The BMW i8 - Strategic Business Unit - Case Study Example

BMW i8 STRATEGIC BUSINESS UNIT (Name) (University) Executive summary International Business as an academic unit focuses on examining business entities; that is companies and Strategic Business Units (SBUs) that meet the international standards are recognized on the international scenes for conducting international business. It is significant to understand international business since it is a blatant fact that, international business has both direct and indirect impacts on citizens in various parts of the world. This paper dealing with international strategies pays a closer attention to the BMW Company while focusing on one of its recent innovations ‘The BMW i8’. The Bayerische Motoren Werke (in English: Bavarian Motor Works), commonly referred to as BMW is a German engine, motorcycle and the automobile company that was established in 1916. BMW boasts of being the mother company to Rolls-Royce Motor Cars and produces its motorcycles and mini cars within a diverse range of its brands. As an established international company, it has been placed together with Audi and Mercedes-Benz companies to form the ‘German Big 3’. The companies pride in being the best sellers of luxury automobiles in the international automobile market (teNeues, 2012). This paper focuses on a recent product innovation of the BMW Company, the ‘BMW i8.’ In examining this product, the discussion delves into the company’s environmental analysis and its implications for the company’s international business strategies. Moreover, the paper extends into a critical analysis of the company’s competitive advantage in the highly competitive international automobile market within the specific realm of this product, BMW i8. Contents 1.0 Product Description and Benefits 4 2.0 Environmental Analysis and the Company SBU’s strategies 5 3.0 Competitive Advantage of the i8 11 4.0 Conclusion 13 Reference List 14 1.0 Product Description and Benefits The BMW i8 is a one of a kind sports car being the first to have both the consumption and emission values of a compact car. As such, the BMW Company has revolutionized its vehicle class through this amazing product innovation. The identified target markets for this product are technology-savvy men, mostly between the ages of 30-40 who are high earners. Hendrik Wenders, the car’s product manager specifically identifies the U.S as the potentially largest market for the i8 sales (Golden, 2014). However, in Europe, Germany, UK, and France are all potential healthy markets for the product. This product, is a perfect fit for this target market, has a variety of adorable qualities that would attract customer preference to it, mostly, for luxury. These include: An average fuel consumption of less than 2.5l/100km, with a top speed of 155mph. Has a 1.5l gasoline engine in addition to its battery power. Ability to propel from 0-100kph within 4.5 seconds A superstar car stance with swan-swing doors and a shark-nose grille. A well-streamlined silhouette with perfectly shaped surfaces and precise contours. Agile handling and sharp steering and a great braking system, which are just but a few special additional qualities to the previous BMW model. On the road, the i8 uses these features to interplay the ideals of driving dynamics and efficiency making it competitively attractive to the target customers. Strategic Business Unit International Strategy Question 3b 2.0 Environmental Analysis and the Company SBU’s strategies To sustain a continuous success in a highly competitive international automobile market, the BMW Company is forced to analyze critically the international business environment, both the internal and external business environments. Both environments are a major contributing factor the growth and development of a company, necessary in sustaining market relevance locally and internationally as well as attract customer preference and facilitate effective competition. Several factors could contribute to the variations in these functional business environments. These changes are inevitable with time and call for quick responses from the companies and SBUs to comply with the changes in order to enhance market performance. In the internal environment analysis, the following aspects were considered by the company’s i8 SBU. These include: The environmental pollution effects, Driving safety, Maintenance expenses and Government legislation Brand. As such, the SBU were able to come up with strategic plans - mainly based on product quality - that would tend to this internal environment needs, thus sustaining or improving the i8’s market preference. These strategies include: Producing the i8 as a hybrid car which cuts down on the effects of noise and environmental pollution, when in electric propulsion mode. Thus, on the international market, adhering to environmental legislations and requirements. The i8 was designed much safer to drive and underwent various fitness and testing procedures that emphasized its safety to the eyes of the potential international