Business Analysis: BMW

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Introduction

BMW is the world’s leading luxury car manufacturer, selling also motorcycles, and continue to create airplane engines. Their closest competition attempts to emulate them in the attempt to seize their market hold, but this is unsuccessful due to the fierce loyalty of BMW customers. The business analysis will introduce BMW’s historical background, present the facts of their market position, address their strengths and weakness, and emphasize how they are seizing emerging opportunities in a changing market. 

Historical Background

The BMW (Bayerische Motoren Werke AG) car company is one of the most consistently successful in the world, and it just celebrated its 100th anniversary (Epatko). Having their origins making engines for aero planes for Germany during the world wars. Their logo retains this history as the alternating white and blue triangles making up the circle are meant to represent the propellers of their famous Fokker D.VI fighter plane. This innovative design, gave German pilots a distinct advantage, but the French and British were quickly catching upFirst powered by a Mercedes 160-horsepower engine, the Fokker D.VII later received an even higher-performing engine from a fledgling company, BMW. The Munich-based company made a 185-horsepower engine that increased the speed of the airplane from 117 mph to 125 mph and catapulted its rate of climb. (PBS News Hour)

Such innovations and the desire for perfection in their craft is what has kept BMW’s selling, and indeed their reputation for high quality is one of their strongest selling points. That, and customer satisfaction. Many BMW customers claim the vehicles are the most fun to drive, as they are powerful, responsive, and finely tuned driving machines. 

Market Analysis

BMW is a motorcycle and car manufacturer based out of Germany with a yearly profit of an average of over $5 billion dollars. The have 23 production and assembly plants spread over 13 countries, and 12 research and development plants in five countries (Illing). Their main products are BMW, Rolls-Royce and Mini cars and BMW Motorrad and Husqvarna motorcycles (Jurevicius). BMW’s main competition is, but is not limited to:

Chrysler Group LLC

Daimler AG

Ford Motor Co.

General Motors Company

Honda Motor Company

Nissan Motor

Toyota Motor Corporation (Jurevicius)

In the context of their very specific customer base, the strengths and weaknesses inherent in their SWOT analysis represent the consistency of their approach, for even the weaknesses are reflections of the company’s strengths. BMW’s strengths are, “1) Brand reputation; 2) Environment friendly vehicles; 3) Quality products; 4) Highly skilled workforce; 5) Corporate Social Responsibility (CSR); 6) Strong brand presence in China” (Jurevicius). While BMW’s weaknesses are perceive to be, “1) High cost structure; 2) Weak brand portfolio; 3) Perception of high prices; 4) Too few acquisitions and strategic partnerships” (Jurevicius). Most likely BMW has heard these claims all during their development, but they chose to stay with the specificity of the business model which initially brought them success. 

For example, strategic partnerships may benefit those companies BMW partner’s with, but it may dilute the quality of the product. Unlike many of their competitors such as Jaguar, BMW makes relatively few different brands, but that is by choice and not limitation. Their desired specificity is due to their focus on quality, precision, and the skilled craftsmanship for which too much embellishment would be a diminution. As such, the strengths represent the consistent values of the company:

1. Brand reputation. BMW brand is the third most valuable automotive industry brand in the world valued at $29 billion. In 2012, Forbes has also listed BMW as the most reputable business in the world.

2. Environment-friendly vehicles. The company tries to develop environment-friendly cars by making them more efficient. It offers nearly 20 models that emit CO2 as low as 140g/km. To make BMW cars more environment-friendly firm’s engineers develop new types of fuels, such as hydrogen, too.

3. Quality products. BMW is valued on its engineering capabilities, skilled workforce and quality products. BMW recalls their cars less often and at lower numbers than most of its competitors do.

4. Highly skilled workforce. Quality cars require premium materials and skilled workforce and BMW employs only the most skilled workers to produce its vehicles. BMW sets up its assembly plants at the countries, such as USA and Germany, where there is only the most skilled vehicle assemblers.

5. Corporate Social Responsibility (CSR). BMW is strongly committed to the environment protection, employee and community well-being and sustainability programs. The company invests large sums in employee health management, programs promoting balanced work life, sustainability requirements for its suppliers and producing zero waste at its plants.

6. Strong brand presence in China. Over the last few years, BMW has seen strong sales growth in China, the largest automotive market in the world. In 2012, BMW sold 326,444 vehicles there. (Jurevicius)

Maximizing Opportunity

BMW’s sell consistently in the United States (21% of sales), Germany (21%), Europe (24%), and sell 14% in India, with sales growing well in China (currently 7%) (Illing). Their brand popularity is ranked as 1) BMW; 2) Mini-Coopers; 3) Motorcycles; 4) Rolls Royce. BMW focuses on strengthening the unity between product quality and customer satisfaction, and as a result customer loyalty is very high. BMW is maximizing many opportunities in the changing market landscape: 

1. Increasing fuel prices. Increasing fuel prices open up large markets for BMW hybrid and hydrogen cars as consumers shift towards cheaper fuel types.

