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1. Abstract..4 2. Introduction ...4 3. Critical Success Factors..4 4. Sustainable Competitive Advantage5 a. Resources...5 b. Competences..5 5. Porters 5 Forces Analysis..6 a. Threat of New Entrants..6 b. Threat of Substitutes.......6 c. Bargaining Powers of Suppliers.6 d. Bargaining Powers of Buyers.6 e. Competitive Rivalry7 6. Future Changes7 7. Environmental Analysis: PESTEL Analysis....7 a. Political....7 b. Economic.....7 c. Sociocultural....7 d. Technological...8 e. Environmental......8 f. Legal....8 8. Recommendation..8 a. Market Development8 b. Market Penetration8 9. Conclusion9 10. References10

Abstract This assignment helps us to know about the well renowned Automobile company BMW. We will be studying about the various strategies of BMW along with the Critical Success Factors of BMW, Competitive Advantages, Porters 5 Forces, Future Changes, Environmental Analysis, Recommendation for BMW and concluding with the conclusion.

Introduction BMW (Bayerische Motoren Werke AG) is a German company, which are the manufacturers for Automobiles, motorcycles and engines, software products and financial services. Originally BMW Company used to manufacture engines which were used in Aircrafts. Then in 1923 they manufactured their first motorcycle and in 1952 they started with the manufacturing of cars. In 1959, BMW Company faced the Bankruptcy, but eventually was saved by the Shareholder Herbert Quandt. After the launch of BMW 1500 model which hit the market, which resulted in increasing sales and made them to gain the reputation for excellent engineering. By 2004, the companys various products sold were over one million under three different brands: BMW, MINI & the Rolls Royce of which they launched the Model Phantom in 2003.

Critical Success Factors After the end of the Second World War, the aero engines market was under threat. The aero engines market was slowly disappearing as the Germany had lost the war. The post war era was very hard as the economy was under serious threat, where in the BMW struggled to survive in the markets. As then the company started concentrating more on the automobile productions. They manufactured various types of models like from bubble cars to large limousines. In 1959, the company faced bankruptcy, where in a powerful shareholder Herbert Quandt saved the BMW from getting bankrupt.

In 1961, when the BMW launched the BMW 1500 model which hit the market, so they were able to gain the reputation for excellent engineering. One of the Germanys unique national resources was the highly qualified labour which was then used by the Germany Manufacturers which helped them to gain competitive advantage. BMW took up the advantage of getting highly skilled labour force which helped them in building a perception of value differences in the minds of the consumers. With the help of the skilled labour, BMW was able to manufacture powerful, reliable and luxurious cars. BMW had also advanced in the technology; their automobiles were conventionally designed, traditionally styled. Even being expensive, luxurious and powerful the consumers preferred BMW cars. The company had good linkages between the suppliers and the buyers, as they had tightly controlled their distribution network, their communication network and the after sales services. As they had good linkages between their buyers, it allowed them to segment the market effectively. So they had segmented their cars according to the consumer needs. BMW have various series like Series 1, 3, 5, 6, 7, X, Z4, M. Series 1, 3 were small family cars whereas the Series 5, 6, 7 were the luxury cars series, Series X were the Sports Activity Vehicles, Series Z4 were the Roadster models and lastly Series M was the Motorsport models which were high performance vehicles. Hence, being close to the buyers they could segment the markets and the consumers according to the needs. (www.bmw.co.uk) Frome the above passage we can say the Following are the Critical Success Factors Quality Cars Conventional Design Traditional Style Quality Labour Force After Sales Services Technology Relationship with the buyers and suppliers Excellent Engineering

Sustainable Competitive Advantage The following are the factors which helped BMW to acquire sustainable competitive advantages. Resources BMW had good resources such as Distinct Brand Image, Brand symbol, Quality cars, global market, and Germanys largest successful company, advancement in technology, Communication network, and linkages. These resources were properly deployed so that they could gain maximum

utilisation from it. They had good linkages with the Suppliers and Buyers. So being close to their buyers they could serve the customer as per the customers taste and requirements resulting to gaining the market share. Being close to the buyers also helped them to segment their products so that the customers had an option to choose various versions. Competences The following are the core competences which help BMW to sustain the competitive advantages such as good linkages with the buyers and suppliers, Customer Loyalty, Skilled labour, well controlled distribution network, marketing strategies, innovative designs, innovative use of the technology and differentiation. As they wisely used the competences against their competitors, which resulted them to sustain competitive advantage. To sustain the Competitive Advantage they had done differentiation with their products which helped them to gain the market share. BMW was successful in implementing the Differentiation strategy which helped them to create a barrier or a blockage for other companies, as the other companies could not implement the same idea into their luxury cars.

Here we are going to study the Porters 5 Forces model with the BMWs Luxury Cars. The Following is the diagram which elaborates the Porters 5 Forces.