market. The i8 would eject airbags and immediately disconnect electricity supply from the battery in the event of an accident. Despite its high market prize, being a hybrid car, the i8 is a cheaper option in terms of electric powering. The electricity powering for the i8 is cheaper than it is for cars using fuel. This saves the user an estimate of $2000-$4000 gas expense a year. However, the car also offers the option of fuel powering with gasoline engine. Strategic combinations of these two aspects also make the i8 have a competitive advantage over other luxury cars. A strategy on BMW brand name and quality that makes the i8 trusted and preferable to the international luxury car market. These strategic designs of the i8 not only enhance the physical outlook of the car models but essentially give the model competitive advantage over other car models. Besides the SBU enjoys an all important BMW slogan, ‘The Ultimate Driving Machine’ that acts as a mass hypnotizer to the admirers and users (Golden, 2014). Porter’s Five Forces Analysis The Porter’s Five Forces analysis is an effective framework that could be used to analyze the external environment within which companies operate. This external environment is beneficial in the setting up of company strategies in response to the external environment business atmosphere. It entails the effective analysis of the changing trends in the targets markets that affect the market dynamics in terms of market needs and demands that consequently determine the company’s formulation of strategies. The analysis entails a keen look into the following five factors in the external business environment: Bargaining power of the suppliers, Bargaining power of the buyers, Threat of new entrants, Threat of substitute products and, Industrial rivalry. Using this analysis of these market forces weighed on an international operational scale, it is possible to establish the external business environment within which the i8 operates. In terms of bargaining power of the suppliers, the i8 SBU strategically opened up to suppliers from all around the world, with most of the suppliers being locally from Germany and is able to meet their supply demands which have a high bargaining power. On the other hand, the bargaining power of the buyers is weak due to the high market prize of the BMW i8 and its limited target to the buyers interested in luxury. However, the SBU has strategically identified the potential markets that would promote the sales of the i8 in the U.S, Germany, France and UK on a larger scale and on a smaller scale targeting the wealthy (Golden, 2014). Moreover, the threat of new entrants is low. In producing a quality brand like the i8, there are too many small parts that require being assembled, which come from different suppliers and would cost new entrants too much time and money to get them. Besides, there is still advertising and marketing costs. Considering this, the i8 strategically enjoys the legal Brand BMW, which attracts customers’ preference for an established international brand. Moreover, the SBU’s hybridism strategic plan for the i8 ensures that it faces lesser market competition from fully gasoline-reliant and electric-propelled cars for a longer span of time. The SBU is also working towards making significant improvements to the i8 that are yet to be revealed to the public. As such, this would counter any potential threats from new entrants, who would be virtually unable to establish car models that would effectively compete with the i8 on the international market. For the i8, the threats of substitute are strong, with the BMW owning a rich variety of appealing cars and motorbikes diverse to different tastes and appeals. Arguably, most young people would prefer supercars to electric cars. However, as a strategy to counter this threat, the i8 designers made it “extremely sleek” and with adorable luxury features that would make it stand out as a revolutionary luxury sports car, attracting customer preference. The i8 has been described not only as, “that car that technologically-savvy persons would not only enjoy to ride and own, but also as a timely revolutionary model with 100% cool appearance, a perfect suit for the cool driver” (Golden, 2014). Besides, the i8 is a hybrid option that would project a significant competitive advantage of new electric cars. Despite the significantly low threat of new entrants, the SBU still effected strong strategies that would counter any potential competition from other automobile companies. With more and more companies such as the Nissan Leaf, Honda Fit EV, and Toyota RAV4 EV, devoting themselves to electric cars industrial rivalry on the international scale is very high. Research reveals that the BMW i8 is not listed among the Top 10 electric cars (Toyota RAV4 EV, 2013). However, the SBU strategically formulated other attractive features that would make the i8 stand out especially in terms of the adorable physical appearance that gives a superior visual appeal as compared to the other company models. In addition, the designers