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
PESTEL
analysis
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.
Conclusion
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.
References
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).
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