Marketing outlook of BMW
By UMAR HUSSAIN - W168473141
CW 1 - CIROC VODKA
CW 2 - BMW
II. PEST Analysis - almost done
III. Porter's Five Forces Analysis
IV. SWOT and Positioning Strategy Analysis - almost done, just positioning left
V. Ansoff Matrix
VI. BMW's Social Responsibility
VII. Referencing List - pending
102 Years of “Sheer Driving Pleasure”
Bayerische Motoren Werke, translated into English as Bavarian Motor Works also known as BMW initially started as a struggling airplane engine manufacturer eventually emerging as one of the flagship luxury car manufacturers in the world. From sheer dedication, BMW grew from a small warehouse in Munich, Germany to one of the global power houses in automotive engineering. BMW was founded by a man called Karl Friedrich Rapp in 1912 (BMW, 2018). Shortly after BMW was founded, it was only a matter of time when World War 1 had commenced. The two world wars had affected BMW in terms of its production. During the first period of WW1 it had struggled to maintain sales of their engines. Determined to stay afloat, BMW then created an engine that revolutionised the aircraft engine used in the German war planes. The German based company had created a 185 horsepower engine (4) which had increased the air speed of an airplane from 117mph to over 125mph (PBS, 2018). The dramatic increase of the power and efficiency of these new engines had meant that BMW had received many orders from the German war plane manufacturers. These orders really helped BMW take off and soon BMW were operating in multiple locations in Munich. If it wasn't for their revolutionary engine development, BMW would have most likely failed as a business.
Currently, BMW stands as one of the most world known faces in the luxury car market alongside Mercedes and Audi (Quora, 2018). BMW has engineered some of the most iconic motor vehicles to ever grace the racetrack including the fully electric i8. Lastly, the BMW Group also owns the iconic Rolls Royce Motor Cars and Mini Cooper (BMW, 2018).
For the future, BMW has a “Vision” The vision carries on its mission statement “Sheer Driving Pleasure” as its centre focus (BMW, 2018). We shall be seeing more of their innovations during the 2019 Geneva Motor Show in March.
To conclude, the aim of this report will be to analyse the external factors that influence BMW and its decisions. I will be also taking into account many factors such as the industry which it operates in and the strategic positioning of the company within the market and the marketing strategy used for its cars, which includes the iconic double grill at the front of every BMW since production for cars started. Lastly, I will be ending with the problems of sustainability and ethics of the company with its aims to reduce its environmental impact.
A PEST analysis involves a spectrum of factors including Political, Economic, Social and Technological that affect BMW's market performance.
Political factors involves government regulations and the legal factors that will affect and influence BMW as a business. Other factors addressed include tax, trade and safety regulations and political stability and status. This includes the ever increasing threats and pressure to ban diesel and petrol cars by governments by 2040. From BMW's perspective, they have adapted to the regulations and still make record sales. This means that BMW have continued with their main statement as “Sheer Driving Pleasure” and managed to create a simple user friendly mechanism to switch into a more eco friendly mode.
Economic factors revolve around the outside issues that will affect BMW's success in financial terms. Some of the factors include interest rates and exchange rates which mean that BMW could either source parts for cheaper or more expensive, which in turn will affect the final on the road price of the car. Other factors include unemployment and credit availability which will affect BMW as more than half of the cars on the road in 2018. Also, with the uncertainty of Brexit, it will mean consumers will be more likely to be saving money instead of spending due to the ever volatile exchange rates. This will also affect the way BMW operate in the UK meaning that if UK do exit the EU, there will be very high import taxes which will mean UK produced BMW's could skyrocket in price.
The overall performance of the middle class and the upper class is which really affects BMW's sales as this is their main consumer groups they are targeting. If there are huge taxes being placed on income, it will mean people will have less of a disposable income which will result in less sales for luxury brands including BMW.
The Social factor of the PEST analysis revolves around the given socioeconomic environment of the industry's market. This includes preferences of consumers and their needs and wants. It also includes the demographics, population growth and age distribution of the industry. Furthermore, it involves factors such as job market trends. Job Market trends are analysed to see how much wealth there is in a market. Due to fuel prices rising, people would want to save on fuel, BMW's answer to this is their Hybrid selection of vehicles. BMW has adapted to socioeconomic changes by creating a wide range of vehicles including off road, family cars and smaller hatchbacks.
Technology plays a huge part in BMW as new technology means they can be producing cars at a faster and more efficient rate in their production factories. This will in turn mean that they will save money and time and in the end mean that they can produce more cars in a shorter amount of time. Due to BMW being one of the largest in the luxury car market it means that they benefit from large Economies of Scale which is also a positive. On the consumer side, BMW has innovated its hybrid electric car selection which includes the i3 and the i8 which is fully electric which will mean that users will not have to spend massive amounts on petrol and it is way more eco friendly with virtually no emissions apart from manufacturing emissions.
Porter's Five Forces Analysis
Porter's Five Forces is a tool first created by Michael Porter (3) to give an insight to an industry's attractiveness and likely profitability. (CGMA, 2013) Since it was created it is one of the most used tools to analyse an industry. In BMW's case it will be the automotive industry, particularly the luxury car market.
A SWOT analysis analyses the strengths, weaknesses, opportunities and threats of a business. In our case we shall be analysing BMW.
The first strength of BMW that distinguishes it from other car makers is that the group consists of BMW, MINI and Rolls Royce all positioned in the luxury segment. Moreover, BMW is not just a car maker, it is one of the world leaders in motorbike, aircraft engines and marine engines (6). This means that BMW has plenty of expertise and capacity to manufacture in their field, with its engineers having very wide knowledge as opposed to most other luxury car manufacturers. This has resulted in BMW being one of the leading brands in the automotive industry, and they have succeeded in positioning themselves as a premium brand.
