Strategic Position Analysis Of BMW In The Automotive Industry

Analysis of the organization’s strategic position in its industry

The automotive industry has developed and grown up as one of the very dynamic industries in the recent decades. Although the key purpose of the industry is to satisfy the requirements and the needs of its customers for travelling from a place to other with safety and comfort, the rapidly changing market has changed the needs of these customers into their desires (Markusen 2017).

This has cleared the path for severe competition within the automobile industry. The BMW (Bayerische Motoren Werke) group is regarded to be the top most luxury carmakers in the world. It was founded in the year 1916 by Karl Rapp. It is to note that the business of the company operate in the market, aiming at achieving a well-balanced growth and development in every markets and that too, in every continents (Press.bmwgroup.com., 2018).

This paper will elaborate on analyzing the strategic position of the chosen company- BMW in its automotive industry by making use of KPIs in comparing the performance of the organization with its key competitors in the business market. It shall also analyze the strategic directions of the company by making use of strategic tools like Ansoff matrix and BCG matric. Moreover, a critical evaluation of the organizational strategy of BMW in terms of its suitability will also be taken into consideration in this paper. Lastly, some recommendations would be made for the part of the company to strengthen its strategic position in market.

2. Analysis of the organization’s strategic position in its industry

Key performance indicators for a company serve as the important metrics or processes those contribute to the success of the company. The organization’s overall success is relied on effective environmental, economic and social performance (Avery 2015). The key performance indicators of BMW Company are observed to increase company’s growth and profits over the years. The key performance indicators of BMW Company are observed to be energy usage, water usage, waste and volatile organic compounds used by the company in its maintaining prices (Blunck 2016).

The KPI’s those are identified for the company includes environmental key performance and financial key performance indicators. The major non-financial key performance indicators identified for the company that has resulted in increased profitability growth of BMW Company over years includes group workforce efficiency, deliveries, fleet emissions and motorcycle segment deliveries (Casals, Martinez-Laserna, García and Nieto 2016). Such KPIs of the company are observed to be focused on the major areas of operations based on which the mid-term targets are set for the time duration of three to five years.

The Environmental Management System is one of the major KPI of the company that facilitates in monitoring progress of its major strategies against its set action plans to communicate the company’s expectations of suppliers and contractors through using “sustainable purchasing guidelines” (Kompalla, Jan and Gabriel 2016).

Moreover, the social key performance indicators of BMW companies against which it compares its performance in the industry includes employment, equal gender distribution, injury frequency rate, suppliers and social contributions. In addition, the KPIs related with economic performance facilitates in measuring BMW Company’s performance in the industry those include net revenue, operating income, vehicles produced all over Europe, engines and produced transmissions, total sales of BMW vehicles, market share and annual investments (Kreutzer and Land 2015).

Key Performance Indicators of BMW

For comparing the performance of BMW Company in comparison to its competitors such as Volkswagen and Toyota within the automotive industry, the Key Perforate Indicators of these two competitor companies are compared and evaluated. The KPIs of Volkswagen are observed to include deliveries to consumers, sales revenue, operating result, operating return on the sales, research and development ratio within the automotive division, sales revenue along with the net cash flow (Mohrdieck et al. 2016). Moreover, such key performance indicators are observed to provide tough competition to BMW Company as the company is observed to attain an increasing trend of scores within such aspects of KPI to attain increased profitability within the international automotive industry (Ng, Hamid and Yusof 2017).

Volkswagen has effective key performance indicators in positioning itself as a profitable automobile manufacturer and these KPIs are indicated in its annual report. Such KPIs has positioned the company as one of the leading automobile manufacturer economically and ecologically. For attaining such goal the major KPIs for the company include meeting stakeholder’s expectations, information technology and quality assurance, procurement, production along with research and development (Plenter 2017). Volkswagen Company has also considered implementing strong performance management systems that has facilitated in attaining improved company efficiency.

Moreover, another KPI identified for the company is the performance based remuneration component that facilitates the company in recognizing employees’ individual achievements. In addition, few other financial and non-financial key performance indicators have been indentified that has facilitated the company in competing with BMW Company over years (Sánchez et al. 2017).

