BMW: The Ultimate Driving Machine

About the Company-BMW

BMW is an Acronym for Bayerische Motoren Wekre AG or Bavarian Motor Works in English. It is one of the world’s best German-based companies which offer a wide range of automobiles of higher quality and premium standards. BMW cluster possesses it’s headquarter in Munich, Germany which manufactures German motor; motorbike and appliances being founded in 1916 and had started its trade since 1969(Abubakrag, 2012). The company slogan is the Ultimate Driving Machine. This company is also the parent business of Roll-Royce vehicles cars and is known for its performance and luxury vehicles. BMW has its presence globally with subsidiaries in about 41 countries and possesses 3000 dealerships and local importers in 100 countries with over 100,000 employees working globally (Abubakrag, 2012).

Question 1: Analyze the strategic positioning of the chosen organization by carrying an organizational audit.

BMW’s Mission for the Planning Period

BMW’s Mission aims to have effective communication with its consumers which can enhance the reputation of the company and provide top-notch products and services for their customers. In fact, the mission statement of the company till the year 2020 is defined as: “BMW groups are the world’s leading providers of the premium products and premium services for individual mobility” (Bart, 2010).

SWOT analysis and resource audit

A SWOT analysis is a technique which focuses the attention of an individual or a group towards strengths, weaknesses, opportunities, and threats. The SWOT analysis of BMW are:

Strengths in the SWOT analysis of BMW

stronger brand image and brand awareness

stronger enactment of the financial service segments

a larger and skilled workforce

Manufacturing of stylish as well as environmentally friendly vehicles.

Advancement in both technology and innovation

plan to launch hybrid models which will allow the vehicles to run through alternative fuels like Electricity and natural gas (DeMattia, 2015).

Weakness in the SWOT analysis of BMW

Products of the company are highly priced.

production costs of the products are very higher.

lack of strategic partnerships in this company as compared to its competitors.

Damage of brand image because of the airbag issues.

weaker brand portfolio with only three brands namely BMW, Rolls Royce and MINI (Geiger, 2016).

Opportunities in the SWOT analysis of BMW

Growing demands of the environmentally friendly vehicles

Expansion of the brand portfolio

Increasing presence in the Chinese market

Formation of the strategic alliances with different automobile companies (DeMattia, 2015)

Engagement in the diversification of the products

Threats in the SWOT analysis of BMW

Regular enhancement on the raw material’s prices

Emergent of the new competitors in the emerging market

Negative effects due to fluctuation in exchange rate

Damage of the brand reputation because of malfunctions

enhancement of the price conscious customers (Geiger, 2016)

Resource audit

A resource audit is a process or procedure which goes through everything’s which is available in the organization. Tangible and intangible resources are the two types of resources where tangible resources possess physical bodies like plants, human resources, and finance which is present within the organization. On the other hand, intangible resources possess non-physical bodies like information, status, and knowledge. The resource audit of BMW are as follows:

Physical resources: universally designed technology, supply chain, effective market segmentation, and dealership management

Financial resources: turnover of 41.53 billion euro, a gross margin of 3.2 billion. The company has an annual surplus of 3.2 billion euro and 7.4% of profit margins.

Reputation or intellectual capital: excellent reputation in engineering and powerful brand identity for luxury and reliable products and services

Human resources: a higher quality, young and wealthy professional with highly qualified excellence in engineering

Company’s Product Line and Products Position Using BCG Matrix

The BCG matrix is an essential tool when where a business makes a plan to analyses the products and make an identification of the chances of growth of various business segments. The products and business segments are divided by the frameworks in four halves namely cash cows, stars, dogs and question marks. the BCG matrix for BMW groups will help in identifying the profit and loss of the ventures. The BCG matrix is explained below:

Cash cow: those products which are in higher demands and brings higher sales and return on investments is considered as a cash cow. Rolls Royce is the cash cow products of BMW as it has helped the company to achieve 10% of the net profit and is the highest consumed luxury car in the US.

Stars: Those products which emerge and provide good growth prospects in the future are considered as Stars. The BMW series 5 like Sedan and Touring, as well as BMW Mini, are those cars which have effective financial performance and future growth prospects and are categorized as Stars products (Bart, 2010).

Question marks: those products which don’t show a similar level of promising future as shown by cash cow and stars are termed as Question marks. SUV series of BMW is the question marks products as the financial performance of these products might improve in upcoming months but is in a loss in the present context.

Dogs: those products which don’t yield to financial gains for the company is termed as Dogs. The BMW Z3 and Z4 series of the car is termed as Dogs as they didn’t perform well in the market.

