Introduction
The automobile industry produces automobiles and other gasoline-powered vehicles, such as buses, trucks, and motorcycles. The automobile industry is one of the most important industries in the world, affecting not only the economy but also the cultures of the world. It provides jobs for millions of people, generates billions of dollars in worldwide revenues, and provides the basis for a multitude of related service and support industries. Automobiles revolutionized transportation in the 20th century, changing forever the way people live, travel, and do business. The automobile has enabled people to travel and transport goods farther and faster, and has opened wider market areas for business and commerce. The auto industry has also reduced the overall cost of transportation by using methods such as mass production which is making several products at once, rather than one at a time, mass marketing which is selling products nationally rather than locally, and globalization of production that pertains to assembling products with parts made worldwide (2001).
Between 1886 and 1898, about 300 automobiles were built, but there was no real established industry. A century later, with automakers and auto buyers expanding globally, auto-making became the world’s largest manufacturing activity, with more than 53 million new vehicles built each year worldwide. As a result of easier and faster transportation, the United States and world economies have become dependent on the mobility that automobiles, trucks, and buses provide. This mobility allowed remote populations to interact with one another, which increased commerce. The transportation of goods to consumers and consumers to goods has become an industry in itself. The automobile has also brought related problems, such as air pollution, congested traffic, and highway fatalities. Nevertheless, the automobile industry continues to be an important source of employment and transportation for millions of people worldwide ( 2001).
At the start of the 21st century, the trends of global trade and manufacturing flexibility continue. Computerization continues to be a major part of auto design and manufacture, as do the search for alternative fuels and more efficient automobile designs. Computer-aided design tools are already used in the automobile industry and will continue to save months of design time and improve the quality of cars. Microelectronics will be more fully applied to future automobiles and may become as commonplace as radios are today. On-board systems are becoming available that enable drivers to find destinations through voice-activated navigation or make cellular calls using the computer. These computers can access the Global Positioning System (GPS) and display maps to help drivers avoid congested freeways and find better routes to destinations (1995).
Alternative energy sources for cars, such as natural gas, electricity, ethanol, vegetable oil, sunlight, and water, will vie for consumer use in the future. Many large automakers are now adapting fuel cell technology for automobiles. Fuel cells are cleaner, quieter, and more energy efficient than internal-combustion engines. Fuel cells combine hydrogen and oxygen electrochemically without combustion to supply electricity. Fuel cell engines will likely run on conventional gasoline, but with a fraction of the emissions of a normal engine (1995). The paper will discuss about the car company BMW. The paper will analyze the strategy of BMW through the use of different techniques like generic strategies, strategic clock, Pest, five forces, resource audit and value chain.
Background of BMW
Few who drive a BMW car know what the initials stand for, or realize that the distinctive blue and white propeller badge reproduces the colors of the state flag of the State of Bavaria. The Bayerische Motoren Werke was established during the First World War. They specialized in the manufacture of engines. The company subsequently diversified into what are now its two principal product ranges: automobiles and motor cycles. Today BMW is one of Germany’s largest and most successful companies. BMW cars are not the most powerful, or the most reliable, or the most luxurious on the market, although they score well against all these criteria. No one has ever suggested that they are cheap, even for the high level of specification that most models offer. Although BMW rightly emphasizes the quality and advanced nature of its technology, its products are not exceptionally innovative ( 1996). The design of the company’s cars is conventional and the styling of its models is decidedly traditional. The company achieves a higher quality of engineering than is usual in production cars. While most car assembly has now been taken over by robots or workers from low-wage economies, BMW maintains a skilled German labor force. The company benefits, as many German firms do, from an educational system which gives basic technical skills to an unusually high proportion of the population. Its reputation has followed from these substantial achievements. In this, BMW is representative of much of German manufacturing industry. Yet BMW’s success was neither easy nor certain. In 1945 the company was Germany’s leading manufacturer of aero engines. Its primary market and its capital equipment were both in ruins (1996).
While German recovery through the 1950s occurred at a pace which attracted the title of economic miracle, BMW did not prosper. In 1959 the firm faced bankruptcy and a rescue by Mercedes seemed its only hope of survival. Instead, BMW found a powerful shareholder particularly Herbert Quandt who perceived the company’s inherent strengths. The turning point came when the firm identified a market which most effectively exploited its capabilities the market for high-performance saloon cars, which has since become almost synonymous with BMW. Today, the BMW business is structured to maximize its advantages. Retail margins on BMW cars are relatively high. The company maintains tight control over its distribution network. This control supports the brand image and also aids market segmentation (1996). BMW cars are positioned differently and priced very differently in the various national markets. The same tight control is reflected in BMW’s relationships with suppliers, who mostly have continuing long associations with the company. BMW is a company with a well-executed strategy. It is a company which came after several false starts to recognize its distinctive capabilities and chose the market, and subsequent markets, which realized its full potential. Its dealings with its suppliers and distributors, its pricing approach, its branding and advertising strategies, are all built around that recognition and these choices. There was no master plan, no single vision which took BMW from where it was in 1959 to where it is today. There was a group within the company which believed strongly that a model like the 1500 was the firm’s main hope of survival. There were other views, other options. No one had more than partial insight into what the future would hold. But BMW’s success was no accident either ( 1996). BMW is an example of a survivor who stood the test of time and developed from a failing company to one of the most successful firm.
