Organizational strategy of BMW
BMW is a leading manufacturer of luxury cars. Her vision is to enhance uniqueness through diversity, risk taking, courteousness and leadership. Her mission is to be the most successful manufacturer of premium cars in the automobile industry. Its objectives include increasing its worldwide sales, have an edge in competition, and manufacture cars that are environmental friendly. The company’s strategy aligns her with the target of profitability and enhancing long-term value in a dynamic environment (Banham, 2010). The strategy of the company has four pillars which include growth, profitability, shaping the future, access to technologies and building a wider customer base.
Analysis of the external environment
i. Political factors
Most governments heavily tax oil, diesel and petrol, making maintenance of cars expensive. Developed countries such as China and USA impose foreign trade regulations which reduce the importation of cars, reducing the sales of BMW.
ii. Environmental factors
There is increased demand for more efficient and cleaner engines to minimize environmental pollution. The environmental regulations also demand that synthetics production to be Chlorofluoro-carbons free.
iii. Sociocultural factors
The industrial countries have a high old population, which has a less preference for sport cars. The ecological awareness and the change in lifestyle that encourage social mobility have reduced the demand for personal premium cars (Nandakumar et al, 2006).
iv. Technological factors
The German government is spending heavily on the research to gain innovative energy. This has resulted to the development of electric cells and combustion technology and demand for which provide for alternative drive mechanism. The car manufacturing industry is experiencing a high rate of technological advancement in terms of engine efficiency, environmental aspects, network technology and passive safety (Burt et al, 2006). This factor helps BMW to meet its strategy of offering technologically advanced products.
v. Economic environment
The increase in inflation, interest rates and unemployment has reduced the purchasing power of cars. The prices of raw materials such as oil and steel have increased, making production costs increase. This impedes its strategy of growth.
vi. Legal factors
The automotive industry regularly faces new changes on environmental and safety matters. She faces changes in regulations of work and product safety.
Porter’s Five Forces Analysis
i. Threats of potential entrants
Car manufacturers operate in a capital intensive industry. New entrants can only venture less advanced markets where they should build up competency. Established industries obtain patents for their innovations to restrict entry (Grundy, 2006). BMW is engaging in research to create more innovations. However, she has a low threat to new entrants since it is an innovation and technology leader.
ii. Consumer power
The consumers of BMW have low power. The company has unique products which pose high switching costs (Porter, 2008). Her products are advanced technologically, which consumers cannot find elsewhere. However, the company should not use low consumer power to increase prices. It must offer explanations of higher production costs before increasing prices. BMW must strive to lead in responsiveness to changes in trends.
iii. Supplier power
BMW enjoys a low supplier power in her market of operation. Because of a strong brand loyalty, she can transfer costs to customers even if their products are expensive. However, BMW will achieve high sales if price increase commensurate with innovations.
iv. Threat of substitute products
BMW enjoys a low threat of substitutes because of unique products. Substitute products have to meet customer needs like BMW and break its customer loyalty. The differentiation of BMW’s products reduces the chances of substitutability (Daft, 2013).
v. Intensity of competitive rivalry
The intensity of competitive rivalry is high since companies such as Mercedes-Benz offer similar products and compete in the same market segment. Even with this rising competition, the price for BMW’s prices is high and attracts customers because of its unique products.
Strategy is dynamic and business should update their organizational strategy regularly. The strategy of BMW has helped her to be responsive in a dynamic industry and keep up with market trends. This makes it capable of managing market risks and obtains new customers. It has maintained market leadership, drive standards, operate globally and add value.
Daft, R. L. (2013) Organization Theory and Design. 11th ed. Mason, OH: Cengage Learning
Banham, H., (2010) ‘External environmental analysis for small and medium enterprises’, Journal of Business & Economics Research, 8 (10), pp. 19-26.
Burt, G., Wright, G., Bradfield, R., Cairns, G., and van der Heijden, K. (2006). ‘The role of scenario planning in exploring the environment in view of the limitations of PEST and Its derivatives’,International Studies of Management and Organization, 36 (3), pp. 50-76.
Grundy, M. (2006) ‘Rethinking and reinventing Michael Porter's five forces model’, Strategic Change, 15, pp. 213-229.
Nandakumar, M.K., Ghobadian, A., O'Regan, N. (2010) "Business-level strategy and performance: The moderating effects of environment and structure", Management Decision, 48(6), pp. 907- 939.
Porter, M.E. (2008/1979) ‘The five competitive forces that shape strategy’, Harvard Business Review,January: 23-41, (R0801E).
50 Lessons (2005) Learn from outside your organisation: interview with Dame Barbara Stocking. [Video, Online]. (Accessed: 19 April 2014).
50 Lessons (2005) Monitor your business environment and anticipate change: interview with Paul Skinner. [Video, Online]. (Accessed: 19 April 2014).