The KPIs are identified to be operating return on sales, research and development in automotive division, net cash flow in company and net liquidity in the automotive direction. Such KPIs is observed to increase sales of Volkswagen by 45% in the year 2017, generated increased response to marketing by 166%, improved return on investment of marketing by 42% and facilitated the company in attaining increased revenues per event (Schmalfuss et al. 2015). In addition, the KPIs identified for Volkswagen also includes safety leadership, consumer safety, fleet management, governance, transparency and product energy innovation.

The key performance indicator of Toyota that has facilitated the company in successfully competing with BMW in automobile market includes certain effective financial and non-financial indicators. Such KPIs include measuring performance against energy usage per vehicle, water usage per vehicle, VOC emissions per vehicle and waste produced per vehicle (Schoettle and Sivak 2017).

In addition, certain other important KPIs identified for Toyota that ensures its success includes strength of brand identity, Toyota production system, revenue growth from its hybrid vehicles, strength of brand identity and increased consumer attention from company website. The KPIs set by the company are focused on analyzing its performance based on the different improvement measures set by Toyota and these include lead-time to produce, work-in-process inventory, finished goods inventory and productivity based on pieces manufactured by per man hour.

3. Analysis of the organization’s strategic direction

Ansoff Matrix

 

The Ansoff Matrix

Like all the other originations in the present business world, BMW too follow some strategic development directions so as to expand its business as well as increase its sales. Ansoff matrix is one of the popular tools that helps such organizations in developing some strategic directions which they could follow in regard to the range of products and services and the markets by taking in context the potential of the expectations of the stakeholders of the organization (Neykov, Antov and Brezin 2017). As it is depicted from the figure above, there are a total of four strategic development directions. BMW follows all of them in its own way. They are discussed below:

1. Market penetration- It is to note that market development involves the process of increasing the market share of the brand by achieving growth in the current products and services present in existing market. One of such expansions of BMW was the grand opening of its new sales subsidiary called the “BMW Malaysia SdnBhd” in Malaysia (Ling, Ishak and Tiang 2017). It was a joint venture of the company with its local partner named Sime Derby (Joshi and Venugopal 2015). However, it is to mention that the main aim of BMW in its opening of its new sales subsidiary in Malaysia was to intensify its brand image and brand presence in the Malaysian market in order to exploit the market growth there. With the same, to improve its international presence, the company also expanded its product and service sales organizations in different countries including Denmark, Greece, Luxembourg and Ireland. Also, in the year 2003, it signed joint venture with China as it was the fastest growing market for BMW (Kim, Kim and Abidin 2017).
2. Product development- The product development of a company involves how a company could sell new and modified products into the market. Towards this, the approach of BMW was to launch a new business model every 3 months right from the year 2003 to 2005 (Reid, Short and Ketchen 2018). The company also named it as “product and market offensive” and worked hard to achieve this. It could also be linked with the diversification strategy of BMW. In the year 2003, the company had also launched a product called MINI ONE D and then the new BMW 5 limousine to the customers and the dealers (Tomczak, Reinecke and Kuss 2018). With the same, it is also to mention that the company maintained its reputation for the production of engaging and dynamic cars by launching the new X6 series.
3. Diversification- Diversification is the part of matrix which shows how the company sells its new products in the new markets by using its existing resources and capabilities. The approach used by BMW in this regard could be linked with the related diversification through developing beyond the present products and services along with its potentials and capabilities. It is to note that BMW has diversified itself by ensuring production of the smaller 1 series cars. It also entered into car racing by launching X3 Sports Activity Vehicle.
4. Market development- It is the strategy where the company aims of selling its product into new markets. During this process of product development, BMW was following the market growth strategy. The primary reason for which the company decides to expand its business in new business markets are the market considerations and its capabilities. The model BMW Z4 had reached in Asia and Europe and it also introduced BMW X3 (Karayel 2017). With the same, the demand for 5-series and 7-series were also tremendously increasing in Chinese nation. India was also a new and potential market for BMW 

Comparison of BMW’s performance with competitors using KPIs

The BCG Matrix

The BCG matrix refers to one of the strategic management tool that is applied for evaluating the strategic business of a company. It divides the business portfolio into 4 different categories and they are Stars, Question Marks, Cash Cows and Dogs(Jarzabkowski and Kaplan 2015). All these categories is based on the competitiveness and attractiveness of the very industry. It is to note that competitiveness and attractiveness are the two factors that identify the affectivity of the whole business portfolio. On the basis of this matrix of BMW, it can be said that BMW is a star player in the market. This is because of the fact that this company has a large market share of premium market and at the same time, it indicates high rate of growth for its business models.

