Global Strategy BMW Case Study

Global Strategy BMW Case Study Assignment

Introduction - Global Strategy BMW Case Study

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The Bavarian automaker BMW is a well-known and revered name in the automotive industry. For the first time in its history, the BMW Group has set a new milestone for worldwide sales of more than 2.1 million vehicles in 2014. For the first time, Rolls Royce Motor Cars was able to surpass the 4,000-unit sales barrier in 2014, establishing itself as the market leader in the absolute luxury area. The MINI brand was able to maintain its sales level from 2013. CEO of BMW, stress the importance of the company’s plan to maintain its position as the world’s best-selling luxury vehicle. Munich, Germany-based BMW is one of the world’s most popular luxury automobile brands. There are two more high-end automobile brands owned by the BMW group: Mini Cooper and Rolls Royce. They are recognised for their attractive automobiles and their emphasis on new technology.

“The structure and role of states and macro environmental factors influence the opportunities and survival of the business organisation”

In the context of business strategy, long-term goals and objectives are determined as well as the adoption of action plans and the allocation of resources required to achieve these objectives. While producing environmentally friendly automobiles, BMW’s business aim is to position itself as a technology market leader in the area of premium mobility and autonomous driving (Rao et al., 2020). Automobile manufacturers now rely mostly on direct sales of internal combustion engines to consumers. Due to the industry’s maturity, it has become exceedingly competitive. “Dieselgate” by VW led OEMs to re-evaluate their business model and strategy. Over 70 million passenger automobiles were sold worldwide in 2015. Connected and autonomous cars will revolutionise the automobile industry in the next decade. Global sales of hardware components for self-driving vehicles are estimated to rise from 400 million US dollars in 2015 to 40 billion US dollars by 2030. The introduction of self-driving, networked, and smart cars will have a significant impact on the whole transportation sector, opening up new business models and rivals. Changes in social and cultural norms will have a significant impact on the automobile industry, causing corporate executives to reassess their current paradigm. The transition is expected to have a far-reaching impact, but the automotive sector is likely to be the first to feel the effects.

There will be fewer drivers and fewer automobiles as a result of connected, autonomous, and shared vehicles. OEMs are compelled to build more environmentally friendly automobiles due to stricter environmental regulations. To secure long-term profitability, successful manufacturers such as BMW must investigate alternatives to their current business strategies. As part of a car-sharing joint venture, BMW established BMWi to develop electric automobiles. Both business divisions have yet to make a profit. There is still a long way to go before electric vehicles become commonplace (Galvin, 2020). Tesla Motors Inc., BMW’s main competitor in the electric vehicle industry, operates on a radically different business model. Instead of selling individual electric automobiles, Tesla is promoting a mobility solution. Connected electric vehicles, charging stations, and energy storage systems are all provided by the American carmaker. Model 3 was a game-changer for the automotive sector when it was unveiled recently by Tesla. The $35,000 Tesla Model 3 has a good range and Tesla intends to develop a broad market for electric vehicles with this model. Tesla must constantly fund in R&D and charging infrastructure in order to keep up with the demand for its cutting-edge goods and services. Despite the fact that Tesla has been around for 13 years, the company continues to make significant losses.

“What is the current strategic positioning of the business organisation in the global industry with regards to external environmental influences?”

As a result of the excellent quality, luxury, and performance requirements that BMW sets for its cars, these vehicles are in great demand among buyers. To be successful, BMW must target high-end markets across the world and constantly establish high-end brand identity. Successful worldwide marketing strategy is shown by attractive and trendsetting items from the 3 through 7 series that actively target wealthy clients (Bosch and Rossouw, 2021). The company’s worldwide marketing approach demonstrates its innovative leadership. After starting off as a maker of aviation engines, BMW set out to find a way to meet the expectations of the luxury market. Many organisations have recently been forced to adapt their business strategies to the changing paradigms of environmental demands due to the increasing need for clean energy and green environmental issues. From the understanding of the need for clean energy, like hydrogen, BMW’s innovation begins.

To illustrate its forward-thinking leadership, BMW has been testing hydrogen-powered vehicles since 1978 and then implementing the technology into production. Value, competitive advantage and innovation ripples are generated by BMW via a variety of marketing initiatives that are largely focused on the premium categories. BMW’s worldwide marketing strategy reflects the importance of premium relevance, despite the fact that marketing disciplines are universal (Ellinger, 2018). BMW does not provide minivans that are classified as MPVs (multi-purpose vehicles). The reasoning is clear. There are no compromises when it comes to BMW’s premium brand. The company’s worldwide marketing strategy emphasises the company’s focus on the premium market. Additionally, BMW has modified its stance as “the ultimate driving machine” to “sheer driving enjoyment,” which alludes to a progressive transition from the focus on automotive performance to the participation of consumers and bringing emotional issues into significant account.

“Strategic analysis of the current positioning of the organisation.”

