BMW

Overview

This paper explores the strategies and environmental influences (both Internal and

External) of a German car giant BMW, Bayerische Motoren Werke, which has

established itself in the niche luxury car market. It has Headquarter in Munich,

Germany, with presence all over the world. The luxury car includes both traditional

luxury cars and functional luxury cars. BMW is one of the most successful car

companies in Europe and worldwide. Despite experiencing the overall sales slump

particularly in the German and the Western European Markets, the Group has been

able to improve its market share and even increased deliveries to their customers in

the vehicle, as well as in the motorcycle sector. The company has built brand equity

over the years through the continuous branding efforts for high quality products.

Direct competitors of BMW are luxury car manufacturers from Japan, the U.S., and

other European Union countries. Globally, BMW’s biggest U.S. competitors are Ford,

Cadillac, Lincoln, Buick, and Chrysler. And Japanese competitors include Lexus,

Honda, and Toyota. BMW competes locally (in Germany) and globally with other EU

companies such as Mercedes Benz, Audi and Jaguar.

No two organizations in the world could be alike so the environmental influences of

BMW could be described through;

1. Internal Environment

2. External Environment

The macro-environment or external environment of the organization is further broken

down into;

A. Immediate Environment

B. General or Task Environment.

The above phenomena of environmental factors are described by the PESTEL

analysis, which helps to analyse external environment i.e. General Environment.

Figure 1 shows the Organization, Internal Environment and its factors.

Figure 1

Figure 2 represents two further outer circles, which is Immediate Environment and

General/Task Environment.

ORGANIZATION

(Internal Environment Forces i.e. Culture, Values, Structure of the organization, Chain of

command, Procedures, Processes etc)

ORGANIZATION

(Internal Environment i.e. Culture, Values, Structure of

the organization, Chain of command, Procedures,

Processes etc)External Environment

General/Task Environment

Immediate Environment

Competitors

Customers

Suppliers

Owners

Political

Economic

Societal

Technological

Legislative

Employee Unions

Bernhardt, Kenneth L., Cases in Marketing Management, 6th Edition, Richard D. Irwin, 1994, 754 pages (coauthored with Thomas C. Kinnear).

PESTLE Analysis:

PESTEL is an acronym for Political, Economic, Social, Technological, Legal and

Environmental factors. As no business could exist and operate in a vacuum, rather

as a part and parcel of the environment in which it finds itself. The PESTLE Analysis

is used as a generic 'orientation' tool to find out about an organization or product the

effect of external environment forces on an organization’s internal environment

forces. It has been originally designed as a business environmental scan, the PEST

or PESTLE analysis is an analysis of the external macro environment (big picture) in

which a business operates. These factors are beyond the control or influence of a

business, however the business needs to be aware of when developing product

development, business or strategy planning.

Therefore it is vital to take into account PESTLE factors for the following main reasons:

By making effective use of PESTLE analysis, the business has to ensure that

what the business is doing is aligned positively with the powerful forces of

change that are affecting our working environment. Effective Change

Management enables business to take advantage of inevitable change rather

than to oppose it.

Effective use of PESTLE analysis facilitates the business not to take action

which could lead to failure for reasons beyond your control

PESTLE is particularly valuable when starting a new product or service. Use

of PESTLE helps breaking free of assumptions, and helps the business to

quickly adapt to the realities of the new environment

Political

The factors that affect the BMW car industry are:

Government, foreign policies and taxes are very critical for the automobile

industry. The government policies help us to decide the chances of

success in the global market.

Implementation of new schemes in the US and Europe automobile industry

wherein regulations were led to produce high mileage cars along with

increase in automobile sales and production (Hill, 2008).

Hill. (2008). The new change in automobile industry. The Wasignton Post

Economic

Economical factors are related to the economic growth globally and exchange rates

prevailing in the industry. Economic factors for the industry are:

• The production of excess capacity of cars give rise to high amount of revenue in

new product designs and marketing. So there was bundle of revenue withheld

with a low demand than supply. For example the UK automobile market had 80%

more capacity in 2003 which led to a freeze of 1.3 billion euro in the

automobile industry (Autofacts, 2004).

Autofacts. (2004). Eurpean Car Market

.

• The increase in the global GDP from 2.0 % to 3.1% .(Statistics, 2009)

Statistics, D. a. (2009, July 18). Data and Statistics Retrieved September 20, 2009,

from The world bank: http://web.worldbank.org

• Decrease in the rate of Euro has held back the European car industry in a big way.

•Downturn in US economy in the US (Copper, 2008)

Copper, I. (2008, August 15). America in recession Retrieved September 21,

2009, from Wealthy daily: http://www.wealthdaily.com

Social

Changes in buying habits of the consumers because of recession in the mature

markets.

Technological

• Spending on research

• Focus of technological effort

• Modifications or limitation on technology causing environmental pollution

• Rates of obsolescence

• Increase use of technology to achieve competitive advantage

Environmental

• Increase awareness of, greenhouse effect,burn out and global warming

among patrons (Organization, 2008)

Organization, W. H. (2008, July 12).Environmental Pollution Retrieved

September 22, 2009, from World Health Organization: http://www.who.int

• Shift in customer tastes and demand towards usage of more eco-friendly cars,

• Firm submission of the EURO norms set up to control pollution

Legal

• EC regulatory threat to European car industry. “With the threat of legislation

looming BMW has shown that even premium car makers can seriously reduce

CO2” Jos Dings Director, Transport and Environment

• Restrictions and firm pollution norms set up in US markets

SWOT Analysis

Strengths

BMW 's strengths are its BMW is a renowned for its global brand name,

highly skilled engineers, designs, gratitude factor and economies of scale.

