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The global business strategy of bmw group

Strategic Management

MBA7002

Dr. Samer Hamzeh

Module Team:

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Fall 2018-2019

Semester:

1 of 2

Assignment Number:

Article review

Assignment Title:

1200

Word Count:

January 14, 2019

Date of Submission:

Malak Hani

Student Name:

30170035

Student ID:

By submitting this assignment, I confirm that the work is all my own, and that I have not plagiarised the work of others in any form whatsoever. I also confirm that I am aware of the University’s Plagiarism rules. I also confirm that the work has not been previously submitted to The British Academy in Lebanon for assessment in any other module.

Abstract

BMW is one of the “German big 3” luxury automakers, along with Audi and Mercedes-Benz, which are the 3 bestselling luxury automakers in the world. It produces mini and Rolls-Royce motor cars, and is well-known for offering wide arrays of automobiles of premium standards and outstanding quality worldwide.

BMW’s mission aims to communicate to customers that BMW’s reputation and quality will become even stronger and continue to provide top-notch products and services for customers. It reveals BMW’s desire to become the most successful premium automotive firm in the industry.

BMW offers unique and premium products which cater to the needs and requirements of its niche segment. This shows that BMW is willing to take the risk and engage in discovering hidden opportunities in the business environment along with challenging technology to create new and innovative products.

Abstract 2

Introduction 4

Strategic Analysis 4

PESTEL analysis 5

Porter’s five forces 6

SWOT analysis matrix 7

Evaluation 9

Recommendations 10

References 12

LIST OF TABLES

Table 1 BMW PESTEL analysis (Hwee, 2015) 6

Table 2 BMW SWOT matrix (Rodrigo, 2012) (papamargariti, 2014) 9

LIST OF FIGURES

Figure 1 Porter’s five forces of BMW (Pløen, 2010) 7

The Global Business Strategy of BMW group

Introduction:

Nowadays, people cannot live without cars because of the development of global economy. So that increases the competition between the motor industries in order to meet customers’ needs and expectations. In other words, competition motives the motor industries to launch new car models to provide new functions for customers, new concepts, new materials and future electronic components (meeting customers’ needs even though they are rich or poor).

The key point to BMW group success is the brand strategy, but the group was posed by the Mercedes-Benz (group leader of luxury motorcar) from entering the luxury car series market. So, for that, to form a good brand image become a big challenge for BMW.

The group start by the global marketing strategies in order to be localized in different market, which can help BMW to localize globally. They do a market research for the European, American and Asian markets. This research help BMW to know its position in these markets, and it results with the foundation of the relationships between the brand and products, brand and communication as well as products and environment. They end up by an advertising strategy based on a tagline. (ukessays, 2016)

Strategic Analysis

BMW tries to gain the maximum market share in the luxury car market around the world. “The creation of a well-known brand image of the world does not mean that it can be marketed in some particular market successfully”. For that BMW decided to use a unique brand strategy system, called global branding and localised marketing. (ukessays, 2016)

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So to understand market needs and to form marketing strategy, a market research should be done, “market research task is to determine the ideal positioning of BMW in Europe.” (Or in America or Asia…). (ukessays, 2016)

PESTEL analysis

To study and to understand a market, we should use PESTEL analysis. So let’s take a look on the PESTEL analysis for BMW:

Political environment • BMW reacted by producing automobiles of at least 85% recyclable and up to 95% recoverable.

• The taxes and government policies are crucial to BMW’s success of automobile demand in the global market.

Economic environment • BMW is exposed to high currency risk from US dollar, British Pound and Chinese Renminbi.

• BMW develops “greener” automobiles like hybrid cars.

Technological environment • BMW uses technology to gain competitive advantage in the production of engines, hence winning many glorious engineering awards in the industry.

• BMW to explore a new production direction by incorporating “green” technology into its business strategy.

• BMW will continue its emphasis on developing new clean technologies for constant innovation and enhancement of its products.