PESTLE Analysis

A PESTLE-Analysis will be used to conduct an environmental assessment of the BMW Group in the automotive sector.

“Political:” “Most manufacturers, including BMW”, are constrained by government rules in areas such as political stability, absent trade agreements, and vehicle congestion charges (Kauerhof,, 2017). These components are linked to legal considerations in which political leaders make the judgments. While Germany is a fairly stable country, it does have a high tax burden, which might be a significant drawback for BMW in terms of political stability, if the company chooses to base its headquarters there. Another example of the utilisation of free trade zones is provided here. The Spartanburg facility, where all SUVs are built, is a free-zone region between the United States and Germany. Due to the growing popularity of SUVs in Europe, the 10% levy on exporting these cars is a significant disadvantage.

Economical: Macroeconomic factors, such as changes in consumer demand and currency exchange rates, have a direct impact on both domestic and foreign markets. Consumer spending and disposable income are also related to the cycle of the economy, as is the pace of economic growth (Hwee, 2015). Customers across the globe have high expectations, and automakers like BMW must meet those expectations by launching new models that take into account local income and consumer preferences. But the lifecycles of these vehicles are becoming shorter and shorter. Standards-based goods are no longer sufficient to fulfil the needs of the global market. Cars that are more fuel-efficient are in high demand because of oversaturated markets. Smaller vehicles and SUVs have also become increasingly popular in recent years. For this reason, BMW produced the series 1 models to match consumer expectations for smaller premium vehicles and the series X models to symbolise luxury SUVs. In addition, BMW wants to produce a Mini-SUV named BMW Urban Cross in order to expand its market position in the rapidly expanding market for smaller SUVs.

Social: The cultural distinctions across nations are unique to each one. As a result, BMW Group has to make sure its goods and marketing are tailored to its customers’ needs. You can’t expect to succeed with a one-size-fits-all strategy here. In addition to China, South Africa, and Austria, BMW maintains production facilities across the globe. There has been a lot of study and development put into deciding where these plants would be located (Madlani and Ulvestad, 2012). To do this, you need to know more than just who your customers are and what motivates them to purchase.

Technical: The only way for a vehicle brand to stand out in the automotive business is to innovate and adapt. This includes incorporating the most up-to-date technology into each vehicle, from the most up-to-date components to features like Bluetooth and WiFi. As a premium brand, BMW can’t do without these “leisure” features since customers have become used to them (Reinhardt et al., 2017). Additionally, the BMW Group is known for its innovation and mobility. The vehicles may be equipped with automated parking, hybrid vehicles, and self-driving capabilities. It’s a hot subject in the automobile business when it comes to autonomous driving. Unlike Tesla, BMW Group is talking about making self-driving vehicles available to the general public.

Legal: When it comes to cars and the technology they include, the BMW Group complies with a slew of copyright rules, including WiFi and Bluetooth. Due to the rules in each nation where the cars are built and marketed, it is more difficult for the Group. If these regulations are changed in any way, BMW’s performance and development of new technologies might be halted or completely halted. People are concerned about the health of the earth in today’s society (Thakur, 2021). CO2 emissions and the use of gasoline by automobiles are two of the most pressing issues. In order to satisfy this demographic, BMW has jumped headlong into the development and sale of hybrid automobile models. More fuel efficient than the typical vehicle. Additional electric vehicle solutions are being introduced by the BMW Group as well.

“Porter’s 5 forces model”

“Bargaining power of suppliers:” There are several elements that impact suppliers’ negotiating strength, including their size and concentration of suppliers, as well as their capacity to forward integrate. The concentration of providers in the car sector is greater than the concentration of purchasers. One thousand and seventy nations across the world are represented by BMW’s suppliers (Henares, 2020). Many of BMW’s supply chain partners are themselves automobile companies, and the primary goal of these collaborations is to build BMW automobiles locally in the areas where BMW operates. For example, “BMW Brilliance, a joint venture between BMW and Brilliance Automotive of China”, has been founded in China to make and sell BMW automobiles domestically. There are several aspects at play when it comes to determining the negotiating power of BMW’s suppliers, including the company’s size and financial health. A partnership with BMW is incredibly lucrative for any of its suppliers, since the brand is one of the most well-known in the world. There are strict guidelines and norms of behaviour that BMW has in place for its suppliers. To remain BMW suppliers, suppliers must comply to the company’s code of conduct and adhere to ethical and sustainable business practises. In this approach, the total negotiating strength of BMW’s supply chain partners is considerably diminished.

