating more eco-centric goals and corporate

social responsibility into the management equation (Senge, 1990). The development of

mechanisms and tools for a business's environmental sustainability needs to take into

consideration the complex issue and value-laden environment in which corporate environmental

policy-making occurs, if tools are to be socially and politically legitimated. In this policy-making

context there has been growing importance placed on the role of social science in environmental

decision-making, as the natural sciences alone may no longer be sufficient to guide the

development of sustainable environmental management (Teece, 1997).

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Strategy 2: Prioritising BMWs Competencies Over Industry Trends

Identifying and understanding the determinants of performance differences among firms is a

central issue in strategy research. Automobile industry is marked with extreme challenges and

various stringent regulations. According to Baden-Fuller and Stopford (1994), it is the firm, not

the industry, which is the main causal factor for success. Focusing on the industry is the old

way, based on the assumptions that:

Some industries are intrinsically more profitable than others In mature environments it is difficult to sustain high profits It is environmental factors that determine whether an industry is successful, not the firms

in the industry

The new view is:

There is little difference in profitability of one industry versus another There is no such thing as a mature industry, only mature firms Profitable industries are those populated by imaginative and profitable firms

Recent statistical evidence does not support the view that the choice of industry is important. The

correct choice of strategy appears to be at least five times more important than the correct choice

of industry (Terpstra, 1992). The writers claim that there is little difference in the profitability of

industries; that it

is not industries that mature but the firms in them, and that profitable industries are so because

they are inhabited by imaginative and profitable firms. Less than 10% of differences in the

profitability of business units can be attributed to choice of industry. While accepting that

industry conditions are influenced by economic upswings and downswings, they argue that

successful organisations can ride those waves (Auerbach, 1988).

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CONCLUSION

BMW is a story of successful brand that epitomize the definition of multinational corporation.

Came from humble roots, building its name and selling the original product in the common home

market of Germany, but eventually expanded globally and became one of the most recognized

names in the international automobile industry, as well as the top two companies in market share

competing in the luxury automobile segment of the market. BMW is currently leading in the

global luxury automobile market, but it has been rapidly growing as a company and brand over

the last decade or so, and is currently attempting to further improve product offerings to the

consumers. BMW, while continuously innovating and releasing revolutionary new automobiles,

is also falling behind in the hybrid and electric car market. It has some amazing concept cars and

prototypes and claims it is in the preliminary stages of growth in that market, but it will need to

begin releasing more electric and hybrid cars very soon in order to keep up with its competitors.

Based on the conclusions derived from the research and analysis presented in this report

regarding BMWs global business presence and strategies, the following recommendations have

been formulated to assist companies looking to compete and succeed in the global marketplace.

These recommendations, if followed, should result in greater standards of business in a global

society:

Emphasise on innovation, develop and keep up with technology, and never stagnate. It isquintessential to keep environment sustainability in mind and move in a direction of

providing a fuel efficient vehicle; however an attempt to produce hybrid or electric

vehicle would also be appreciated.

It would be advised to BMW to collaborate with its competitors; this doesnt meancolluding the market but spending and keeping margins according to the industry.

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REFERENCES

Auerbach P, Competition: The Economics of Industrial Change (Basil Blackwell, 1988)

Clyde V. Prestowitz, Trading Places: How We Allowed Japan to Take the Lead, (New York:

Basic Books, 1988).

Cravens, D. W., Shipp, S. H., & Cravens, K. S. (1993). Analysis of co-operative inter

organizational relationships, strategic alliance formation & strategic alliance electiveness.

Journal of Strategic Marketing, 1(1), 5570.

De Witt, B and Meyer, R (eds.), 2010 4 th Edition, Strategy: Process, Content, Context An

International Perspective, Thomson Business Press, London

Dev, C. S., Klein, S., & Fisher, R. A. (1996). A market-based approach for partner selection in

marketing alliances. Journal of Travel Research, (summer) 11}17.

Hamel, G., Doz, Y. L., & Prahalad, C. K. (1989). Collaborate with your competitorsand

win.Harvard Business Review, (JanFeb), 133139.

Kim, W.C.; Mauborgne, R. (2005) Blue Ocean Strategy. Boston: Harvard Business School

(HBS) Press.

Lorenzoni, G. and Baden-Fuller, C. (1994). Creating a strategic centre to manage a web ofpartners. California Management Review, 37, 3, 14663.

Senge, P, 1990, The fifth Discipline: The Art and Practice of the Learning Organisation,

Century

Shah GJ, and Garnsey, E, 1994, The acquisition of high technology firms: Evidence form

Cambridge, University of Cambridge, Research Papers in Management Studies 1993-1994 No.

7.

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Smith, G and Fleck, V, 1987, Business Strategies in Small High-Technology Companies, Long

Range Planning, Vol. 20, No. 2, pp 61 to 68, 1987

Stanworth, J and Gray, C, 1992, Entrepreneurship and education: Action-based research,

International Small Business Journal, London, Jan-Mar 1992

Stopford, J. M. et Baden-Fuller, Ch. W. F. (1994), Creating corporate entrepreneurship,

Strategic Management Journal, vol. 15, pp. 521-536.

Storey, DJ, 1994, Understanding the Small Business Sector, Routledge, London and New York

Teece D, Pisano G and Shuen, A, 1997, Dynamic Capabilities and Strategic Management,

Strategic Management Journal, Vol. 18:7, 509-533 (1997)

Terpstra, D and Olson, P, 1993, Entrepreneurial start-up and growth: A classification of

problems, Entrepreneurship Theory and Practice, Vol. 17, 3, Spring 1993

Westhead, P and Storey, DJ, 1997, Financial Constraints on the growth of high technology

small firms in the United Kingdom, Applied Financial Economics, London, Apr 1997

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APPENDIX

APPENDIX 1: SWOT ANALYSIS

Strengths

Innovative capabilities, thecompany is using significant

amounts on R&D

Good distributionnetwork/channels.

