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Introduction:

BMW was founded in 1916 and has been publicly traded since 1969. The company produces and markets a varied range of higher end sports cars and motorcycles and with BMW, MINI and Rolls-Royce Motor Cars, the BMW Group is one of the most successful multi-brand premium automobile manufacturers in the world. In 2008 the group sold 1,435,876 BMW, MINI and Rolls-Royce brand vehicles with over 53 billions of Revenues. The group employed over 105,800 employees in 17 production facilities around the world.

The first step to look at the external environment in which the firm operates and the main challenges faced by the organization and to do so I will use the PEST analysis. The second step is the analysis of the immediate or operational environment. This part will cover the subject of customers, competitors and the market share. The third and last step is a tracking of the firms shares, in the last months and relatives assumptions concerning the fluctuation of the share.

1st Part - PEST analysis


Political: In recent times political factors such as the EU laws concerning the carbon emissions, produced by cars, have meant that BMW has had to review their cars and engines in order to adhere to EU laws. Therefore BMW has had to invest in greener technologies as well as providing new technological advances. Although this has increased BMWs manufacturing costs, the consumer is becoming far more aware of their carbon footprint and so BMWs failure to change would damage sales and their market presence. In order for BMW to promote their greener image they have manufactured the first passenger car running on hydrogen ready for common use. Their greener image is being heightened by new engine technology called Efficient Dynamics that is being promoted in the UK with an integrated campaign promising 'Less emissions and more driving pleasure'. Economic: A very important environmental factor, which has had an effect on the company, is the economic climate in which it operates, the financial crisis. The economic recession that has occurred in the last year has taken a knock on consumer purchase behaviour and also consumers ability to gain credit because of the credit crunch. Obviously the fact that BMW produces and sells cars at a premium price puts BMW in a risk position. Another factor regarding the economic climate is that the dollar has fallen against the Euro meaning that in 2007 BMW lost 517 million Euros due to adverse currency fluctuations and increasing raw material prices. So although they have had strong sales their profits were reduced by external factors. In recent times oil prices have reached 150$ a barrel which is another contributing factor that has affected BMWs sales. The first reason is that raw materials, due to increasing transport costs, went up in price, which increased BMWs own costs and therefore affected profits. Secondly this made the price of petrol and diesel rise that increased the cost of transportation for road users. This had an effect on larger vehicles, such as SUVs, because consumers sought more fuel-efficient vehicles in order to offset the rise in fuel prices and higher road tax.

The governments have imposed new road tax, which are dependent on a cars emissions. This means that larger and higher polluting cars are now more expensive to own and run which has consequently had an effect on their sales. For example in some cities in Italy, high polluting cars cannot circulate in the town centre or if yes they have to pay high cost license. Social: BMW have in recent years diversified into many different markets and countries meaning that they are dealing with different cultures, expectations, values and incomes. This will mean that a winning formula in one country may not necessarily work in another and so this has to be taken into account so to be successful in all markets. Given the fact that governments combined with all sorts of promotion show great concern about the climate change issue, it has helped shift societal attitudes towards saving the environment. Today, more than ever, people feel they have to be in environment saving involved and look after ecosustainable cars. Technological: Lately technology has been a key selling point for car manufacturers because customers feel the need for safer, more entertaining and cheaper vehicles. So BMW has had to invest in better technologies in order to maintain their competitive advantage in such a fast changing industry. Their latest technological advances are showcased by their Formula 1 car, which has the very latest technology concerning engines, safety and performance. Legal: Environmental: The company is a charter member of the U.S. Environmental Protection Agency's (EPA) National Environmental Achievement Track, which recognizes companies for their environmental stewardship and performance. It is also a member of the South Carolina Environmental Excellence Program and is on the Dow Jones Sustainability Group Index, which rates environmental friendly companies. BMW has taken measures to reduce the impact the company has on the environment. It is trying to design less-polluting cars by making existing models more efficient, as well as developing environmentally friendly fuels for future vehicles, example- electric power, hybrid power (combustion engines and electric motors) & hydrogen engines. The BMWi is one such initiative.

2nd Part Operational environment


Main Competitors: In the premium car segment in Europe and US, the direct competitors of BMW is Daimler Chryslers Mercedes Car Group. This group is a giant in the luxury automobile industry that supply high class vehicles of the same range of BMW. Mercedes Car Group has been known for its prestige and ability to meet customers needs. Like BMW, Mercedes cover a wide range of high class cars, such as: sedan, off-road, suv, Formula1 and touring cars. Other competitors of BMW in Western Europe include: Volkswagen group: Audi, VW and Bentley; Fiat group: Lancia, Ferrari, Alfa Romeo and Maserati;, Ford group: Jaguar, Land Rover, Aston Martin and Volvo; General Motors: Opel, Saab and Vauxhall; Porsche, Renault, Toyota and Lexus. The principal competitors of BMWs ultra premium Rolls-Royce brand are DaimlerChryslers Maybach brand and Bentley sedans.