Generic strategies
Porter’s Generic Strategies
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The cost leadership strategy of BMW is focused on making sure that the company earns more and spends less. The cost leadership strategy of the company takes a look at how expenses can be minimized without sacrificing the production of the company’s product and the quality of product sold to clients. The differentiation strategy of BMW is focused on making sure that the company produces products that are unique. It makes sure that the logo of the company is not only the one that makes products of the company different. It makes sure that the internal and external characteristics of the product make it unique. The segmentation strategy of the company makes sure that it has a selected market that can provide huge amounts of income for the company.
Bowman’s Strategy Clock
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Based on the strategy clock of the company, the company wants to focus on price based strategies wherein the main goal is to achieve more profits without sacrificing other things. The company wants to make sure that it will achieve a better financial status when compared to competitors; the company also wants to have prices that are unique from the price offering the competitors offer.
PEST analysis
Political sector
The company will not get any good reputation, trust and success if it will not be aware of what is happening in the political sector of the country. BMW makes sure they comply with what the law states in the country; they make sure that they comply with the regulated standards of the country. The company makes sure they are aware of the political situation of the country and the company has its position with regards to political issues. The company is prepared for any problems concerning the political sector.
Economic sector
The company can be said to be economically stable for the past years. Its economic stature is doing well that’s why they try to improve their products to give the best to their clients. It is not only the internal economic situation of the company should be taken note of but also the economy of the country, the company checks first the economic status of the country they are operating in before making decisions because making decisions during a difficult time on the economy of another country may cause catastrophe for the company. It also checks on how the economy of the country they are doing.
Social sector
The company makes sure that the product they create will not be cause of health problems. They make sure the products will emit low emission that can reduce pollution. Pollution is one cause of health problems of a country and the company tries its best to prevent it. BMW emphasizes safety among the production of their goods. They make sure that the proper safety standards are followed and there are no hazardous chemicals in the production.
Technological Sector
The company offered new innovations in the technological sector and introduced new concepts with regards to the car engine industry. The company set the standards for car engine makers both current and new companies. Since technology rapidly changes the company makes sure they are updated to what is happening and they can adjust to these changes. The company makes sure that the products they have are updated with regards to technology and if new technologies emerge they can compete with these products.
Porter’s five forces
Potential Entrants
The company has been around for a long time and the company is not greatly affected by the new entrants. The influence of potential entrants to the company is weak. But to ensure that no other problem arise the company maintains low cost of unit production, this helps in making sure that the new entrant will not have advantage over them. Another thing that the company do is to innovate new techniques and procedures in serving the clients so that their can be product differentiation and the company has a unique product apart from the product their rivals has.
Competitive rivalry
Competition is one of the things that the company tends to focus its attention. Competitive rivalry highly influences the company. Different things are done by the company to ensure that they have advantage over their competitors one is a strategy wherein they give service straight from the heart. This kind of strategy gives the company a better relationship with the clients. Having a good relationship with clients gives them advantage over rivals. Another thing done by the company is to offer quality prices. By doing so the company lures clients away from competition. Moreover the company uses different promotional materials so that clients get to know them and so that more clients will transact with the company.
Substitutes
Substitutes give high influence to the company since substitutes can make a company lose the clients it has. The company makes sure that the substitutes won’t give them much problem. They do this by proving that the service and products they offer are the best quality and are better than substitutes. They also prove that their service is better against others by comparing and contrasting it with substitutes so that clients can know the difference. The company also tries to offer products and services superior than substitutes so that they can attract more clients. By offering superior products
Bargaining power of buyers
The bargaining power of buyers highly influences the company. It shows how good the company is doing in serving the clients. It also helps in determining how known the company is. The company makes sure that the bargaining power of buyers is high. They do this by making sure that buyers are concentrated and there are few buyers in a significant market share.
Bargaining power of sellers
The bargaining power of sellers highly influences the company. The company makes sure that their suppliers have high bargaining power through helping them show their importance in the industry. By demonstrating the value of their suppliers the company can attract other companies to purchase the suppliers products thus their bargaining power increase.
Resource Audit
The company gathers its materials and supplies from the most respected and trusted suppliers. The materials and supplies have high value and are highly reliable. The company is certain that the materials they use in producing a product is something that will make the product have high standards of quality.
Value Chain
Global value chain analysis provides another way of explaining development by tracing the amount of value added produced in the different stages of a commodity’s life from direct production through to final sale. By focusing on a specific chain it analyses a significant, but still manageable slice of the world economy. Moreover, monitoring where value is produced and appropriated highlights patterns of inequality and the potential contribution of the activities to the development of the region where they are located (2004). The company makes sure that it monitors the value of its products from all over the world. It sees to it that the products in other places are given the appropriate value it should have. The company also makes sure that the different factors that are under inventory and supply chain are not having problems.
Conclusion
BMW is a company with a well planned and well-executed strategy. It is a company which came after several false starts to recognize its distinctive capabilities and chose the market which realized its full potential. Its dealings with its suppliers and distributors, its pricing approach, its branding and advertising strategies, are all built around that recognition and these choices. It continues to dominate the industry it belongs in. BMW is constantly improving its product line. It is finding new ways to give their product a more unique identity and provide to clients products that gives them satisfaction.
Credit:ivythesis.typepad.com
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