Strong Brand and effectivemarketing by BMW, the

strong brand of the company

allows it to charge a premium

Weakness

Lack of economiesof scale as the

company

Very dependent onthe European and

American markets

Rise in fuel pricewhich can lower the

demand of petrol

cars

Opportunities

Growing global motorcyclemanufacturing industry

Increasing demand for cars inBRIC nations

Focus on the environmentand green technology, a

continued focus on the

environment in the car

production

Threats

Competition in theglobal automotive

market

Currency risks. Thethreats from

uncontrollable

interest rates

Source: Marketline, 2012

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APPENDIX 2: UNITED KINGDOM AUTOMOBILE INDUSTRY: HOUSEHOLD

EXPENDITURE ON VEHICLES

Source: Office of National Statistics, 2013

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APPENDIX 3: THE COMPETITIVE STATUS OF THE UK AUTOMOTIVE

INDUSTRY

Prof. Richard ParryJones, University Of Cambridge, 18th April 2013 (Accessed as onhttp://www-innovation.jbs.cam.ac.uk/research/downloads/holweg_competitive_status.pdf)

The UK auto industry has transformed itself in the last decade from a sector with turbulent

labour relations and a poor reputation for quality and productivity to one that is fully

competitive. Independent external reliability surveys put UK built cars at the top of the rankings,

and productivity and labour relations are among the best in the world. Until the impact of the

global financial crisis, the industry was profitable and selfsustaining in Europe and in the UK.

Technology and modern management practices have transformed the shop floor environment,

and product technology embraces light weight materials, cutting edge design analysis and

visualisation tools and the extensive use of integrated electronic systems to extend digital control

to most functions of the car. But all is not as rosy as this picture paints, and the UK industry has

fragilities and faces significant challenges.

The industry has developed a highly integrated industrial system that offers unprecedented value

and accessibility to consumers worldwide through efficient logistics, massive scale, global trade,

and sophisticated systems integration skills. It is a huge source of technological, industrial and

commercial innovation. Many of these innovations have been adopted by sectors outside the

industry, following the example of the moving production line, justintime inventory control,

total preventative maintenance and lean flexible production methods, The climate change agenda

is accelerating technological change at an unprecedented rate, and the industry in Europe and the

UK has embraced the CO2 challenge and is investing heavily in people and technology to

provide innovative solutions while continuing to offer exciting, safe and satisfying products that

people want to buy. I believe that the fundamental starting point for developing policy

recommendations for any industry is a fearless and rigorous research and analysis of the key data

that helps describe the state of the industry, the underlying dynamics, and the diagnostics that

help shape thinking about where we should be trying to go next, and how we are going to get

there.

http://www-innovation.jbs.cam.ac.uk/research/downloads/holweg_competitive_status.pdfhttp://www-innovation.jbs.cam.ac.uk/research/downloads/holweg_competitive_status.pdf

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APPENDIX 4: THE AUTOMOTIVE REGULATORY FRAMEWORK OF THE

NEXT 10 YEARS

July 7th

2013, by European Commission Accessed from

http://ec.europa.eu/enterprise/sectors/automotive/documents/consultations/2005-next10/

Issues

A wide range of policies affect the European automotive industry, including transport,

environment, R&D, taxation, intellectual property, competition and many others. The European

Competitiveness Report 2004 stresses that the competitiveness of the automotive industry

"depends on a coherent and cost-effective regulatory framework" (Chapter 4, section 4.7, p.226). In that regard, the report points at a number of challenges to be addressed in the future, in

particular its excessive complexity, the need to take into account possible conflicts between

regulations, their cumulative impact as well as their external aspects.

In order to facilitate the consolidation and analysis of responses, it is advised to structure your

contribution around the headings listed below, i.e. competitiveness, road safety, environment

and better regulation.

Without prejudice to other policy areas, specific chapters on road safety and environmental

protection have been identified separately because of the comparative weight of European

legislation in these areas affecting motor vehicles.

1. CompetitivenessThe European Competitiveness report 2004 defines competitiveness in the context of a single

industrial sector as "the ability to defend and/or to gain market share in open, international

markets by relying on price and/or the quality of goods" (Chapter 4, section 4.3.1, p. 168).

Although based on global performance the report concludes that the European industry today is

competitive, it warns of the existence of major technological challenges ahead, with competition

and innovation continuing to be the main factors of the viability and strength of the industry.

http://ec.europa.eu/enterprise/sectors/automotive/documents/consultations/2005-next10/http://ec.europa.eu/enterprise/sectors/automotive/documents/consultations/2005-next10/

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2. Road SafetyRoad safety risks are still unacceptably high with the present rate of 46.000 deaths per year in the

EU-25, at least 2 million injuries and an economic cost of 200 billion Euro. Road safety

improvement is therefore a major societal and economic imperative for the future.

3. EnvironmentEnvironmental protection is a challenge in all major automotive markets (the US, Japan

and the EU). Air pollution is a source of important health and environment problems and

climate change is a major threat. Fuel quality and availability are closely linked to this

question.

4. Better RegulationWhile the previous chapters concern the substance of the policies, the question under this

heading refers to how to best introduce these policies, to define the best regulatory approach(es).

This refers mainly to the regulatory process, the instruments used and the implementation

methods.