Market share
In 2007 BMW group was ranked 14th in the worldwide ranking of automakers with a production of 1,541,503 vehicles and a market share of 2.1%. BMW focuses exclusively on the production of premium automobiles and motorcycles and the following table shows the total automakers market share. As stated before, BMW and Mercedes currently dominate the luxury car market.

The BMW Group was able to defend its leading position over Mercedes Group during the first three months of 2009. The BMW brand increased its market share of the worldwide premium segment. As stated by Ian Robertson, responsible for Sales and Marketing: Despite the difficult conditions, the BMW Group aims to remain the worlds leading supplier of premium automobiles in 2009 and after the first two months we are right on track. BMW, performed considerably better than the overall premium segment, which is projected to shrink by around 27%.

Customers
BMW is classified in the luxury / performance segment, and the target audience is of highly brand individuals. The brand emphasis on their core values such as performance, quality, luxury and exclusivity. People that can purchase BMW, Mini or Rolls-Royce are usually well-off person with high requirements, in fact these niche of people expect luxury, high performance, and technological advance products. For example the 3 series product line has been targeted for people, that are on the way up the ladder of success.; in other words that particular target market could be described as the upwardly mobile. Instead, the 5 series product line, have been created for people that achieved an established success in their career and so they can afford to the mid-range BMW luxury product.

3rd Part Share tracking


General share information

In September 2008, the international financial crisis became increasingly felt in BMW affecting its shares in the stock markets. The German stock index finished to touch the lowest value since 2006 loosing 27% in value compared to the end of 2007. The 4 of November 2008 BMW reported a slump in profits of -63%, the German company announced that it would make a loss in this quarter because of consumers scared of the current situation and credit freeze. The world's leading premium car maker, would emerge stronger from the crisis and reaffirmed profitability targets for 2010 and 2012.

Trend 2005-2009

As shown in the graph, the general trend of BMW was affected dramatically by the situation of the general financial crisis. From the second part of 2007 the company had a negative trend till the end of 2008.

From Dec 01.2008 to Dec 30.2008

During the second half of 2008 began the automotive industry crisis, affected by the general financial crisis caused by the credit crunch. The crisis started primarily in US and extending to Canada, Europe and Japan. This affect dramatically the sales in all the car industry and consequently the trend of shares. BMW's automobile sales are down 40.2 percent in December to 13,796 versus 23,064 in the same month a year ago. In 2008, sales decreased by 15.4 percent, to 195,085 automobiles compared to 230,535 in 2007.Comparing the shares

with the previous year it is notable a drastic decrease of value: the 28th of December 2007 BMW shares price had reached 42.71, the 28th of 2008 the share closed with 21.38. BMW Group will emerge stronger from current difficult situation "The financial crisis is by no means behind us yet, particularly its impact on the real economy in 2009. The automobile industry is without doubt facing some extreme challenges. However, we need to look at the opportunities such times may bring us. As a strong and innovative company, the BMW Group will overcome the current difficult situation, putting it into an excellent starting position for the future", stated Norbert Reithofer, Chairman of the Board of Management of BMW.

Historical prices

From Jan 02.2009 to Mar 31.2009

During the period from January till March, the trend is characterised by a continuous fluctuation. The lowest value has been reached at the end of January touching the value of 17.30. One year early, the value of BMW shares, in the same period reached 40.20 per share. During this period the company of Monaco accused losses for 152 millions of Euros in contrast with the last year that had a net profit of 487 millions of Euros in the same period. The general turnover of the company has decreased 13% caused by a decrease in sales of 21%. During January, to increase its earning power, BMW started a rigid programme to cut costs. The production has been cut by 34%, this results in a cash flow of 220 millions of Euros.

US are still the main market for the German company, during March sales decrease of 24.2%, this can be seen as a good result compare to the general trend of the automaker industry that has decreased by 37%. During the first quarter the company sold 42.731 vehicles in this market achieving the leading position in the premium car market.

From Apr 01.2009 to Apr 30.2009

The international economic and financial crisis affected the performance of the BMW Group in the first quarter of 2009. In addition to sharp drops in sales volume on major markets, the BMW Groups reported figures were impacted by continued high refinancing costs. As a result of the global financial and economic crisis, the number of cars sold by the BMW Group during the first quarter 2009 declined as predicted. The total number of BMW, MINI and Rolls-Royce brand cars sold in the first three months of 2009 fell by 21.2 % to 277,264 units. BMW reached a positive trend in the emerging markets such as China, India and Brazil. In the first quarter, the German company, has maintained its growing standards; in China has delivered +13,8% compared to 2008 in the same period, in India +13% and in Brazil sales has been increased of +12,7%.