BMW has always been associated with quality and performance and have a

good name in the automobile industry

BMW has a diverse ranges of Products e.g. BMW, MINI and Rolls-Royce

BMW is Capable of turning resources into advantages

Weaknesses

Sales rate due to high price have less market shares on other market create

weaknesses for BMW

Customers Perception is of High Prices

BMW is facing extremely high competition

Opportunities

Although the economic crisis will continue to affect car makers in 2010, BMW

said it will grow profitably this year due to the gradual economic recovery and

a slate of newest models.

Read more: BMW 2009 Revenue Fell 4.7% as Luxury Waned at

SmartMoney.com http://www.smartmoney.com/breaking-news/on/?story=ON-

20100129-000153#ixzz0fRPBKjkS

Focus on diversification as customers change to more comfortable and low

budget cheap cars

Popularity and launching schemes in developing countries

Threats

Currency fluctuations and recession is a great threat to earnings and

revenues for BMW. 

New legislations for the company can decrease the sales

Other competitors are also keeping pace with new technology 

Economic downturn

Porter’s Five Forces

The five competitive forces model by Michael E. Porter suggests that competition in

an industry is rooted in its underlying economic

structure and goes beyond the behavior of current competitors (Porter, 1980). 

Porter, M.E. (1980) Competitive Strategy, Free Press, New York, 1980

Level of competition

The industry has cut the competition for its products, as its targeting the same

segment and positioning in a similar way.So the rivalry was high in the auto

industry

Threat of Substitutes

The brand image of BMW is powerful and luxurious. The threats from substitutes

like Jaguar, Mercedes Benz,Toyota is positioned to be high as premium branded

cars.

Threat of New Entrants

The threat of new entrants in automobile industry is very less because large capital

cost is needed to set up a manufacturing plant . It also requires time for new entrants

to make place in the minds of the consumers

Bargaining Power of Buyers

BMW is positioned as exclusive product .So the power of bargaining of buyers is

very high and the customers can decide the product according to their buying

power range and buy the products accordingly. Also with ample substitutes available

the consumer has a variety of selection range.

Bargaining Power of Suppliers

BMW supply chain management system is superb and have long term

relationship with suppliers. The bargaining power of suppliers in industry is high as

they can dedicate the price tag for the raw materials.

Conclusion

The competition has been increased within the car manufacturing industry in all the

segments. The competitors are Mercedes, Volvo, Honda, Toyota, Volkswagen, Audi

etc. All of the competitors are launching new strategies and products everyday to win

customers to have a greater share of the market.

The consumer market’s trends and scenarios are constantly changing. As silver

generation has a demand for mobility and financial strength, demands new features.

Then the lifestyles have changed as well as there must be individualization and

differentiation between lifestyles and products. It is recommended that BMW must

keep this factor in mind to develop products which can attract middle and moderate

culture families through launching fuel efficient and economical variants.

Today’s markets are more efficient therefore it needs products with simple

interaction but excellent networking as customer’s environmental sensitivity is

increasing. Hence environment is fast becoming a competition factor. Though BWM

is very articulate towards environmental protection and development but it is highly

recommended to develop vehicles from renewable sources of energy. For instance

BWM has a segment of Hybrid Cars but they are less efficient as compared to its

Japanese competitor Honda’ Hybrid cars.

BMW must focus on product differentiation through the efficient use of technology,

emotion and it must emphasis to further improve product and brand image. Product

leadership needs to be extended through design, quality and driving experience.

BMW must focus on developing customer relations through image generators. There

is a huge untapped women consumer market which BMW can capitalize through

designing and developing products which are exclusive for this segment although it

has a brand MINI.

References

Autofacts. (2004). Eurpean Car Market

Bernhardt, Kenneth L. (1994) Cases in Marketing Management, 6th Edition, Richard D. Irwin, 754 pages (coauthored with Thomas C. Kinnear).

BMW (2009) Revenue Fell 4.7% www.Luxury Waned at SmartMoney.com

Copper, I. (2008, August 15). America in recession Retrieved September 21, 2009, from Wealthy daily: http://www.wealthdaily.com

Gerry Johnson, Kevan Scholes, Richard Whittington. (2008). ExplorinCorporate Strategy. Pearson Education

Hill. (2008). The new change in automobile industry. The Wasignton Post

Organization, W. H. (2008, July 12).Environmental Pollution Retrieved September 22, 2009, from World Health Organization: http://www.who.int

Porter, M.E. (1980) Competitive Strategy, Free Press, New York, 1980

Porter, M.E. (1985)Competitive Advantage: Creating and Sustaining Superior Performance Free Press, 1998

Statistics, D. a. (2009, July 18). Data and Statistics Retrieved September 20, 2009, from The world bank: http://web.worldbank.org

Transport and Environment (2006),www.transportenvironment.org