BMW’s core competencies, critical success factors and limiting factors

Core competencies:

Good relationships with the suppliers

Speedy production and technology

Inevitable quality of the products

Critical success factors:

The business model of BMW

Brand image

Sustainability

Limiting factors

Unfavorable effects of currency

The decrease in economies of scale

Extreme rivalry and price wars

Question 2: Carry out an environmental audit for BMW.

2.1 Detail PESTEL analysis

PESTEL analysis is done so as to acknowledge the key drivers of the change which can be utilized in order to predict the future scenario. PESTEL stands for a political, economic, social, technological, environmental and legal form of analysis of the organization’s macro-environment.

Political factors:

Laws and regulations had an impact on the automobile industry and the introduction of environmental norms had made the car manufacturers take more care of environmental problems while manufacturing cars

Introduction of newer schemes in the automobile industry of the US and Europe wherein company needs to manufacture higher mileage cars

Government foreign policies and taxes are important for the automobile industry as it helps in deciding success

Economic factors

The downturn of the economy in the US market

Increase in the GDP

The decrease in the rate of exchange impacting the car makes of Europe

Emergent of the stated with developing economies such as India and China with higher buying power and capital both regionally and globally (Dyson & et.al., 2007)

Social factor

Changes in the buying behavior of the consumers because of the recession

Environmental problems and awareness regarding the harmful emissions through automobiles

Modification in the perception of the people from the car being a symbol of status to the fuel efficient and lower emission cars

Technological factors

Enhancement in the usage of technology to achieve competitive advantage. Modification on technology due to environmental pollution. Usage of trendy style and design to overcome the issue of decreased margins(Dyson & et.al., 2007).

Environmental factors

The shift in the taste and preferences of the consumers towards the usage of eco-friendly cars, fuel cell cars, etc. Enhanced effects with higher awareness of global warming and greenhouse effects. Usage of the EURO norms in order to control the pollution in developing countries.

Legal factors

Application of strict pollution norms in European and US markets. The stern implication of the EURO norms in developing countries (Dyson & et.al., 2007).

2.2. Competitor’s analysis using porters 5 Forces theory

Threats of new entrants:

The threat of the new entrant has its dependency on the challenges being faced while entering the industry. In the case of the automobile industry, the threat of new entrants is lesser as larger capital is needed to set up the assembly liner and manufacturing plants. Moreover, time is required to set brand image and reputation in the consumer’s mind (BMW Group, 2016).

Threats of substitutes:

BMW possess powerful and luxurious brand image but there are many substitutes of BMW like Mercedes, Toyota, GM. Thus, there is a higher chance of threats of substitutes for BMW.

Bargaining power of buyers:

BMW and its competitors possess an exclusive range of the car wherein the bargaining power of buyer is higher. It is because the customers can purchase the products as per the price range (BMW Group, 2016.).

Bargaining power of suppliers:

BMW possess effective supply chain management system and have a longer relationship with suppliers. There is a higher bargaining power of suppliers as they have the power to dedicate the price tag for the raw materials of the vehicles (BMW Group, 2016).

Competitive rivalry:

There is a higher completion in the automobile industry with its products targeting the same market. The Asian market is giving stiff competition to the US and European markets ((BMW Group, 2016).

Question 3: Assess the significance of stakeholder’s analysis when formulating new strategies

3.1 Stakeholders of BMW

Stakeholders are the individuals who are interested in the organization and they get affected by their actions. Stakeholders are of two different types namely primary stakeholders and secondary stakeholders where primary stakeholders are affected directly by performance of organization like shareholders, managers, employees whereas secondary stakeholders are the person who gets affected by both positive and negative performance of organization like political groups, trade unions, government agencies, etc. (Dyson & et.al., 2007).

The major stakeholders of BMW are:

Shareholders- Who need a return on investments. Customers Who care regarding their own vehicles and brand image. Suppliers- Who sell their products to BMW. Employees- Who require their income and a job (BMW Group, 2016). Communities with a BMW factory- Job for community and tax revenues.

3.2 Stakeholder’s Map Explaining the Relationship and Pattern of the Interdependence of Each Stakeholder

The stakeholders mapping makes the usage of power and interest matrix which assist in identifying the expectation, power and political priorities of the stakeholders. The relationship between an organization and its stakeholders is termed as interdependence. It had been analyzed that all stakeholders are dependent on one another and the organization’s collaboration with key stakeholders results in increased autonomy (the UK, 2012). A good relationship is generated when an organization interacts with its stakeholders so as to achieve a beneficial solution. There is higher interdependence when the organization establishes a relation with stakeholders as they are not forced into such relationships (Hambrick & et.al, 2018).