2. Positive attitude towards “green” vehicles. Today consumers are more aware of the negative effects (air pollution) caused by cars fueled by petrol and diesel. Large quantities of CO2 emissions intensify greenhouse effect and negatively impact the life on earth. Thus, consumers are more likely to buy new hybrid and hydrogen fueled cars that emit less or no CO2 at all.

3. Expand brand portfolio. In order to grow at a higher rate, BMW should expand its brand portfolio to meet more needs and to satisfy larger consumer market. The company could introduce new models that aren’t currently included in its range.

4. New emission standards. A new wave for stricter regulations on vehicle emission standards would positively affect BMW position in automotive industry. The firm produces one the most ecological vehicles and has introduced hydrogen fuels that emit zero CO2. New vehicle emission regulations would mean 0 additional investment for BMW while its competitors would have to invest large sums of money to comply with regulations and lose a share of profits. (Jurevicius)

These opportunities have been seized in part because of the growing global competition amongst car manufacturers. While BMW is the leading luxury manufacturer, Toyota is the highest selling number of cars globally (Illing). Unwilling to rest on their laurels, “Despite a 53 percent increase in research and development and a 75 percent increase in capital expenditures over the past two years, BMW's net profit for 2003 rose 8.3 percent to $2.36 billion, while revenues climbed 9.9 percent” (123 Help Me). Some analysts pose that BMW is not doing enough to maximize social media, but it may be that the type of people (rich people) who buy BMWs are not on social media as much. The contextual reflections of the perceived weakness must be taken into account (Lovejoy). 

Understanding the need to expand their portfolio just a bit, the Mini-Cooper is the company’s newest acquisition. Unsurprisingly, “Profits for this car line are greatly exceeding BMW's forecast with unexpectedly strong sales of loaded models. Buyers are snapping up options from navigation systems to sunroofs, paying as much as $35,000 per car” (123 Help Me). Decisions like this helped BMW weather the economic crash with very little damage to their shares, and their overall portfolio (Madlani and Ulvestad 11). Another such decision was the choice for BMW to merge with VW in 2009, which has resulted in a more compressive German market performance (Illing).

The leaders of BMW consistently express a unified vision of their joint creation. As the 2002-2006 Chairman of BMW, Helmut Panke, expressed, “I would say: focus on who you are, what you stand for. What are the values you have in the organization?...BMW build high performance products because BMW is a high performance organization” (Bruce, Papamargariti, Naue, Hughes, and Zajancauskas). This is the spirit of focus and excellence which enables BMW to have success through the dramatic shifts in the market. No doubt the company goes a long way to reinforce and strengthen the Germany economy with its standards, which is one of the strongest in Europe. 

Conclusion

The BMW Corporation is leading the world in quality, innovation, precision, and customer loyalty to which many other manufactures aspire to. This has been accomplished through a focus and prioritizing of purpose which does not make end profits the goal, but rather the reward of quality. Ignoring the social pressure of overly expand, dilute their business with partnerships, and a distractingly complex catalogue, BMW choses the consistency and simplicity which comes from the cultivation of quality. As such these are the types of customers the company draws in, those who value quality over quantity.

Works Cited

123 Help Me. “BMW Company Business Analysis.” 123Helpme.com, 2016. Retrieved from: http://www.123helpme.com/bmw-company-business-analysis-view.asp?id=158430

Bruce, Alastair, Athina Papamargariti, Benny Naue, Kaysha Hughes, and Lucas Zajancauskas. “Business Strategy of BMW Group.” Prezi.com, 29 Oct. 2014. Retrieved from: https://prezi.com/nmgot9yzjpzy/business-strategy-of-bmw-group/

Epatko, Larisa. “Here’s what BMW did before it made luxury cars.” PBS News Hour, 7 Mar. 2016. Retrieved from: http://www.pbs.org/newshour/updates/heres-what-bmw-did-before-it-made-luxury-cars/

Illing, Lorenz. “BMW Market Analysis.” Slideshare.net, 23 Nov. 2010. Retrieved from: http://www.slideshare.net/lorenzilling/bmw-market-analysis-5879711 

Jurevicius, Ovidijus. “SWOT analysis of BMW.” Strategic Management Insight, 16 Feb. 2013. Retrieved from: https://www.strategicmanagementinsight.com/swot-analyses/bmw-swot-analysis.html

Lovejoy, James. “Analysis: The BMW vs Mercedes Social Presence Showdown.” Brandwatch.com, 26 Jun. 2015. Retrieved from: https://www.brandwatch.com/2015/06/analysis-the-bmw-vs-mercedes-social-presence-showdown/

Madlani, Jalpesh, and Jens Chr. Ulvestad. “A Fundamental Valuation of the BMW Group.” [Master’s Thesis]. Copenhagen: Copenhagen Business School, 2012. Retrieved from: http://studenttheses.cbs.dk/bitstream/handle/10417/3661/jalpesh_madlani_og_jens_chr._ulvestad.pdf?sequence=1