Identify and analyse the macro- and micro-environmental influences that affect business organisations today.
The automobile industry is a global multi billion industry competing for market shares in the economy. Every year Gerick Jackson builds and sells over one million BMW vehicles each year (Bmw.co.uk 2017). Over the last three decades, BMW is the only automobile manufacturer from Germany to show a positive balance sheet consistently, by focusing on its engineering excellence and consistently delivering in-demand products to their discerning customer base. The mission statement of BMW aims to be the most respected and admired service organization in UK. We can ascertain that the objective of the Company is to increase the value for the products of BMW AG, its parent company. BMW (GB) limited and the subsidiaries from marketing and sales organization are dedicated to promote its customer services and brand values together along with the BMW dealer networks (Herrera 2015). The company was originally started in Germany and has strong workforce in Europe, America and America.
Mission of BMW:
The mission statement for the organization, BMW up to the year 2020 is well-defined and become the world’s leading service provider of premium products for maximizing individual mobility (Bmw.co.uk 2017).
Vision of BMW:
The organization vision is to provide efficient dynamics automobiles that uses today’s technology for driving tomorrow’s pleasure.
UK car industry makes nearly 60 million cars per year and employs millions of employees around the world. Through PESTEL analysis, we can analyze the macro- environment factors of BMW. The external uncontrollable environmental factors that affect the organization are as follows:
Political Factors
These are the legal regulations, government by-laws and security measures that are formulated to control the performance of automobile Industry (Hollensen 2015). The taxes and duties both by foreign and domestic countries affect the success and policies of the industry. The political factors of European Union laws for the carbon emissions generated from the cars shows that BMW has to check its carbon emission level.
Economical Factors:
These are the crucial factors that help us to ascertain about exchange rates, economic growth and all the business settings existing in the industry. High amount of revenue is raised by generating excess amount of car in the market. The demand was less than supply so lot of revenue was withheld. The European Automobile industry is hampered if the exchange rate of euro declines.
Social factors:
The factors show us the changes in cultures and demographic at a global level apart from the new changes in the buying patterns of the existing consumers. The social factors are responsible for the impact on the automobile industry. The rising changes in consumer predilection for the cars that are fuel efficiency are increasing. Therefore, BMW produces car that are low in emission as well as status symbol for the potential customers (FTSE Russell 2017). The current environmental issues and the harmful emissions coming from automobiles is also a crucial factor and the consumer should be aware of.
Technological factors:
The increasing use of latest and advanced technology helps in gaining clear competitive advantage in the automobile industry. Application of sophisticated and new designs helps to tackle the low profit margins in the automobile industry. Moreover, restriction and modifications of the existing technology that is the cause of environmental pollution is required. BMW latest hybrids models include gear shift indicator and auto start stop function.
Environmental Factors:
The increasing effect of awareness for greenhouse effect and global warming is to be made among the patrons (Foxall 2014). The taste and preference of the consumers should also be shifted towards the use of hybrid cars, fuel cell car and more eco friendly car. It is our duty to save the environment besides enjoying the luxurious lifestyle. We are ultimately responsible for the degradation of environmental condition. In developing countries like china, stern application should be made of EURO norms to curb pollution.
Legal factors:
In the European and UK market, strict pollution norms and restrictions are set up. In the developing countries, strict implications of the EURO norms are imposed. BMW group is inclined to save the customers and the community from all unfair business behavior and advertising activities.
Threats of new entrants:
The threat of new entrant is possible due to the arising challenges faced due to entry of new competitors in the automobiles industry. The threat of new entrant in the market is generally less for automobile industry as large cost of capital cost is needed to set up the manufacturing plants and assembly liners. Thus, huge amount is needed for investment, funds, and capital, skilled and high qualified employees for a successful organization.
Therefore, through porter analysis of BMW, we can know that the company or organization must maintain strong brand image and position for the automobile industry. BMW hybrid technology further helps to focus on more gain or profits.
Threats of substitutes:
BMW has a positive brand image and is regarded as the most luxurious and powerful company. BMW has been further segmented in the exclusive car range sectors and various substitutes exist in the market like Toyota and Mercedes. In the UK market, the threat of substitution rate for BMW is very high. The government can further pave threats for the BMW due to the environmental hazards caused by the cars due to emission of fuels (FTSE Russell 2017).