Environmental • BMW observed the changing trend of customers’ preferences and support for “green” products, and therefore responded by increasing its focus on manufacturing more fuel-efficient automobiles.

Table 1 BMW PESTEL analysis (Hwee, 2015)

According to PESTEL analysis, which describes a framework of macro-environmental factors used to analysis the impact on BMW group that should be aware from new regulations and tax policies, which are crucial political factor; from economic factors, which they have the most direct effect on BMW profitability; from technological and environmental, since new technologies will contribute to sustainable solutions for “greener” products.

These factors have both negative and positive impact on BMW group, although the group should know how to deal with the negative effects and to make it positive for the company.

Porter’s five forces

To know what choice BMW should choose, to assess its attractiveness and to have an effective strategic decision making, we should refer to porter’s five forces framework.

Figure 1 Porter’s five forces of BMW (Pløen, 2010)

According to porter’s five forces analysis, the strong brand identity and R&D experience of BMW will help it to remain competitive in the future. And since the luxury automotive industry is assessed to become more competitive in the future, it puts BMW under pressure to continually improve its competitive advantage to stay ahead from the competition.

The threat of new entrants and substitutes may both reach a moderate level in the future as they may be new entrants and innovations in the industry; and if they can successfully establish in the industry. So BMW should expect to lose market share.

SWOT analysis matrix

To understand the current situation of BMW group, we should take a look on its SWOT analysis, which refers to: SW (internal factors) and OT (external factors).

Internal

External

Strengths

 Strong brand image.

 Niche product (MINI, Roll-Royce…)

 Qualified employees.

 Strong relationships with suppliers.

 Strong R&D capabilities.

Weaknesses

 Small brand portfolio.

 Low cost products of its competitors.

 High cost structure.

Opportunities

 Used of advanced technology.

 Poised to benefit from the growing demand for cars in BRIC countries.

 Incising demand for hybrid electric cars (green technology)

 Flexibility in development and manufacturing.

 Low interest rates.

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 Benefit from strong brand image, niche product and high quality suppliers to increase demand for cars in BRIC countries.

 Ability to respond for “green technology”, because of the strong R&D capabilities and the qualified employees.

 Benefit from low interest rates to decrease the cost structure, so that it will have ow cost products.

 The usage of advanced technology and the flexibility in development help to improve the brand portfolio.

Threats

 Strong completion in the luxury segment of cars.

 Increase in fuel cost.

 Environment protection regulations.

 Strong brand image can help to have a high brand loyalty, which is important to cut-off the competition.

 Respond for “green technology” will protect the environment and follow the regulations.

 Benefit from strong relationships with suppliers to settle down the potential rise from fuel costs.

 Reducing cost structure in order to combat raw material cost rising.

 Make cheap cars to make more profits than competitors, so that it can increase the competitive advantage.

Table 2 BMW SWOT matrix (Rodrigo, 2012) (papamargariti, 2014)

BMW is in a positive situation more than negative, and since the conditions of the market are not just changing slowly it has to focus correctly and change according to market conditions. The SWOT analysis used to highlights where the company need to change.

We can see that the best opportunity for BMW is the opportunity of exploring their “green” image further; the company has earned a reputation for its performance of active safety and passive safety include Fully Integrated Road Safety Technology, since it attaches great importance to the safety and environmental issues. So the need for reaction on the exploration of opportunities must be evaluated as high. (Chambers, n.d.)

Evaluation

BMW found that some situations will be more understood after problems happened, and to meet the European or other country’s needs, BMW should comply with several requirements (reliability, safety, quality and advanced technology), so that people will consider it as an excellent car.

Global branding and localized marketing strategy will help BMW group to meet customers’ needs when it will use modern ways to rebuild its international positioning, so that it could find the best strategic direction principles. Moreover, this strategy will help the group in raising its competitive advantage and improving its strategic positioning of the brand. The market research that BMW group have done, results with solid foundation for the relationships between the brand and products, brand and communication as well as products and environment, and these relationships will help in solving market problems. Based on these results a new brand strategy of BMW is built (Formation and implementation).