There are several products of the company that can be identifies as stars. They include the cars that include in the BMW series like the touring and Sedan. On the other hand, the financial dimensions and the motorcycles of BMW can be regarded to fall under the cash cows as because of the high share that they possess of the premium market. However, it is to note that the growth rate of the motorcycle and the financial services is very steady and they have not changed for the last few years. One of the significant examples of cash cow products of BMW comprise of the Rolls Royce- the subsidiary of the company. It is to state that this segment has always been one of the primary source of financial earnings that drive the company towards development and growth.

The products that show high degree of uncertainty falls under the quadrant of question mark. In the case of success they provide the company with financial leverage. However, the question marks for BMW is its SUV series that has been regarded as a very profitable venture. However, the potential of it to generate revenue has been declined and this has resulted in loss of the market share of BMW in the segment of luxury car.

The next quadrant in the BCG matrix is Dogs. This segment comprise of the business units or products that do not give any financial gain to the company. In fact, they show very poor performance in the market in terms of revenues, future prospects and sales. However, in some cases, the firm continuously invest in these products and in others, they try to dissolve them or sale them. For BMW, its BMW Z4 and Z3 cars fall under this segment (Ramshaw 2016). This is due to the fact that the performance of these cars are not up to standard as compared to the other BMW cars. Hence, they gained negative feedback from the customers.

4. Critical evaluation of the organization’s strategy 

This strategy of BMW Company is observed to be present in UK and European Union market competition through introducing exceptional quality cars internationally. Moreover, the company is observed to have positive aspects in terms of suitability, acceptability and feasibility (SAF framework) (Schoettle and Sivak 2017). This framework is observed to be feasible in developing effective business strategy also with evaluating usefulness and effectiveness of the strategies implemented by BMW Company.

• Suitability- Suitability if the business strategies developed by BMW Company serves as a vital factor in analyzing whether the organization is attaining the suitable results from its implemented strategies (Wedeniwski 2015). Moreover, suitability of the strategies implemented by BMW is analyzed through evaluating several criteria’s such as environment suitability, expectation suitability along with capability suitability. BMW is observed to implement modular strategies that consider conducing threefold increase in all its car model numbers. Such modular strategy has resulted in shorter development cycles along with increasing flexibility in its BMW plants. Such strategy has resulted in increasing the organization’s strategy suitability in the market along with enhancing quality, car performance, permitting manufacturing of custom orders and reducing the defect rates (Williams and Vrabie 2018). Through implementing strategies such as the company’s group profit before tax is observed to be on a similar scale in both the years such as 2016 and 2017. The automotive segment is anticipated to record a nominal volume growth n the year 2017 and made a new sales record in the year 2017. The EBIT margin is also observed to attain growth of 8 to 10% with return on capital employed is recorded to be 26%. The motorcycles business segment is observed to attain an increased sales volume in the year 2016 that has resulted to an increase in its revenues and earnings. In the financial services segment, the implementation of its business strategies has resulted in increased return on equity of 18% (Aithal 2017). BMW is observed to attain an increased sales volume growth, innovation and profitability by means of cost-conscious along with enhancing research and development.
• Acceptability- BMW enjoys a grad range of acceptability of its strategy in the international automotive market. This is for the reason that the strategy of the company in developing unique car design architectures permits an increased differentiation among the models in terms of design and size that is responsible for 70% of the company’s production cost (Morden 2016). The organization’s priority within the growth markets encompasses Eastern Europe, China, India, Brazil and Russia. It has also attained growth in China’s premium segment with increased CAGR of 11.3%. It has also been noted that total automobiles delivery of BMW Company has increased by 1,380,384 units in 2016 to 1,540,085 units 2017 representing a change in 11.6% (Williams and Vrabie 2018). In addition, series 6 car launched by BMW has attained an increased growth of 146.8% from the year 2015 to 2016. Moreover, the series 1 brand launched by BMW automobiles attained a 26.8% increase in its sales over the years from 2016 to 2017. The series 3 and series 5 brand launched by BMW company has attained an increase in soled units internationally in the year 2017 in comparison to 2016 (Williams and Vrabie 2018). Such increase after implementation of launching these series through implementing innovation strategy was around 8% in the year 2017. In addition, X1, X3, X5 and X6 car brands launched by BMW recorded an increase in the deliveries that is recorded to be 16.9%, 27.1%, 3.5%, and 7.0% respectively. However, the strategic decision of BMW Company in launching the brand Z4 resulted in its profit decline of 18.9% in its overall deliveries for the year 2017 in comparison to its previous year (Williams and Vrabie 2018).
• Feasibility- BMW Company’s strategy to constantly increase the innovation of its cars and launching modified version of automobiles as per consumer needs and introducing new car models such as X1, X3, X5 and X6 in the international market has facilitated the company in attaining increased profitability over the recent years. Considering such situation, the feasibility of its innovation strategy is also confirmed as such strategy increased the company’s net profit to increase by 4.4% in the year 2017 in comparison to the previous year (Tomczak, Reinecke and Kuss 2018). Moreover, in ensuring further feasibility of cognitional standard engines, the company needs to tweak its existing manufacturing prices. Aligning the internal processes to address the external demands is therefore dependent on the efficiency of the company’s value chain management. The suppliers along with the vendors of BMW Company requires to implement the Enterprise Resource Planning (ERP) method in training its visibility and feasibility of its supply chain management integration along with making rapid decisions to decrease the lead times (Tomczak, Reinecke and Kuss 2018). This new business strategy developed by BMW Company will consider the company’s production process in UK along with the associated suppliers, methodology along with just tweaking the assembly line based on the demand of the consumers for its various car models (Tomczak, Reinecke and Kuss 2018). It has been observed that implementing of such strategy has further increased chances of attained feasibility in the market after they are implemented as it confirmed the company has used its resources, aptitude and abilities in a better manner to attain success in order to obtain better cash flows over years.