Bargaining Power of Customers: Customers’ bargaining power is a key component in determining a company’s sales and profitability. Customers’ bargaining power is affected by a variety of things. Increasing competition, increased regulation, changing consumer patterns, and reduced switching costs have resulted in an increase in the bargaining power of consumers in the 21st century. Customers are now well-informed and do their own research before making a final decision (Lukkonen, 2019). There is also a greater emphasis on product quality and passenger safety because of increased government regulation in favour of the consumer. Customers’ negotiating power has increased as a result of increased competition. Customers and market share are at stake for every brand. Even BMW’s closest competitors are spending a lot of money on research and development, as well as promoting their products. Quality items are no longer the primary goal, but rather a customer’s whole experience. Luxury car businesses are likewise putting a lot of effort into marketing and customer service. “Brand equity, product quality, technical innovation, and customer experience” are some of the most important variables that limit the negotiating power of BMW consumers. Overall, “BMW buyers have” a fair amount of negotiating leverage.

Threat of Substitutes: Demand and profitability of vehicle brands are affected by the threat of replacements, such as BMW. Any brand’s demand and profitability are jeopardised if there are too many alternatives to choose from. The danger of BMW’s replacement goods comes from a variety of sources, but there are also aspects that mitigate the risk. The main competitors of BMW are other automobile manufacturers and other modes of transportation. A number of high-end luxury car companies “compete with the likes of BMW and Mercedes-Benz in the luxury car market”. BMW has competition from other modes of transportation, including automobiles, buses, taxis, and planes (Christiansen and Strobel, 2019). It’s a matter of class, elegance and distinction for many BMW owners to possess a BMW. Furthermore, owning a high-end automobile allows you to enjoy greater convenience in your personal life. BMW’s customer service is superior to that of most of its competitors. Only a few competing manufacturers on the market can equal BMW’s level of passenger safety, convenience, and elegance.

Threat of new Entrants: In the car business, new entrants are exceedingly unlikely due to the high entrance and “exit barriers”. The entrance barriers have been larger throughout time, but departure barriers have also gotten taller. Partnerships between big automotive firms have been developed in order to cope with the increasing pressures on the global market (Hoppenburg, 2021). This is a highly competitive sector that requires considerable capital expenditure, the requirement for highly qualified people resources, technical obstacles as well as a brand’s equity. Creating a strong source of competitive advantage for a new brand would need a significant financial expenditure. Research and development and marketing expenditures of the established companies in the car industry are already fairly high in order to maintain their market dominance.

Intensity of Rivalry: The car business is characterised by intense competition. “Audi, Mercedes-Benz, Skoda, FCA, Ford, Toyota, Tesla, and Land Rover” are just a few of BMW’s competitors. Existing competitors are spending a lot of money on marketing and research & development to manufacture new car models and gain market share, even if new competitors cannot join the market or pose a danger quickly. Audi, Mercedes, and Tesla are just a few of the luxury automakers that take customer satisfaction and passenger safety very seriously. Consumer satisfaction and technical advancement are at the heart of these companies (Scherer, 2020). In order to produce ecologically friendly automotive models, they are investing in digitization. In addition, as rivalry heats up, businesses are creating alliances to boost their competitive edge and make automobiles closer to home to sell in their home markets. Daimler Chrysler and Great Wall Motors of China are two additional automotive companies with whom BMW has formed relationships. Both current businesses and new ones benefit from these strategic alliances since they help them get a foothold in new marketplaces.

Conclusion

Consumer and technological changes throughout the world have resulted in more emphasis on digitization and a better customer experience. In contrast, BMW has a number of competitive advantages, including a strong brand, research and development, a worldwide distribution network, and a powerful manufacturing network. Many other factors might impact a company’s ability to compete in the marketplace. The five dynamics at the heart of this concept influence both the level of competition and the profitability of any given business. These factors have a specific significance in the case of BMW and the broader car industry. This article discusses the effects of these pressures on BMW’s worldwide operations. It’s no secret that BMW is one of the world’s most well-known and luxurious automobile manufacturers. As a result of its enormous financial resources, BMW Group is a strong force that may influence legislation and regulations. Despite the fact that the corporation competes with other car manufacturers, such as Toyota, its focus with innovation sets it apart from the others.

References

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Christiansen, N. and Strobel, E., 2019. Chance or burden? A study of sustainable business models within the automotive industry: An empirical analysis of BMW Group and Volvo Cars Group.

Ellinger, J.K., 2018. From manufacturer to mobility provider: BMW’s response to the disruption in the automotive industry (Doctoral dissertation).

Galvin, R., 2020. Who co-opted our energy efficiency gains? A sociology of macro-level rebound effects and US car makers. Energy Policy, 142, p.111548.

Henares, H., 2020. Approach to corporate social responsibility management strategy: case comparison study of the United States Ford Motor Company and Germany’s BMW Group (Doctoral dissertation).

Hoppenburg, T.T., 2021. The business portfolio synergy analyzer: a model for evaluating synergies between business models and its application to BMW (Doctoral dissertation).

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Kauerhof, A., 2017. Strategies for Autonomous, Connected and Smart Mobility in the Automotive Industry. A Comparative Analysis of BMW Group and Tesla Motors Inc. GRIN Verlag.

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