Bargaining power of buyers:
BMW and their current competitors are positioned in the product range exclusively. The bargaining power of consumer is high as they have the supreme power to purchase the product according to the price range (Wagner and Hollenbeck 2014). The environmental issues are another factor that further hovers over the BMW Company. The customers have always the upper hand with the available sample substitute.
Bargaining power of suppliers:
The supply chain management system of BMW is perfect and the relationship with the suppliers is quiet long. In UK the bargaining power is generally high as the suppliers of the automobiles industry can dedicate or decide the price tag for the raw material used. The long time association of the company with the suppliers can prove beneficial as the ultimate and final word is decided more or less with the suppliers. We can ascertain the future profit or loss through the suppliers bargaining power.
Competitive rivalry:
The competitive rivalry is generally high within the automobile industry as the overall European markets and dominant US sector have to face stiff competition with the Asian market. BMW has maintained leadership position in the luxury car market at a global level with over 1.9 millions of the car is sold per year. There is huge competition for the premium car segment in the business market at the global level and the rate of differentiation between individual brands is crucial. (Herrera 2015).
Strength:
BMW enjoys high reputation being in the top five lists in the global automotive industry. This further made it categorize as a reputable business at an international level by becoming the premium car brand. This has thus made BMW a reputed brand name that is not just attracting the potential customer but also the trained workforce. BMW is also attempting to make eco-friendly and fuel efficient cars to support the pollution free revolution at a global level. Furthermore, as per the current market statistics, we came to know that the sales of BMW have also increased in the markets of developing countries like China (Kinicki et al. 2014). BMW have also adequate capital to generate and innovate enough for future competition.
Weakness:
The major weakness of BMW is the higher cost than its competitors. Expensive raw materials and skilled workmen demands huge price that increases the cost structure. The cost of BMW is slightly higher than the other competitors like, General Motors and Volkswagen. The BMW brand portfolio is also weak that consists only few brands like Mini, Rolls Royce and BMW (Bmw.co.uk 2017). This fails to serve the demands of large section of our society that demands demand diversification by targeting the wide range of market, customer and products. The growth of the company is completely on its own without any alliances and strategic partnership.
Opportunity:
The rising cost of fuel attracts the consumer towards the BMW fuel efficient models and hydrogen and hybrid cars (Rothaermel 2015). This further helps in cutting down the routine expenses and contributes for a pollution free environment. After ascertaining the business opportunities, we can further make proper decision in future.
Threats:
BMW is providing us with latest market trends and opportunities but there are certain threats that we should be well aware off. The existing cut-throat competition with the global leaders poses a major threat. We also determined that the increasing price of raw materials further makes the BMW automobiles more expensive due to its expensive raw material (Foss and Knudsen 2013). The fluctuating foreign exchange rate also affects another currency that reduces their value of exchange.
Value chain analysis is used to identify business activities through an analytical framework by creating competitive advantage and value to the business. We can determine the inbound and outbound logistics of BMW through value chain analysis.
Primary activities:
Inbound logistics
This is the primary step taken in the line of production and during these step the raw materials are generally received from the suppliers (Porter and Heppelmann 2014). The automobile industry and its suppliers are scattered throughout the world from Japan and US to China and Thailand. During this stage, the raw materials received from suppliers and as per the requirements distributed among the manufacturing units. The BMW group has over 13,000 suppliers located at an international level. . BMW adds value in their primary activity of inbound logistic by sourcing highest quality of raw materials and minimizing the transportation cost. The company purchases majority of its raw material from Eastern Europe and Germany.
Operations:
This is the second and most crucial stage, which covers the vital production stage. Operations are generally the process of transforming the raw materials into product (Keller and Kotler 2016). BMW group is generally divided into four business segments as, first, automotives with a gross profit of 17.7 %. Secondly, gross profit margin in the motorcycles segments amounts to 22.5%. Thirdly, financial services that are the vital segment that includes credit financing and leasing for the branded BMW cars. Lastly other entities are generating million profits before tax. Therefore, we can say that BMW Company further increases the value of operational primary activities mostly by using advanced and robotics technologies.
