The Identification and Exploration of the BMW Strategic Positioning - Essay Example

BMW The Identification and exploration of the organization’s (BMW) strategic positioning and choices for strategy Introduction The automotive industry in general and BMW in particular have seen both ups and downs insofar as their relative fortunes are concerned. However given the information in the case study, it seems that there are still a lot of ways in which BMW can improve itself and better position itself to take advantage of upcoming opportunities. The PESTEL and SWOT analysis (based on the case study) given in this paper identify and suggest methods for the company by which a future strategy can be selected. PESTEL Political Factors The governments of the world are looking towards creating legislation which reduces the impact of greenhouse gas emission and other harmful chemicals produced by human activity. Politically speaking, being green or a friend to the environment means that a legislator or a political maven would not be too friendly with performance and luxury car producers like BMW. Essentially, the entire industry is facing this problem and something must be done on a collective basis to counter the political forces. Economic Factors Since BMW is a global brand, it has to position itself according to the global market requirements for high end cars. In many places, the demand for luxury cars may not be as significant as others and since BMW is primarily a manufacturer of luxury cars, it should consider making inroads into areas like China and the Asia Pacific region where market growth is expected to boom in the coming years. Moreover, economic competition for BMW is rather difficult since it competes more on the idea of luxury and style which is often much better than the other producers in the market. However, for markets where the buyers are seeking to economise on their cars, the MINI brand can work quite well if the market segmentation is handled effectively (Harbour, 2001). Additionally, cars running on alternative fuels such as hydrogen and cars running with hybrid engines can also be created for markets where there is an adequate support network for both. Socio-Cultural Factors While it is difficult to consider politically created socio-cultural factors as hurting or helping BMW’s position, the use of media, advertising and brand positioning all come into play under this title. Effective use of these sources can help BMW create, establish and even change their image if media sources are effectively managed by the company. The repute for German car making for example has long stood as a given in the car industry (Wikipedia, 2006). Similarly, the position of BMW as a luxury and performance car was certainly enhanced by the link to cultural icons like James Bond and such continued product placement can only help the brand in the days to come. Technological Factors The internet and modern media sources have become very important for car buyers of today For example, J.D Power and Associates studied nearly 30,000 car buyers in 2002 to discover that more than half the buyers look at the internet before making a buying decision about a car. Additionally nearly 90% of car buyers visit the car manufacturer’s website to get a better idea about the look and feel of the car. Therefore, the use of technology in this area is an essential requirement for car manufactures of today (Baki et. al., 2004). Similarly, innovation in terms of car design, the use of materials, increasing performance, reducing costs, improving the buyer experience can all be greatly helped with the use of technology (RBSC, 2006). Car manufacturers like BMW are ideally placed to being technological improvements since their production plants as well as the company’s software arm are technological innovators in the field. Technology is also important since it is one area of the automotive industry which still has a lot of room for competitive innovation since other factors have nearly fallen to a level of parity amongst the competitors. This means that current producers are continually challenged to find ways in which they can lower costs while increasing the attractiveness of their products for various market segments. Even in the current scenario, industry experts expect that there will be few car manufacturers left in the world in a few decades (Raisch and Zimmerman, 2006). The rest will either close down, be absorbed by other companies or simply cease production due to losses. It must be noted that car manufacturing and the industry itself affects millions of people around the world therefore the closing of a production plant or even the change of the location of a production plant can be serious in political and economic terms. Environmental Factors The automotive industry and the environment which BMW is placed under has become more difficult for the survival of small companies and lesser known brands. The automobile industry is a textbook example of an industry where economies of scale pay a very important role. While there may be dozens of players around the world who produce, support and work with the industry, there are only a few producers who can claim to have a significant share of the market. Similarly, even though cars are produced in almost every developing and developed nation, only a few countries contribute in a significant manner to the global car production and