BMW knows deeply that it should focus on the customer rather than the vehicles. So, according to the blueprint of enterprise strategy, the core target market of the BMW’s brand can be determined, where the scale and characteristics of the different types of customers will be mastered by BMW group. (ukessays, 2016)

Furthermore, the advertising strategy is a smart step from BMW by doing advertising campaigns. Even though, competitors are big in the North American Market (like Mercedes-Benz), so that BMW must take the market share from these competitors. But according to survey results (which has done by Ammirati Puris Lintas advertising company) shows that there is no favorable impression for the brand of BMW, since their cars have advanced requirements. So that’s why the advertising strategy did not help BMW to attract the attention of people by its interior design. For that reason it refers to a tagline that help the advertising theme and positioning to achieve a great success by attracting the new generation after highlighting the differences and the advantages of the BMW group.

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Recommendations

According to PESTEL, porter’s five forces and SWOT analysis, I found that BMW is in a good situation, but even though it have some points that needs to work on it, so that it can be an excellent car with all requirements that a customer need.

BMW employees are an important resources for the company, they are a key factor for future success to ensure future competitiveness. For that it should organize various activities and trainings to boost employees’ confidence, which strongly affects their work capacity, quality and production efficiency. Since it have strong R&D capabilities, it can achieve higher quality of vehicles, with unique customization and provided by the latest technological features, so that its reliability will increase. (Hwee, 2015)

By following the marketing strategies, BMW will be able to share assets across geographical locations. So the production will decrease; where cost drivers help the company to stay profitable while serving the niche target market. And to cover the cost of these investments slowly, R&D and production improvement will be implemented across region by region. In terms of strategic flexible planning and outstanding technological edge, help BMW to stay ahead from its competitors. So it’s good for BMW to put more efforts in the US: a steady market and lower production cost, since it has more manufacturing facilities located in the US that will help reduce additional shipping costs thus driving more profit. The company can than focus on a new type of distribution or even a location of a facility within the Asian market borders. (Chambers, n.d.)

Based on my research, I found that BMW to maintain its prestige brand identity and communication with customers, it needs to continue focusing on its differentiation strategy. It can understand customer behavior and invest in market research. So it’s also good for the group to attempt to attract new consumers to the brand by creating a larger brand portfolio, since a small brand portfolio has considered as a weakness for it. Moreover, through new types of partnerships and collaborations, BMW should continue to develop its business model; which include: share technology through cyber security and communication, and innovations for producing small engines based on low emission technologies. Attract new highly qualified talents to the company it is another strategy that help in transferring knowledge and continue innovating vehicles and new production methods. (Chambers, n.d.) (Hwee, 2015) (ukessays, 2016) (Fleischmann & Sonja Ferber, 2006)

References

Chambers, R., n.d. BMW Strategic Management Analysis, s.l.: s.n.

Fleischmann, B. & Sonja Ferber, P. H., 2006. Strategic Planning of BMW’s Global Production Network. Interfaces, 36(3), p. 194–208.

Hwee, E. Q. C., 2015. Building & Sustaining Strategy: Bayerische Motoren Werke (BMW) – Automotive industry. TMC Academic Journal”,, 10(1), pp. 29-46.

papamargariti, A., 2014. prezi. [Online] Available at: https://prezi.com/nmgot9yzjpzy/business-strategy-of-bmw-group/ [Accessed 29 octobre 2014].

Pløen, R. R., 2010. Valuation of BMW- – Financial & Strategic Analysis, Århus: Department of Business Studies.

Rodrigo, 2012. the write pass journal. [Online] Available at: https://writepass.com/journal/2012/11/strategic-analysis-pestel-porter-and-swot-of-bmw/

[Accessed 17 novembre 2012].

ukessays, 2016. The Global Business Strategy Of Bmw Group. [Online] Available at: https://www.ukessays.com/essays/marketing/the-global-business-strategy-of-bmw-group-marketing-essay.php [Accessed 5 decembre 2016].

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