One of the most critical processes of management of any company is the formulation of a strategy. Strategic planning therefore must combine a number of internal and external factors putting in mind how these factors affect the performance of the company.
However in the ever dynamic business world some of these factors may not be well captured and therefore assessed unless we employ tools to effectively extract these factors from within the operational environment of the company. The strengths, weaknesses, opportunities and threats (SWOT) are some of these very critical factors that must be put in consideration to effectively strategize.
For many years now SWOT analysis has proven as a vital start point to effectively assess corporate performance. This analysis has even been extended to all the components that compose the business entity including the human resource.
Employing SWOT analysis effectively covers the various areas of the company or organization and gives the analysis a more complete outlook.
The history of BMW a brand of automobile dates back to the time of the 1st world war. This began as a family business in the heart of a Germany city called Munich.
The Quandt family who were the owners of BMW began trading in aero-engines before diversifying into automobiles and motorcycles.
The history of BMW certainly is one that exhibits strengths, weaknesses, opportunities and threats. Being one of the most reputed of our time BMW showed some of the following strengths:
- They employed the highly skilled Germany workforce at the time and through this BMW was able to build a perception of valuable difference in the mind of buyers and thereby becoming a source of competitive advantage.
- Their close proximity to buyers of their products allowed BMW to effectively segment the market.
- BMW also established a tightly controlled distribution network in effect benefiting its brand management and communications
- They build a reputation for product quality and a brand name that identifies with the aims and aspirations of the customer.
- They pursued a product strategy to compliment their skills and broaden the market when they attempted an acquisition with Rover UK.
- They designed and were keen to control technological developments such as the air bags, ABS and fuel injection systems.
- BMW were keen to exploit the concept of internet and e-commerce to help them get a more accurate assessment of volumes, kind of vehicles and the optional extras the market required.
- By using the internet BMW also was able to significantly reduce the lead time for the manufacture of an automobile
A number of weaknesses are evident from the case study as well and included:
- BMW was interested in pursuing a maximization of shareholder value since 46% was basically family owned. In so doing this policy was a hindrance especially in countries where policies stipulated otherwise. This denied BMW venture opportunities in such areas.
- Outsourcing reduced automobile assemblers such as BMW’s scope for design thus impairing their ability to add value to the product.
- While wanting to defend family share holding BMW unceremoniously disposed Rover UK which may have affected their credibility.
- Poor profitability at BMW and a strong sterling pound contributed to BMW Rover UK failed merger
- BMW’s management indecisiveness during the Rover UK merger crisis
- Rover UK’s high break even point which affected the profitability of this venture.
Similarly a number of threats are clearly evident from this case study some of which include:
- Quality level attained by automobile manufacturers among them BMW meant that product differentiation opportunities became fewer while the cost structure and the degree of rivalry made price competition a strategic factor.
- Increased automobile production resulted in oversupply and a mismatch between demand and capacity increased the price competition.
- Environmental concerns and increasing petrol prices generated demand for smaller automobiles.
- Demand for cost reduction and pressure on regulatory compliance brought in trends of standardization of automobile across regions which threatened BMW’s brand management campaign.
- The desire of governments to minimize disruptions caused by mergers and acquisitions further reduced the likely hood of any successful mergers.
The most obvious opportunity was the increase in consumer demand for newer products, greater choice and value for their money opened a door for diversity.
SWOT analysis strategy developed will be effective only after the strengths, weaknesses, opportunities and threats have been identified as what has been done above. The categorization of strategies may follow a number of combinations of these factors. According to the BMW case study we can identify a strength and opportunity strategy, a weakness and opportunity strategy and strength and threat strategy.
Strength and Opportunity strategy
Effective brand management and communication will continue to ensure that BMW is one of the best selling brands in Europe. Maintaining a reputation for the brand name and product quality through establishment of the latest standards in automobile manufacture and the development of these products to the aspirations and aims of the customer will be desirable. Exploration of acquisitions and mergers by BMW through the revival and enhancement of their product strategy is vital. BMW will also look at maintaining close proximity to prospective buyers in order to promote market segmentation. The promotion of automobile technologies geared towards producing safer products is also a matter of consideration.
Weakness and Opportunity strategy
The restructuring of BMW’s top brass and the relinquishing of the Quandt’s controlling stake within allowing for consolidations across Europe effectively ensuring that BMW competes for markets with brands such as Toyota. This flexibility will open doors for a broader market scope and may in turn improve profitability.
Strength and Threat strategy
The standardization of the BMW products will open new doors for market across Europe and eliminate regulation slapped on non compliant products.
Its most certain that BMW would want to continue enjoying a strong brand management and communication campaign that would see their product as described in their slogan ‘the ultimate driving machine’ for the automobile. This will however be possible if they adopt their strength and opportunities strategy effectively meeting the aims and aspirations of the customer by maintaining quality and safety. However all this is determined by various market forces and BMW will position themselves at a strategic advantage as they adopt a resilient approach.
Johnson, .G. et al. (2005).BMW AUTOMOBILES Case study in Exploring Corporate Strategy, Text and Cases (7th Ed), Essex: FT Prentice Hall.
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