Analysing Bmw and the Automobiles Industry
BMW – the Bavarian based luxury car producer is seen as one of the most prestigious, stable and admired companies in the world. By 2008 the company sold 1.2 million automobiles under its largest brand – the BMW. In 2001 it very successfully launched the new Mini which is the only brand kept after the failed acquisition of the Rover group with sales rising to over 230 thousand in 2008. In 2003 Rolls Royce was added to BMW’s portfolio and sold 1,212 units in 2008 – an increase of 53% compared to 2004 (BMW Annual Report 2008, pp6-7). The company has not only one of the strongest brands worldwide and exclusively high profit margins of 8 – 10% but since ...view middle of the document...
Increased cooperation could not only be found among car manufacturers but also with their suppliers. Wide-ranging 1st tier outsourcing, including R&D, modularization, and supplier parks were being commonly used in car industry (Jung and Lee, 2006). Furthermore by the 21st century the quality and technology of the cars had risen to similar standards. In addition, companies were increasingly using the same platforms and other components in different models in order to increase profitability. The consequences were that cars produced by different companies looked very similar and the low differentiation led to increased price competition. (Lencioni, 2005). In addition to that, overcapacity had also become a concern within the industry (Oliver and Holweg, 2008). As a result companies were lowering prices as well as offering incentives which, however, had negative influence on the profitability of the whole industry. At the same time it stimulated a shift of competitive advantage to product design, marketing and brand-building (Lencioni, 2005). This was also true for the premium segment with new entrants and models coming in, particularly from the Japanese companies.
In the meantime the product variety and customer service had also increased. An investigation by ISDP identified that the sales of cars with exact specification had increased from 31% in 1992 to 78 % in 2002 while build-to-order car sales rose from 10% to 43% and the service level (in the dealer perception) increased from 80% to 95%. (Turner and Williams, 2005). A wider variety and increasingly heterogeneous market have in turn implications on car manufacturer’s organisation and technology. Assembly plants have become smaller, more flexible and new methods, like lean management, just-in-time (JIT), kanban and others have been introduced (Morris et. al., 2004).
For the company to be successful, it is crucial to analyse the wider environment carefully in order to anticipate changes and be proactive. The concept of PESTEL will be employed to analyse the different but overlapping and interrelated areas (Johnson et. al., 2008, pp54-57).
The ‘green agenda’, including such issues as pollution, waste, climate change and resource deficit, has become an important topic in the 21st century. Given that the road transport contributes 20% to the EU's CO2 emissions while passenger cars account for approximately 12% (EU Press release, 2007) there is a general concern about the future of the car industry. The producers of large, premium automobiles such as BMW that very often are very fuel-consuming are seriously affected, particularly in the long-term.
With the car being highly sensitive to price and consumer income, the car industry is very vulnerable to economic changes (Akpinar, 2007, p175). The global economic downturn in the beginning of 21st century led to lowering demand for cars, however, as Hawranek (2008) argues that premium cars...