BMW Environment Performance - Case Study Example

What are the key issues in the external and competitive environment affecting BMW (Bayerische Motoren Werke)? Discuss the opportunities and the threats for the organisation. Introduction: Globalisation is no longer a concept but a reality and many organisations are finding it necessary to cope with the changes in their strategic management to cope with this reality of globalisation. These changes have meant facing the challenges thrown at them by the changed external environment and creating the required changes in the manner in which they function to convert these challenges into opportunities. Globalisation has brought not only challenges to management in the rising competition, but also opportunities to expand markets to hitherto unplanned markets. This is true for all sectors of industry including the automobile industry. Bayerische Motoren Werke is an established name in the automobile industry and is not excluded from the both the challenges and the opportunities that the new world order has brought. The Global Automobile Industry: The global automotive industry faces risks at the same time finds new opportunities. Plans to make use of these opportunities could become unstuck if the challenges of competition, supply chain management and the retail environment. The challenges do not just end there In addition they need to cope with new regulations, demands on cost reduction, managing capacity and inventory, and maintaining a control on healthcare and compensation costs.(Automotive). Looking at the opportunities that are available to the automobile industry, the economic development in the Asian region and in particular the more populated countries of China and India present an example of a definite one. The economic development and the large upwardly moving middle class present an opportunity that no automobile would want to miss. An added feature is that the local manufacturing of the region located in Japan and Korea that have offered stiff competition to the European car manufacturers are not expected to meet the growing demand in both quantity and quality from these expanding markets. (Michael, R. 2000. Automotive Industries). Another opportunity that may be considered by high end automobile manufacturers in existing markets is the customer willingness to spend money on automobiles that have trendy looks and powerful engines. (Kelly, K. 2005. The BUSINESS of PERFORMANCE). Political Impact on the Automobile Industry: Globalisation has broken down the political barriers that were present in the past to expansion of markets. This has not diminished the requirement of maintaining the necessary political liaison in countries where the markets are attempted to be tapped or in expansions to manufacturing in existing markets. Location of manufacturing units of the automobile industry is critical to their being competitive and both the national and regional governments have a crucial role in making this available to the business enterprises in the automobile industry. (Nelder, G. Harris, K and Evens, L. THE IMPACT ON UK REGIONS OF RECONFIGURATION IN THE AUTOMOTIVE INDUSTRY). Economical Impact on the Automobile Industry: The automobile industry like any other industry has to keep an eye out for changes in the economical environment. Petrol is the fuel that automobiles run on and in the current circumstances the rising cost of petrol could act as a damper to sales of automobiles. In addition there is likelihood of additives like ethanol becoming an additive to petrol to reduce the cost of fuel. This means that automobile manufacturers need to be conscious of the needed technology to allow their vehicles to run on petrol a well as petrol with additives like ethanol. (Ford: Oil companies need more ethanol pumps). Society and the Automobile Industry: The automobile industry products are used in all societies and hence there is an impact on the automobile industry on social concerns as the use of automobiles becomes widespread. One of the aspects of this is the safety of the automobile user as well as the other users of the roads. There is the need to address these safety concerns to remove giving cause for social action to bring in increased safety norms in automobiles. The safety belt in automobiles came about as a result of social concern for the mortalities that were a result of automobile accidents. (Yandle, B. 2002. The Economics of the Automobile Industry). Technology and the Automotive Industry: Technology has a vital role to play in the automobiles manufactured as well as meeting the challenges of running the business enterprise as a whole. It would not be far from the mark to say that business enterprises in the automobile industry need to transform and many have transformed to make use of high technology in the running of their business enterprises as well as in their products. Yet, keeping up with technology does not come easy and it comes at a high cost. In a move to cut costs on technology the business enterprises in the automotive industry has resorted to collaboration on this front rather than competing. It is not uncommon to see alliances among automobile manufacturers pooling their resources to meet the costs of high technology in their attempts to serve the global markets. (applying the power of research to industry challenges). Legal Issues and the Automobile Industry: The automobile industry is impacted on by the legal framework in different countries not just on their products, but also on the way business is conducted. This legal framework varies from country to country and in some countries they could be very strict. Even legal strictures and compensation orders against the dealers of the automobile manufactures could be o their detriment. In the United States the legal framework is tight as can be seen from the award of $20,000 as compensation due to the lack of providing the contract in Spanish language, which was constituted as infringement of rights. (Hudson, T. Dealer Hit With $20,000 Judgement for Not Using Spanish -Language Contract). Environment and the Automobile Industry: The impact that the automobile industry on the whole has on the communities around the world has to be viewed seriously. On one hand come the economic benefits derived from the employment opportunities but on the other hand are the major concerns on pollution of the environment by emissions from automobiles. Since 1990 there has been focus on the impact of automobile emissions on the environment in terms of pollution of the air, soil and water and global warming. Steps to make it mandatory for reduction