Furthermore, another strength of BMW is that the have been one of the first to emerge and market in the Asian market. Due to the Asian market picking up pace with the likes of India and China being one of the fastest growing economies in the world, BMW have started earlier than all other premium car makers by setting up operations in the Asian market. This is a strength as they will be exposed to many new consumers which will help increase sales. In the Asian Market BMW is now one of the top selling luxury car brands in India and China which has made their early move to the Asian Market very profitable.
Weaknesses include BMW's notorious car recall (ref/). For a brand of this magnitude, any issues on the production line could be very disasterous. This was seen where BMW had to recall over 1.6 million vehicles due to airbag concerns. Although BMW is taking extra precautions with safety, this should have been spotted much earlier. For the size of BMW, this is affecting its brand image.
Another weakness includes the less brand wary new generation. The new, younger generation is more likely to spend online or on new gadgets and technology then saving and spending on a premium car (7). Also, with the likes of Uber and Lyft, it is easier than ever for the younger generation needing a car as within a few taps they can get from A to B. This is a weakness as the less appeal means that in years to come, BMW and many of the other luxury car makers could see a dramatic fall in sales.
There are plenty of opportunities presented to BMW in recent years. This includes fuel prices rising in the future due to fuel being a scarce resource. Following a trend that when fuel prices are low for extensive periods of time, demand for big engine automobiles such as SUV's and pickup trucks increase. However, when fuel prices rise, demand for smaller more economical vehicles increase dramatically. This is an opportunity for BMW as they have not invested much into its larger engine cars but they have been investing in making engines smaller and more economical. This will increase demand for BMW as currently speaking, fuel prices are on the rise, and they will not be going down due to heavy government taxes.
Another opportunity for BMW is that there is an increase in demand for autonomous vehicles. . It is expected that the value of the autonomous driving market will be over £40 billion by 2025. Many researchers also state that autonomous driving is the “next big thing” for the automotive industry (8).
Although plenty of opportunities, the last I will be mentioning is current affairs. Since BMW operates from an EU country, most of the revenue they earn is in Euros. This means exchange rates will not particularly affect their profits in these countries, however once you move across the globe to America, the exchange rate has been weakening against the Dollar for a few years now. This means that on average, American consumers can afford BMW's for a cheaper price as they have much more purchasing power in their dollar compared to BMW's Euro. If BMW pushes to market even more in the American market, it will mean that BMW can increase sales dramatically as more and more American consumers can afford the luxury vehicles compared to a few years ago. This is only on the condition that the Euro stays weak against the Dollar.
Finally, the threats BMW has to face is the looming menace of government regulations that may raise the cost of production of non green vehicles. Due to most of BMW's automobiles being reliant on hard oil such as petrol and diesel, on the supplier side, BMW may have to pay excessive taxes which will reduce their profit margin and on the consumer side, fuel prices will be constantly rising highly taxed upon by government, meaning consumers will leave BMW behind to seek more greener vehicles.
BMW's Social Responsibility (Corporate Social Responsibility)
As a worldwide company, BMW has a responsibility to give back to the community, maintain good morals and ethical practise and to reduce its environmental footprint. BMW have its own CSR strategy which its goal is to attain the highest level of sustainability throughout the manufacturing process and the end product which is the vehicle which includes a few measures.
The first measure is “Green Logistic Concepts” (Research Methods, 2018) (11). This involves minimising the global footprint of transportation of goods. This includes anything for BMW where it is transporting the vehicles or transporting the individual parts to the manufacturing base. Green Logistic Concepts is an ideology followed by many transportation companies. It includes reducing climate change, air pollution and carbon emissions by investing in greener logistics vehicles (Green Logistics, 2016). This will include eco friendly trucks and safe and secure transportation of goods.
Although BMW and many other car manufacturers have been confronted with ever so stricter emissions standards (Prezi, 2018) (12), BMW has responded with grace, implementing “Eco-Pro” and “Efficient Dynamics” in all of its newest vehicles to reduce emissions from them. This is a smart and environmentally responsible move by BMW as many other car manufacturers are struggling to keep up or destroying current models and replacing them with electric models which the consumers would not like. Furthermore, BMW has striven to continue reducing its energy and water consumption and increase its recycling. The figures are remarkable with both energy and water consumption declining by over 31% since 2006 (Research Methods, 2018) and its total waste disposed declined by over 79% (Research Methods, 2018) (13).
BMW is also involved in many programmes to support local communities (Research Methods, 2018). This includes a “Care 4 Water” programme taken out with a non-profit organisation “Waves for Water” which in present in many countries such as Sierra Leone, Indonesia and Haiti (Waves For Water, 2016). This included BMW's own employees where they raised money to support third world countries and communities where access to clean water was scarce. (Research Methods, 2018).
Ethically, BMW also stands out, where they have strict gender equality and minorities equality in the work force. Over 14.5% of management positions are taken up by females within BMW (Research Methods, 2018) and they guarantee a gender neutral recruitment system (14). Lastly, BMW also invests heavily into its own workforce to “Educate and Empower” them. This included over 350 million Euro spending (Research Methods, 2018)
From my point of view I believe this approach used by BMW has been very successful as they still remain one of the leading brands in the automotive industry (Car Review, 2018) and the fact that they can help consumers be more environmentally friendly themselves by implementing automatic features such as “Efficient Dynamics” (BMW, 2018, it will deem popular with consumers as opposed to any other car brands.
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