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Industry
Analysis

BMW’s
Businesses

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BMW has
three primary business lines: automobiles, motorcycles, and financial services.
The automobile business constitutes the highest revenue followed by financial
services and motorcycles. The focus of BMW is the premium segments of the international
motorcycle and passenger car market. In addition, the company provides
information technology and financial services. BMW’s marketing of vehicles
takes place through the company’s own showrooms, subsidiaries, importers, and independent
dealers. The company’s manufacturing takes place in 31 assembly and production
facilities in fourteen countries. BMW has a sales network operating across the
globe in at least 140 countries (BMW Group,
2017). The automobiles business entails the manufacture, assembly, and
sale of off-road vehicles and passenger cars under the Rolls-Royce, MINI, and BMW
brands. Related to this business is the sale of automotive accessories and
spare parts. In Germany, the company sells the MINI and BMW brand products
through independent dealers and its own outlets. Outside Germany, the sale of passenger
cars takes place through independent importers and subsidiaries.

BMW’s
Generic Competitive Strategy

The
business strategy of BMW adheres to product differentiation. The company
particularly focuses on digitization and design. Currently, the company is
taking the electro mobility direction in differentiating its products. In 2013,
BMW began selling its fully electric BMW i3. In 2014, the company introduced
its hybrid vehicle, the BMW i8. Additionally, the business-level strategy centers
upon the sale of premium services and products. Thus, differentiation is BMW’s generic
competitive strategy. Regarding the investment strategy, BMW was hesitant to
invest outside Germany until 1992. Currently, the company aims to break open
the Asian market through India and China. The company has also been
increasingly expanding its U.S. and Russian markets through its manufacturing
plants (Johnson, 2017).

Industry
Life Cycle

Regarding
the industry life cycle, BMW has its products in the maturity stage. Even though
growth remains stagnant at times, the company’s brand identity and huge market
share allows it to standardize products such as the 1,3,5,7 series in
developing and mature markets. Even with high entry barriers in the maturity
stage, the company’s competitive advantage has been the relatively high reputation,
large market share, and excellence in engineering. The competitive advantage
also results from superior designs and effective processes. The company competes
effectively with General Motors, Volvo Group, Toyota, Mercedes, and Lexus.

SWOT
Analysis

            BMW exhibits several strengths. Since it is a renowned
company, it occupies a high position because many people recognize the brand. The
company has a very qualified labor force, which serves as a competitive
advantage. It uses advanced technology in its products, which enhances the design,
quality, and pricing. Finally, the company maintains a strong relationship with
its suppliers. The company experiences two major weaknesses. Its competitors
sell low cost products, and the company relies heavily on the U.S. and European
markets. Several opportunities are available for the company. First, the
company is enjoying the increased popularity of newly developed countries like
China and India. The company has also adopted flexibility in manufacturing and
development, as well as advanced technology for its products. Lastly, many consumers
can afford BMW products due to a decrease in interest rates. Among the threats
that face the company are the stiff competition in the automobile industry,
particularly in the luxury niche, as well as the negative effects of economic
downturn and rise in the cost of fuels. There is also increasing supply costs of
steel and other raw materials, as well as a rise in the number of entrants into
the car manufacturing industry.

Recommended
Business Strategy

The
company cannot pursue both a differentiation strategy and low-cost strategy
simultaneously because its customers are used to premium but highly priced
products. The competitive advantage of the company is sustainable because of
effective research and development, the premium status of cars, efficacious
features and design, and superior after-sales customer service. Regarding the
threats, the company can cope if it expands to new markets and maintains quality
despite selling its products at high prices. It should maintain its leadership position
in terms of customer service and superior quality. Finally, it needs to cut its
manufacturing and operation costs.

Structure
and Control Systems

            With respect to
differentiation, BMW products reflect horizontal differentiation from other products
in the same premium category like Mercedes Benz. Nevertheless, they exhibit vertical
differentiation from less luxurious brands like Hyundai (Valentin, 2014). The company has the right level of horizontal
and vertical differentiation, and this makes it compete effectively. The
company does well in the use of both the functional structure and product
structure. It uses appropriate control systems in managing its operations. It
rewards its managers and encourages cooperation between its units or divisions.

 

Suggested
Action Plan

            BMW needs to review its business level strategy to ensure
that its competitiveness is sustainable with all its weaknesses and threats in
the automobile industry. It should harmonize its brand image so that the BMW
brand can appear luxurious in all the global markets. It needs to expand its
operations to markets outside Germany, U.S., Russia, China, and India. Finally,
it needs to keep rewarding its managers who satisfy the company’s expectations.

 

 

 

 

 

 

 

 

 

 

 

 

References

BMW Group. (2017). The Bmw Group – A
Global Company. Retrieved 12 16, 2017, from BMW Group:
https://www.bmwgroup.com/en/company/locations.html

Johnson, W. (2017, 09 26). Information
on BMW Foreign Direct Investment. Retrieved 12 16, 2017, from
https://bizfluent.com/info-8399616-information-bmw-foreign-direct-investment.html

Valentin, E. (2014 ). Business Planning
and Market Strategy. Thousand Oaks, California, United States: SAGE
Publications.

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