3.3. Role and Importance of Stakeholder’s Analysis in Strategic Formulation

The role of stakeholders varies as per the types of projects and business circumstances. The role of stakeholder’s analysis is very important in the strategic formulation as effective stakeholders help in sharing ideas and solutions, acts as a problem-solving resource and also prevents the unforeseen problems (the UK, 2012). Stakeholders analysis is the consideration and reviews of the stakeholder’s impact on the business. It is important for the organization to understand the interest of each of the stakeholders and make strategies to prevent the issues. Stakeholder’s analysis is important in the strategic formulation as it helps in developing marketing strategies in an effective manner (Automotive Management, 2011). Moreover, analyzing the roles of the employees also helps in formulating a strategy. Forming of partnerships is also termed as considered as important in a strategic formulation for longer-term period.

Question 4: Recommend Strategic Options for BMW

4.1 Strategic Options Available for BMW

It had been recommended that BMW can generate profit by selling optional extras apart of the base price. Selling of the optional extras like leather seats could help the company to achieve higher margins than by selling the car itself. Moreover, BMW as well as Mercedes can also make the reduction in standard specifications of models and could also offer the desired accessories of the vehicles as optional extras. In addition to that, BMW can also develop a brand image by reducing the product’s price and can differentiate the cars from competitors (Automotive-News, 2013). The company can also use the customer relationship marketing to give focus on the long-term relationship with its customers.

4.2 Analyses the Appropriateness of Alternative Strategies Linked With Market Entry, Substantive Growth, Limited Growth or Retrenchment for BMW

Market Entry Business strategy: as per discussed in the BCG analysis, the company has the automobile sector in the region of Question Mark because of the presence of bigger companies such as Mercedes. Thus, it is suggested that the company needs to look for the acquisition or mergers with these companies so as to hold their automobile business in that country. Moreover, the company can also adopt the franchise options in the developing nations which are being operated by smaller retail shops and companies instead of opening their own stores (BMW, 2013).

Substantive growth: According to the diversification of the Ansoff matrix, BMW needs to involve in the selling of the newer products in the newer markets so as to gain the optimum profits. Although, diversification might be risky it can give higher profits to the company. For instances, BMW’s new business in BMW MINI is the European market it seemed to be a successful story and have given higher returns to the company (Cioban, 2013).

Limited Growth strategy: limited growth strategies help in highlighting the present situation of the retail business. BMW is running in European markets and consideration of the market structure of the retail sectors in the UK, BMW possesses very lesser scope in order to grow due to the oligopoly nature of the structure of the market (BMW, 2013).

Retrenchment: BMW should instantly stop its execution of banking units in the USA and should also sell all of its capital which is being used in these sectors. This can help the company to channelized all of its funds in some of the more productive and profitable areas such as Asian countries.

4.3 Selection of a Strategy

The chosen strategy is the expansion of the retail stores in Asian countries such as India. The justification of this strategy is explained below:

Sustainability: from the perspectives of the growth, these nations could give a wider range of growth to BMW. BMW which is known for the creation of the job opportunities could assist the unemployment issues which is prevailing in these countries. Due to the enhancement in the power of purchasing, people would prefer to purchase the quality products being offered by BMW. Youngsters in India are exploited (Automotive-News, 2013). However, upcoming of the BMW could help the youngster to achieve benefits from the job provided by them.

Acceptability: BMW has been in the market for a longer period. The major reason for longer-term sustainability of this company is its higher quality innovative products and services given towards its customers. BMW needs to promote regarding its stores in order to create awareness regarding the company so as to start the business. Moreover, since India possess a larger amount of barred land, BMW can enjoy the lower operational costs and thus, the cost of the vehicles will be lesser and will be accepted widely (Cioban, 2013).

Feasibility: There is a higher number of people in the underdeveloped nations who possess lower income and thus, possess limited shopping experience. However, the income level of people in a developing nation is rising continuously which thus improvise the purchasing power. The lack of a good automobile company also favors BMW in terms of feasibility and also gives higher opportunity in order to set its business to become successful.

References

Dyson, R. G., & et.al., 2007. The strategic development process. Supporting Strategy: Frameworks, Methods and Models, pp. 3-25.

Hambrick, D. C. & et.al., 2018. Strategic Attributes and Performance in the BCG Matrix—A PIMS-Based Analysis of Industrial Product Businesses1. Academy of Management Journal, Vol. No. 25, No. 3, pp. 510-531.