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, BMWs 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.

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

Figure 1 Figure 2 represents two further outer circles, which is Immediate Environment and General/Task Environment.

General/Task Environment Political

Competito rs Legislative Economic

ORGANIZATION (Internal Environment i.e. Culture, Values, Structure of the organization, Chain of command, Procedures, Processes etc)
Custome rs

Owners

External Environment

Employe e Unions Supplie rs Societa l

Technologic al

Immediate Environment

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 organizations 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

Porters 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 markets 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. Todays markets are more efficient therefore it needs products with simple interaction but excellent networking as customers 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