Bmw Case Study

BMW Case study

Table of Contents

Introduction 3

BMW History and Background 4

BMW's position in 2003 4

The Markets 4

External Environment Analysis 6

Political 6

Economic 7

Social 7

Technical 7

Internal Environment Analysis 9

Strategic alliances of BMW 9

Strength and Weakness of BMW 9

Conclusion 14

Refrences 16

Introduction

In this paper we have tried to evaluate external environment for automobile industry and the BMW's internal factors. Rather than keeping the paper theoretical we have taken a more critical approach, whereby we will focus on the effects of the both internal and external environmental factors and will try to corroborate with the relevant theories as propagated by many researchers.

The case study availed focuses on auto industry's analysis in the mid-2000s and also provides information about BMW mostly for the year 2003 with the proposed strategies for growth in the next 5 years. Our analysis suggests that at the time, for which the case has been presented, auto industry was overall struggling within European market and also the geo-political factors were straining the sales efforts. Moreover various internal factors like the new management, conflict in the board room were also threatening the BMW group internally. But the fact that BMW had spread its production across the world, gave it an edge in terms of cost and foreign exchange fluctuations. The internal culture of human network and innovative culture was one of the biggest strengths.

In order to support our discussions we will present a PEST analysis to determine the external macro environment for BMW group and will also present an analysis of how will this affect the BMW? The internal analysis has also been carried out and has been presented in subsequent sections. We will look at these points in more detail within the next few sections and then conclude accordingly.

We have also assumed that this case study analysis of a company is in its present form and the effects for future growth or failure are entirely based on the scenario presented within the case. We have limited ourselves to the provided facts within the case study and the industry at the time of the analysis, 2004.

BMW History and Background

Bayerische Motoren Werke AG or BMW was established during First World War as air craft engine manufacturing company. Later it diversified into automobiles and motorcycles, making them its main products by 2000, and in process making it one of Germany's largest and most successful companies.

During post Second world war era, due to drop in aero-engine demands, the company had struggled. Without any focus it had started manufacturing, under license, small bubble cars to limousines. This forced the company with prospects of bankruptcy. Herbert Quandt, upon realizing the inherent strengths of the company bought shares in 1959 and helped BMW to launch the BMW 1500 automobile in 1961 and established the brand as one with engineering excellence.

BMW's position in 2003

The BMW brand, by 2003, was one of the Europe's top auto makers and accounted for three quarters of the group sales including motorcycles, software and a growing financial services division. The turnover of the group had come down by 2.1% due to the strong EURO over US$, which otherwise would have been 4.2%. Gross margins also came down by 2.8% as compared to previous year largely due to growing expenditure on product development and market development. These results were remarkable in light of the generally downwards trends in the industry's profitability.

BMW employed over 104,000 workers in 2003, spread across Munich &Rosenberg in Germany, US, South Africa, UK and China with a total production of 1.1 million BMW, Mini and Rolls Royce. Of these 928,000 were BMW automobiles up by 1.6 percent than 2002.

The Markets

The main markets for the BMW has been Western Europe, USA, Japan and the pacific region with the markets of Germany and the US accounting for almost half the total sales. USA market grew by 8% on the previous year and becoming the biggest market for the group and overtaking the Lexus brand for the first time. In Chinese market there were growing demand for the higher end models of the range, specifically for the 7-series and 5-series.

External Environment Analysis

Today's business environment is comprised of a set of relationships between agents or stakeholders in the environment - relationships that are changed by individual decisions taken (Lewontine cited in Mason, 2009). These interactions continuously "co-create" the environment. The business environment is changing faster than ever before (Achrol, 1991; Hamel and Prahalad, 1994; Kotter, 1996; Glass, 1996; Loewen, 1997; Conner, 1998 as cited in Mason, 2009). It is important that managers are cognizant of this fact and anticipate the dynamic external environments and prepare for them beforehand to succeed.

Moreover, Yeo (2005), also states that organizational survival in volatile times is parallel to the understanding of organization's external environment, outsmarting its competitors and leveraging on its competitive advantage.

The external context of strategic decisions is very broad-ranging. It can include governments, competitors, technological and social change and the dynamics of buyer and supplier markets. One way for managers to analyze their exposure to the set of potential contextual factors is through the application of a PEST analysis (McGee, Thomas, & Wilson, 2005).

A PEST analysis of the automobile industry based on the facts given in the case study is as below

Political

* The changes in tax regime