Business Management - Essay Example

?BUSINESS MANAGEMENT Executive Summary and Aim BMW which is one of the impressive car produces is the established and enthusiast company of the automobile industry. Initially when it was introduced it entered into the market with the aim of committing the profile based on environmental supporting factors and that is why they introduced many environmental supporting products. Introduction This report gives a detail of business management of BMW during the period of 2004 when the automotive industry was facing threat from external environment and various factors in the industry related to the competitive advantage and competitors. BMW focused on the market trends and strategies in order to get a hold on high share in the market. BMW Case Analysis What main trends are identifiable in the business environment in general and in the automobile market in particular in 2004 that might affect BMW’s strategy? The main trends that are identifiable in business environment mainly include the competition between the different brands of same product category. It is on the basis of the quality and differentiation that is created by every brand. In automobile market the most important trend that is identifiable is the uniqueness in terms of design, price, quality and convenience provided to every customer when it comes to use. Whether it’s for any segment, the prime objective of automobile industry is to provide the ease to use it. According to Porter’s Generic BMW is highly differentiated in the automobile market, and this differentiation was on the basis of brand itself that created different identity in consumers mind. BMW conveys a perception of prestige and dignity for the high-end users. Uniqueness in terms of design seems to be the most important weapon for any company to fight and to move in fast–paced automobile industry. But in 2004 the market for automobile industry became more concentrated and productive. Every brand like GM, Ford, Toyota and Volkswagen tried to link itself with higher performance by creating differentiation in design (Highfill, Baki, & Copus, 2004). Moreover, the price competition was higher in 2004 and industry was in mature phase. Car market declined in 2003 and by 2004 it created a big issue for car manufacturers. There was no issue of quality in this year because of rapid growth of automobile industry but consumers of North America and Western Europe started demanding cheaper cars due to economic instability which forced them to reduce the spending on non-essential goods, and this adversely impacted the matured car market. On the other hand the market of Asia especially in China the demand of high–end and expensive models increased. Henceforth, quality was not the issue in 2004 whereas every company was focusing on placing their brand on the top of automobile industry. The war was of branding not of quality because the quality was no longer an issue (Mathews, 2006). 1. Using Porter’s five-force framework, attempt an analysis of the competition in the automobile industry in 2004 (adopt the BMW perspective). Consider the time horizon of strategic planning and attempt to identify what future changes are likely for that period in the light of the factors at play in the macro-environment. Industrial Rivalry – The competition became so ferocious, there was no room for differentiation and growth was slow because industry was in the mature phase. So, the focus turned to price of the product in automobile industry. Those who set economical prices and uniqueness into their brands were ruling the market. Quality was the weapon and the design too but that no more be considered as factor for choice-making, it was necessary for car makers to look for quality of product. Profitability was affected badly due to various external factors as well as competition. Substitutes – In 2004 automobile industry was facing substitute like motor bike, boats and leisure cruises were immensely used. Potential Entrants – Deluxe cars like Ford entered the market with Jaguar and Volvo models and Volkswagen entered with Audi models with the strategy of low costs. It was a significant threat. Bargaining Power of Buyers – Buyers were limited that point of time and they had little bargaining power. But car rentals and various companies were in power to give pressure on companies’ profitability. Bargaining Power of Suppliers – Suppliers in 2004 were in little power and were capable of backward integration. Strategic planning to identify the future changes -- To identify the future changes it was important to establish more accurate and advance IT in strategic decision making. Special consideration should be given to Research and Development department to do more research on unexplored niche market at macro-environment the economical environment was a threat because it causes to reduce the purchasing power of many users whereas technological environment was growing rapidly (Larsson & Falkemark, 2007). Trends were changing rapidly with new demands of technology so automobile industry needs to be more updated with latest trends and requirement of customers. 