Porters 5 Forces Analysis

( http://student.dcu.ie)

Threat of New Entrants The threat of New Entrants in luxury cars segment is high. As the market for luxury car segment is already crowded with various companies. If an existing company wants to enter the luxury car segment, then it is easy to enter as they already have a ready foundation. For instance: General Motors came with Cadillac, Toyota came up with Lexus. Hence the threat of entrance is high. If a new

company is planning to enter into the luxury car segment and compete against the various automobile brands like BMW, Mercedes-Benz, Lincoln, Cadillac, Lexus then the threat of entrance is low as it requires huge capital investments for the new company and quality resource to compete against them. Threat of Substitute Threat of substitute is high as the customers for the luxury cars are premium customer. The threat for the luxury cars segment can possibly be like purchasing other leisure products like bikes, cruises, yachts, properties, choppers, etc. These all leisure products can act like the threat of substitutes for Luxury cars. Bargaining Power of Suppliers The bargaining power of the suppliers is low as the switching cost would be low. As there are many suppliers for the raw materials in this industry, they can get the raw materials from the other suppliers too. Else BMW can be its own supplier by applying Backward Vertical Integration. Bargaining Power of Buyers The bargaining power of buyers is high as the Consumers have got various options available in the market. The consumer can buy according to his taste and requirements, Hence the Bargaining power of the buyers will be high.

Competitive Rivalry The Competitive Rivalry is high in the industry as there is cut throat competition in the market as manufacturers will try to gain the market share by using various strategies. As this segment is already crowded with many manufacturers, each and every manufacturer will try to gain the maximum market share by various means and earn greater profitability.

Future Changes The future changes in the industry could be for the time span of 5-8 years down the line. Further changes in the industry would be like the small companies or the smaller organisation would be acquired by the bigger dominant companies More of concentration in the niche market, where in the needs of a specific market segment would be satisfying market particular needs, price range, quality and taste. We could see more of Business links getting connected in the form of Joint Ventures, alliances which will be more often when Companies are entering into a new market area. We could see more of Technological Growth, which could result in quality luxury cars, cut throat competition. If lacked then it will directly affect the manufacturers. Certain changes in the government policies for hybrid cars or eco-friendly cars as protecting the environment have become the major issue these days.

Environmental Analysis for BMW: PESTEL For any organisation it is important to scan the macro environmental factors which exist in the markets. These factors are directly related to the industry. The Macro Environment is categorised into 6 categories which all together form as PESTEL analysis. Political The main critical factors for any company to consider will be the trade barriers, government policies, duties and the taxes. These factors can affect the pricing factor for each products and results in affecting the profitability of the company. Economic The overall economic condition of the market in the particular country affects the industry. The level of unemployment, exchange rates can directly affect the demand for the industry. Most important point to be considered is the consumers income. A sudden unforeseen change in the economy can drastically affect the sales and profits of the car manufacturers. Sociocultural Consumers lifestyles and the standard of living are the main points to be considered by a car manufacturing when they are concerned with the luxury car segment. By understanding the consumers lifestyles and the standard of living, the company can easily target the needs of the consumers resulting to gaining more of market share. Technological We can see that there is rapid advancement in the technology, as the manufacturers got more options to serve the customer as much as they can with new technology, equipments and machines. By using the latest technology, equipment, gadgets one can lead the market in this industry resulting to Competitive Advantage. Environmental BMW has taken the advantage of manufacturing cleaner cars or eco-friendly cars, as protecting the environment has become a major issue. So, keeping into the consideration about protecting the environment, they have launched the Hybrid Cars. They have also expanded their eco-friendly models; they have included Z4 Roadster and coupe series. (www.autocar.co.uk)

Legal The rules and regulation differ from country to country such as health and safety measures, speeding limits, and local standards of the government. This will help BMW to customize their products as per the legal requirements of the country.


Market Developments

Exploring the various markets of the global by which they can gain major market share. Target those countries where in BMW do not have their Outlets or Target those countries which have High level of Consumers income. By implementing them they can attain greater market share and boost their sales and revenues. They can develop the markets with the help of the following points Targeting new geographical Markets Various Pricing policies to attract the customers

Market Penetration

BMW can penetrate into their new markets with their existing products, which will help them to gain the market share. This can be achieved by using various strategies & increasing the usage of the existing customer by creating some loyalty customer schemes.\\\\

From the above assignment we can conclude that there is a cut throat competition in the automobile industry and especially in the luxury cars and premium cars segments. It is due to the heavy investments, technology, resources and market. The profit margins are higher in this industry as well as the risk is also higher. To survive in such a competitive market, one should have unique resources and unique competences by which they can survive. Entry for the new manufacturing companies will be difficult as it will take huge investments and time to build up their reputation in the market.


Anon, (2009) Porters 5 forces model, http://student.dcu.ie/~slejhad2/porter.htm [Accessed on 7th Jan 2010] Anon (2010), Quick Model Selector http://www.bmw.co.uk/bmwuk/modelselector_flash/0,,1156___sit-bmwuk,00.html [Accessed on 6th Jan 2009]

Anon (23rd August 2007), BMW Z4 goes eco-friendly http://www.autocar.co.uk/News/NewsArticle/BMW-Z4/227463/ [Accessed on 7th Jan 2010]

Anon (11th April 2007), BMW hybrids must beat diesel http://www.autocar.co.uk/News/NewsArticle/AllCars/225175/ [Accessed on 7th Jan 2010]

Anon (Friday May 21st 2004) BMW opens China Factory th http://www.testdriven.co.uk/bmw-opens-china-factory/ [Accessed on 7 Jan 2010]

Anon (Tuesday 21st April 2009), BMW building 2nd China plant with partner http://english.sina.com/business/2009/0421/235519.html [Access on 7th Jan 2010]

Johnson, G. (2008), Exploring corporate strategy. 8th edition. Essex, Pearson Education limited pg.: 55, 59,229, 233, 236.