Outbound logistics:
It is the process of moving out the final goods from manufacturers to retailers. The auto makers generally have own showrooms and various operates through franchisees. BMW group distribution network consists about 3310 BMW, 140 Rolls-Royce and 1550 MINI dealership (Bmw.co.uk 2017).
Marketing and sales:
The main element of the value chain analysis for the BMW Company is the marketing and sales part. This part of outbound logistics includes advertising, distribution, promotion and customer relationship management. The aim of marketing is to drive up profitability and sales. BMW Group uses media and print advertising to represent the major elements of the communication mix. Recently, BMW is successfully using social media for efficient marketing. We can ascertain that this marketing technique is cost-effective and reaches majority of customers globally at a short span of time. BMW Group also benefits through its marketing strategy by product placement in popular shows and movies to attract the potential customers. The main source of primary sales activities and marketing of BMW is done through social media and viral marketing (Armstrong et al. 2015).
Services:
This is the last and final activity of value chain, which adds core value to the product. After selling the product, the customers are given constant support regarding the maintenance of the BMW vehicles. The support activities of the organization include customer retention. Post sale services are one of the core service provided by BMW for gaining competitive advantage (Van Wormer and Besthorn 2017). BMW group introduces improvements and innovations for maximizing the customer services.
Thus, it can be concluded that the authentic BMW with their distinctive quality, superior technology, clear profile and high commitment and reliability to the products deserve completely their market position as “The ultimate driving machine”. The goal of BMW marketing strategy is to make the target market well aware about the product and to ensure that it reaches the target customers and further increasing our standard of living. Moreover, BMW is known for top sophisticated car models, highly engineered developments and trained qualified employees. We can further reveal that BMW has also meet their corporate social responsibility by providing employee health benefits, stakeholders well being, sustainability initiatives, societal upliftment and environmental protection. Nowadays, we buy according to the reviews and buyers comment provided in the websites and magazines. . BMW runs complex manufacturing network in various countries. Therefore the company should create striking broachers and catalogues to attract the potential customers. New schemes are also initiated by the automobile industry wherein regulations are made for producing high mileage cars and increasing our living standards
References:
Armstrong, G., Kotler, P., Harker, M. and Brennan, R., 2015. Marketing: an introduction. Pearson Education.
Bmw.co.uk 2017. [online] Bmw.co.uk. Available at: https://www.bmw.co.uk/en_GB/index.html [Accessed 29 Dec. 2017].
Foss, N.J. and Knudsen, C. eds., 2013. Towards a competence theory of the firm (Vol. 2). Routledge.
Foxall, G., 2014. Strategic Marketing Management (RLE Marketing) (Vol. 3). Routledge.
FTSE Russell 2017. Industry Classification Benchmark (ICB). [online] FTSE Russell. Available at: https://www.ftserussell.com/financial-data/industry-classification-benchmark-icb [Accessed 29 Dec. 2017].
Herrera, M.E.B., 2015. Creating competitive advantage by institutionalizing corporate social innovation. Journal of Business Research, 68(7), pp.1468-1474.
Hill, C.W., Jones, G.R. and Schilling, M.A., 2014. Strategic management: theory: an integrated approach. Cengage Learning.
Hollensen, S., 2015. Marketing management: A relationship approach. Pearson Education.
Keller, K.L. and Kotler, P., 2016. Marketing management. Pearson.
Kinicki, A., Williams, B.K., Scott-Ladd, B. and Perry, M., 2014. Management: A practical introduction. McGraw-Hill Education Australia.
Madsen, T.L. and Walker, G., 2015. Modern competitive strategy. McGraw Hill.
Peteraf, M., Gamble, J. and Thompson Jr, A., 2014. Essentials of strategic management: The quest for competitive advantage. McGraw-Hill Education.
Porter, M.E. and Heppelmann, J.E., 2014. How smart, connected products are transforming competition. Harvard Business Review, 92(11), pp.64-88.
Rothaermel, F.T., 2015. Strategic management. McGraw-Hill Education.
Van Wormer, K. and Besthorn, F., 2017. Human behavior and the social environment, macro level: Groups, communities, and organizations. Oxford University Press.
Wagner III, J.A. and Hollenbeck, J.R., 2014. Organizational behavior: Securing competitive advantage. Routledge.
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