effectively input a hybrid power propulsion system for the i8 such that it is not only dependent on electric propulsion but also gasoline hence does not limit the user to a specific propulsion mechanism. While environment -conscious users may prefer the electric propulsion feature, electric charging process for the i8 may prove to be ineffective in time saving, as such, the SBU could not undermine the effectiveness of gasoline propulsion in such cases which makes the car superior to other fully electric cars. It is also therefore a good choice for the users who would still opt for fuel powering rather than electric powering. In terms of propulsion mechanism, the i8 has no limitation. The SBU strategically used this hybrid aspect to make the i8 suitable not only for luxury short distance outs but also for important long distance travels. Conclusively, in terms of strategy, the SBU has used the following aspects to its advantage to compete favourably on the international market: Structure Innovativeness Strategic plans on how to penetrate certain foreign markets and Knowledge about diverse cultures, which all impact on the SBU’s market. In terms of structure the SBU has an effective management system entailing directors and consultants working together with a team of specialist designers working together in the creation of this revolutionary product, the i8. Besides, the SBU has used intensive research analysis of the external and internal environments and the market forces internationally to facilitate formulation of strategies that would promote international sales of the i8. Through this effective structure, the i8 has been able to gain international popularity and acceptance within a very short period of time from the time of its invention. Using strategic innovations, BMW i8 according to the designer Jacob Benoit has been able to use hybrid technology to metamorphisize car designs after long periods of stagnation (Bryant, 2014). Inventions of cars for over a century has made manufacturers find it difficult to create distinct new models but through innovativeness the i8 is seen as a high performing hybrid sports car with fewer emissions than other city run-around cars, hence nominated for the 2015 Design of the Year award. Jacob admits that advances in technology and new lightweight materials pose design challenges but also present diverse aesthetic opportunities which the SBU innovatively explored in the making of the i8. Through using innovative technology, the i8 SBU is able to penetrate the car market internationally with ease. The i8 features in the international market under the BMW brand name and a powerful strategic slogan ‘The Ultimate Driving Machine’. Through the BMW quality brand, the i8 has penetrated the international market with ease. Besides, BMW i8 advertisement campaigns have been launched in all the major target markets of the SBU in the world to publicize the model and promote sales. In addition, in the planning strategies, the SBU has tried to lay bare the qualities of the i8 such that its achievements as a car model are visible and understandable to the international eyes hence enhancing its preference in market (Bryant, 2014). Finally, the SBU has an effectively working research time that has strived to understand different cultures. Using analysis of this research, the SBU is able to understand market trends as a result of socio-economic issues and identify the target markets while at the same time making strategic responses to these market issues. Understanding the cultures of luxury, status quo and desire for superstar stance, the SBU Jacob adds, emphasized on the visual cues of the i8 in order to deliver a wonderful vehicle that would dominate a market sceptical of hybrid cars. To summarize this Jacob says, “It was clear from the beginning that the i8 would have to stand out from the crowd as a statement. When it comes to electric mobility, nobody is ready to give up on the good things we already have. Nobody wants to say the party is over” (Bryant, 2014). Question 3c 3.0 Competitive Advantage of the i8 Electric cars are not all that universal with most people still opting to use the easily affordable gasoline cars. However, there is a gradual rising trend of car users growing conscious of the environmental conditions and desiring healthier lives. As such, there is also a gradual increase in the number of car users who prefer the electric car, which has attracted the interest of several international automobile companies (Gulzar, 2014). Research has revealed that by the end of 2015, there will be 15 brand new electric cars in the international market from different companies (Toyota RAV4 EV, 2013). In such a case, how does the i8 maintain its competitive advantage with more similar products in the market and for how long will this competitive advantage be maintained? The BMW i8 SBU prides itself on the overtime achievements of the BMW Company. As such, the SBU reaps major benefit from the quality brand name that will offer the i8 model a competitive advantage in