Key Performance Indicators of Volkswagen

5. Conclusion

The paper elaborated on analyzing the strategic position of the chosen company- BMW in its automotive industry by making use of KPIs in comparing the performance of the organization with its key competitors in the business market. It is gathered from the paper that the key performance indicators of BMW Company are observed to increase company’s growth and profits over the years. The key performance indicators of BMW Company are observed to be energy usage, water usage, waste and volatile organic compounds used by the company in its maintaining prices. In addition, moreover, suitability of the strategies implemented by BMW is analyzed through evaluating several criteria’s such as environment suitability, expectation suitability along with capability suitability.

BMW is observed to implement modular strategies that consider conducing threefold increase in all its car model numbers. Such modular strategy has resulted in shorter development cycles along with increasing flexibility in its BMW plants. BMW is observed to implement modular strategies that consider conducting threefold increase in all its car model numbers. Such modular strategy has resulted in shorter development cycles along with increasing flexibility in its BMW plants. Based on the findings, the company is recommended that.

For expanding their business on the current market and improving the competence, it is recommended that BMW should focus on enriching its product portfolio. Although it is a global leader in the field of luxury car market, it captures only two percent of the overall market of cars. Hence, a new strategy needs to be formulated and addressed to enrich the portfolio by means of strategic acquisitions.

6. Recommendations

1. The brand image of the company is very strong in the market and people value its products as they provide them comfort and are reliable. However, it is recommended that BMW should work more on developing and enhancing its brand image.
2. For expanding their business on the current market and improving the competence, it is recommended that BMW should focus on enriching its product portfolio. Although it is a global leader in the field of luxury car market, it captures only two percent of the overall market of cars. Hence, a new strategy needs to be formulated and addressed to enrich the portfolio by means of strategic acquisitions.
3. To ensure effective implementation of strategic acquisition within the company, BMW should follow three important factors of strategic implementation such as strategic leadership, corporate governance, change management and system management. Also, in this process, for reducing the employee resistance to this strategy, the management or the executives should clearly communicate about the plan of change to them. Also, a strong support from the part of management and executives in regard to the strategic acquisition program should be ensured.
4. The corporate governance should balance the sustainability and profitability of the strategy.
5. Execution of the implementation should be monitored properly

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