2. What were the critical success factors in the market segments in which BMW competed? How do BMW’s competences compare to these? Was BMW able to acquire and maintain a sustainable competitive advantage? The critical success factors are shown in this graph The critical success factors of BMW are their management team, experience in the industry of automobile, good quality, satisfactory or acceptable cost, effective supply chain, and overall the image and positioning of BMW is successful. In case of its employment, BMW followed advance employment culture (Mettler, 2005). While doing comparison it is observed that BMW tried its best to reach the optimum level, however BMW itself holds a great share in market due to its brand image which is the strongest critical success factor. Technology also played important role because automobile industry is based on technology. The supply chain is very straight, systemized and integrated which ensures the product’s movement is secure and delivery is done at right time and at right place. Buyers only observe three characteristics in any automobile that is “quality”, “prestige” and “status” and buyers do associate themselves with these characteristics. BMW committed to improve their environmental activities and profile of their products. They introduced electric powered cars in 1970s, further in late 1970s they introduced hydrogen powered car. Then it expanded its plan from time to time. In short, BMW is able to maintain its sustainable competitive advantage due to its various critical success factors (Mathews, 2006). 3. Discuss BMW’s source of competitive advantage? Competitive advantage of any product/service is predicted on the basis of its characteristics and abilities that are judged by its users. Competitive advantage in today’s world can’t be same throughout the years because of the rapid growth of industry trends and technology changes rapidly. In this fast movement of technology, any product’s specifications and attributes are considered more conspicuous and significant. But innovation and creativity always creates a big difference in making history. It is the most powerful element to struggle for and have an edge over in the industry. So, strategies should be more efficient in order to achieve growth in market with trust of potential customers. The main source of BMW’s competitive advantage is its “uniqueness in design which shows its strong internal processes” and this couldn’t be copied by any other company (Krebs, 2010). The groups of engineers working for BMW are so efficient that their extensive interaction and collaboration created uniqueness in their brand. This team of engineers introduced “computerize system to test crashes” which helped in reducing cost and to improve quality by designing safe cars. (Christensen, 2001), As this system helps in reducing extra cost that is charged in testing automobile, this helps in balancing economic scale which could increase its core competency. This may help in solving many problems related to product design and its performance and a way of managing cost only for producing best outcome for its users. They follow the approach of creating “difference” by introducing BMW, Mini and Rolls Royce for every segment with the message of ultimate driving machine. They also bring “improvement in their products” through designing, vigorous R&D and various skills. 4. Discuss corporate strategy issues relevant to BMW as a group. The portfolio of products seems to be the issue relevant to corporate strategy. The example is of Mini and the Rolls Royce. These two products are different from one another to great extent. The expansion of BMW may weaken the brand because of the variation in product portfolio. Henceforth, BMW needs to manage its portfolio as this is apparent to every customer. Moreover, BMW needs to be more independent and should increase its size by relying on the loyalty of those who are controlling the shares in their equity. BMW should trust their shareholders in order to increase size of their business in the market of automobile and this can lead them to much higher position. They should expand their market segments with the proper research on it. There is no doubt on BMW’s credibility as they do hold a big share in market due to its reliability but still they do have ability to move further and to go beyond the goals set by them (Mcelhany, Toffel, & Hill, 2002). 5. Explain the directions and methods of strategic development BMW is appearing to follow. BMW used the strategy of market development by expanding its market to China, India and Eastern Europe. This had increased the number of customer in the market and into different segment based on the demographic segmentation. Further they use strategy of product development too in order to create sustainability in to these new markets where they entered (Mcelhany, Toffel, & Hill, 2002). This strategy focused on the key issues that BMW was facing and that could be developed by little efforts means the establishment of new divisions (Mendiola, 2009). Strategies were more efficient and effective to create reputation in the market. They also worked out over the capabilities of the company internally. The response from these markets was good enough to move. However, this strategy of market and product development could create a long term effect on the brand’s power and could increase the market share based on differentiation (Mathur, & Kenyon, 2001). Conclusion BMW is one of that brands that is known for its prestigious position and uniqueness into the market. BMW managed it efficiently not by decreasing cost but by increasing the difference through research of more market segments based on geographic and demographic sections, improving product portfolio, establishing efficient IT system and producing more environmental friendly products that reduce fueling issues improved their market position. References Mathur, S. 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