consumption statistics. Taking a look at the overall industry we can see that competition has also driven consumer’s expectations about performance, styling, technological innovation, comfort levels as well as reliability upwards while the expectations of costs have been going downward. International agreements like the WTO and local trade associations mean that giant car manufacturers can produce cars in one country where labour and services are cheap and sell them in another where labour may be more expensive. In fact, the process of global sourcing and international business is directly and most visibly connected to the automobile industry (Baki et. al., 2004). In the modern world, there are just a few companies who define the overall structure of the automobile industry. They are: GM, Ford, Daimler-Chrysler, BMW, VW, Volvo, Toyota, Mazda, Mitsubishi and Nissan. These companies also formed an industry alliance which is called the Alliance of Automobile Manufacturers. In the last two decades, the industry has seen a spike in mergers and acquisitions which has consolidated many different brands of cars under the same company (Raisch and Zimmerman, 2006). Very recently, technology and innovation has come to the forefront of car manufacturing since the pervasive nature of technology has motivated car producers to accept it as a given focus. In such an environment, BMW should look towards acquiring other brands which can help it compete in international markets and for segments where they are not present. For example, BMW does not really compete in the economy section but that is a lucrative section of the market where opportunities are not being exploited. Legal Factors The laws concerning automobiles are certainly putting pressure on the industry to produce cars which run cleaner, are more fuel efficient and follow other requirements as per the laws laid down in the country. Internationally, some countries are more car manufacturer friendly than others but for the most part, in the coming future the legal environment will get tighter for the entire car industry. BMW has to watch out for such laws coming into place and comply with them to the maximum extent in order to prevent itself from fines or lawsuits from the government or civil unions. This is because the automobile industry as a whole has come under a lot of pressure from environmentalists, governments as well as special interest groups to reduce carbon emissions and the creation of greenhouse gasses which result from the use of their product. At the same time, vehicles form the basis of our civilisations since ambulances, fire engines and even the engines for air planes would not function without the products made by car manufacturers. There is a very delicate balance between the requirements of the economy and the requirements of the environment and things like hybrid engines and alternative fuel cars can help this balance from a technological standpoint (Stein, 2004). SWOT Analysis Strengths Weaknesses Brand Image Perceived quality of the product Current placement of MINI and BMW models is excellent High visibility of the brand with ownership of super luxury manufacturer Many years of experience in the automobile industry with an effective management team in control Shared components and parts between several models Bureaucratic management is nearly absent and the production lines are flexible enough to keep up with the demand Manufacturing base in China where the costs are low and the returns are significantly high High demand for the high end models product line up, especially in growing markets No real placement of the company in the economy market Slowed demand for certain models where initial expectations were very high Technological innovations such as the iDrive system have shown to be weak in implementation Still considered a niche market manufacturer and not a production powerhouse like Toyota or Ford Recent losses and bad experiences with takeovers of other companies Outside contractors are not able to produce parts to the quality standards provided by BMW Opportunities Threats Entry into the value and economy based sector of the market Development of technologically superior solutions to counter the problems people have with transport Mergers and acquisition with companies who compliment their product line-up. Could be taken over by a larger company Failure of new models which focus on unique styling Industrial regulations or changed laws which negatively affect sales or production Works Cited Baki, M. et. al. 2004, Automotive Industry Analysis - GM, DaimlerChrysler, Toyota, Ford, Honda. AcademicMind.com, [Online] Available at: http://www.academicmind.com/scholarlypapers/business/management/2004-11-000aaa-automotive-industry-analysis.html Harbour, R. 2001. Small-Car profit strategies. Automotive Industries, vol. 181. no. 1, pp 13-15 Raisch, S. and Zimmerman, A. 2006. Changing Fortunes. University of St. Gallen. RBSC (Roland Berger Strategy Consultants). 2006, Six Key Purchasing Trends in the Global Automotive Industry. RolandBerger.com [Online] Available at: http://www.rolandberger.com/expertise/en/html/publications/2006-01-11-Six_key_purchasing_trends.html Stein, J. 2004. GM plans to launch 2 hybrids in China, Automotive News, vol. 79, no. 6116, pp. 16-17. Wikipedia. 2006, Automaker. Wikipedia.org, [Online] Available at: http://en.wikipedia.org/wiki/Automaker Word Count: 1,712 Read More