the international market. In an online forum about cars, one user with referring to i8 commented, “...it’s quite different from Tesla, so it will appeal to different people. For consumers who need approval from masses, BMW is more widely valued name today” (Tesla Forums, 2013). This sentiment could be used to reflect on the universally established brand BMW and its significant impacts on the users. Therefore, this powerful brand would be a significant tool in offering the i8 competitive advantage in the market. However, BMW Company is known to be proactively and innovatively working on improvements and new brands over time. As a result, despite the brand name, innovations from the BMW Company would be potential threats to the i8 market (Golden, 2014). Secondly, the i8 also uses cutting edge technology in its development. For example, there has been major focus on active accident prevention in the case of the i8 leading to incorporation of various drivers assistance systems such as, the intelligent brake pedal, collision detection systems, intelligent breaking systems and intelligent lighting systems. In addition, it is not just but an electric car but a hybrid model with an optional gasoline propelled engine, ideal for most users. This use of technology, among other technological aspects, included in the i8 offer key product differentiator and hence the major source of competitive advantage. However, with the world becoming technologically-savvy, new technological inventions are created on a daily basis, and different manufacturers have different technological appeals fitted to their cars. Therefore, this competitive advantage may dwindle in the coming years. In addition to these factors, the BMW i8 will majorly benefit from the Firm-specific advantages (FSAs) established by the BMW company, which will give it a competitive advantage in the markets. These advantages include: Easy access to suppliers, Readily available technical personnel and staff, And effective marketing strategies and branding among others. Besides, considering the international recognition and existence of BMW over time, the SBU will also reap major competitive advantage in terms of the Country-specific advantages (CSAs). Through this, the SBU can do strategic planning in the designing of the i8 cars series to suit particular regions or adjust and input various changes significant to the changing trends. However, facing stiff competition from other well-established automobile companies like Mercedes-Benz and other companies venturing in making electric cars, the SBU may not entirely enjoy market dominance in the next, say, three years especially considering its limitation to the wealthy class due to the extremely high cost. 4.0 Conclusion The BMW i8 sports car model is an ingenious innovation by the BMW i8 SBU. With unique features and adorable looks, the model has been described as the newest revolution in the electric sports car world. The SBU has been effective in the strategic planning, identifying the appropriate target market for the i8 effectively, rendering the car a success in the international market so far. The model has been able to attract customer preference by its unique feature but majorly because of its electric powering that helps in saving fuel cost and also environmental conservation. The model’s safety precautions are also uniquely attractive and attractive to the customer. However, in a world quickly advancing in technology, the i8’s popularity may not be for a long time as it faces stiff competitions from upcoming and strong rivals. As such the SBU needs to keep analyzing the international business environments and strategically improve this product to attract customer preference and maintains its competitive advantage (Gulzar, 2014). Reference List BMW GROUP. (2013). Supplier Network Overview. Available: http://www.bmwgroup.com/e/0_0_www_bmwgroup_com/verantwortung/lieferkette/uebe rblick.html. Last accessed 15th May 2015. Bryant, R. (2014). Hybrids Have ‘Changed the Constraints’ of Car Designs says Head of BMW i8. Dezeen Magazine. Available: http://www.dezeen.com/2015/05/14/bmw-i8-head-car- design-benoit-jacob-hybrids-constraints/ Last accessed 17th May 2015. Golden, M. (2014). BMW I8: 34 Most Asked Questions on BMW I8 - What You Need to Know. Emereo Publishing. Gulzar, A. (2014). Competitive Advantage, Definition, Type and How to Achieve It. Available: http://www.studylecturenotes.com/management/competitive-advantage-definition-types- example-how-to-achieve-it. Last accessed 15th May 2015. Jenkins, J. (2014-2015 Edition). Electric Car Guide: 50 Electric Cars for Sale with Price Today. New York. teNeues (2012). The BMW Book. Germany: teNeues; Mul edition. Toyota RAV4 EV. (2013). Top 10 Electric Cars all-electric-vehicles. Available: http://www.gayot.com/lifestyle/automobile/lists/electric-cars/toyota-rav4-ev.html Last accessed 15th May 2015. Tesla Forums. (2013). New BMW i8 - Will this be the Model S killer? Retrieved from: http://www.teslamotors.com/forum/forums/new-bmw-i8-will-be-model-s-killer Read More