of pollutants in the emission of automobiles have been put in place and with gradations for reduction in these levels over fixed periods of time. Automobile manufacturers need to be sure that they stay within these stipulated norms would not find buyers as they would not be fit for use on the roads. (The Automobile Industry and Environmental Problems). Bayerische Motoren Werke (BMW) Brief History: BMW started its operations in 1913, manufacturing automobiles, motorcycles and aircraft engines. (The History of the BMW Motor Company). Through these several decades that have elapsed BMW has firmly established itself as a premium automobile manufacturing company, with its automobiles quite often referred to as the ultimate driving vehicles. This has been achieved through a no compromise attitude in terms of quality in all its products and services. (International success). Threats to BMW: In addition to the impact of politics, economics, social issues, technology, legal issues and environmental concerns, BMW may have to face competition from the existing competitors, the likelihood of the entry of new competitors, the threat of product substitution and the bargaining power of suppliers and buyers to remain not only just competitive but also make use of the new opportunities that have become available with globalisation. (Five Competitive Forces (Porter). Strategic Management of BMW. The corporate strategy of BMW has several legs to its foundation. These include identifying potential and encouraging growth, knowing what they represent, recognition of strengths, and utilising every opportunity that presents itself. This philosophy can be seen in its structure as well as its decision making process. The culture of the organisation demands that an uncompromising pursuit of excellence and this in their own words has resulted in “outstanding brands with an unmistakable profile. Automobiles and motorcycles which fascinate people all over the world and which win legions of new admirers every day. And a degree of success which sees the BMW Group from strength to strength”. (Corporate strategy). The corporate strategy of BMW includes putting into effect the rewards that a manufacturing plant of it has on the community not just around the location but spread out too. This can be seen from the effect that the locating of a manufacturing facility in the State of South Carolina in 1993. The investment was to the tune of $1.9 billion, providing jobs to four thousand employees. The impact of this plant was not just in this direct investment and jobs but felt on the positive side on the economy of the state. (The Economic Impact of BMW of BMW on South Carolina). BMW has emerged as the leader in its industry through the successful implementation of its corporate strategy. The capacity of BMW to face economic challenges has proven to be the best in the automobile industry. The foundation of this successful corporate strategy is the presence of a sound and consistent management team; state-of- the-art production process and supply chain management, the high quality of its products and last but not the least a successful positioning of its brand that enables the delivery of premium on its products. All this is augmented by a very advanced risk management system employed by the company that is enabled by the high level of flexibility of BMW’s production network and working time models. The culture of the human resource function in BMW is to look after its employees and this can be seen in a compensation package that has incentives as a part of it. As a result of locating its products in the premium sector the carbon intensity of its products is above average. Still BMW has strongly committed itself to reduce carbon emission of its product range in the ensuing years. (Bayeren Motoren Werke). Conclusion: The automotive industry sector faces challenges and opportunities in this changed world. BMW with its positioning of its products n the premium sector, sound corporate management, concern for social, environment and employee welfare is well placed to face these challenges and make use of the opportunities and the history of the company endorses Literary References applying the power of research to industry challenges. THE INTERNATIONAL MOTOR VEHICLE PROGRAM AT MIT. IMVP. [Online]. Available at: http://imvp.mit.edu/frameiv.html. Automotive. PRICEWATERHOUSECOOPERS. [Online]. Available at: http://www.pwcglobal.com/Extweb/industry.nsf/docid/6977E84565DCF36685256D810076CBEB. Bayeren Motoren Werke. [Online]. Available at: http://www.sustainability-index.com/djsi_pdf/Bios06/CBR_BMW_06.pdf. Corporate strategy. Corporate facts. BMW Group. [Online]. Available at: http://www.bmwgroup.com/e/nav/index.html?http://www.bmwgroup.com/e/0_0_www_bmwgroup_com/investor_relations/corporate_events/hauptversammlung/2005/hauptversammlung.html Five Competitive Forces (Porter). 12 MANAGE. RIGOR RELEVANCE. [Online].. Available at: http://www.12manage.com/methods_porter_five_forces.html. Ford: Oil companies need more ethanol pumps. 2006. Automotive News. 12 MANAGE. RIGOR RELEVANCE. [Online] Available at:. http://www.autonews.com/apps/pbcs.dll/article?AID=/20060308/REG/60308005/1003&refsect=. Hudson, T. Dealer Hit With $20,000 Judgement for Not Using Spanish -Language Contract. ShowroomToday.com. [Online] Available at: http://www.showroomtoday.com/spotdeljan.html. International success. The BMW Group. [Online] Available at: http://www.bmw.com/com/en/index_narrowband.html. Kelly, K. 2005. The BUSINESS of PERFORMANCE. Ward’s Auto World. [Online] Available at: http://waw.wardsauto.com/ar/auto_business_performance_2/index.htm. Michael, R. 2000. Automotive Industries. FIND ARTICLES. [Online] Available at http://www.findarticles.com/p/articles/mi_m3012/is_12_180/ai_68535985. Nelder, G. Harris, K and Evens, L. THE IMPACT ON UK REGIONS OF RECONFIGURATION IN THE AUTOMOTIVE INDUSTRY. [Online] Available at: http://www.univ-evry.fr/labos/gerpisa/rencontre/S21Nelder-Harris-Evens.pdf.. The Automobile Industry and Environmental Problems. HONDA. [Online] Available at: http://world.honda.com/environment/environmental-policy/industry-problem/index.html. The Economic Impact of BMW of BMW on South Carolina. 2002. [Online] Available at: http://mooreschool.sc.edu/moore/research/presentstudy/bmw/bmwmay.pdf. The History of the BMW Motor Company. [Online] Available at: http://www.bmwclubs.asn.au/sa/history.html. Yandle, B. 2002. The Economics of the Automobile Industry. SOCIAL CHANGE PROJECT. Mercatus Center. GEORGE MASON UNIVERSITY. [Online] Available at: http://www.mercatus.org/socialchange/article.php/246.html. Read More