Bmw And The Automotive Industry Porter Competitve Forces And Sowt

2149 words - 9 pages

1. Introducing Industry Life CycleThroughout the Firms Industry Life Cycles (ILC) many challenges Faces the Managers that needs to tailor the Firms or Company Strategy , these changes on the Strategy called the "Strategy Fit" , actually managers will depend on certain Input factors ( The Current ILC Challenges ) which are weighted when choosing the best strategy to fit the current ILC (The Strategy for Success ), these Factors that affects managers decisions in choosing the Company strategy depends on the Industry life Cycle phase Introduction, Growth, Mature , Decline, Focusing on Maturing and Growth ILC phases as they are related to the selected companies in this paper, .As defined by (Thompson and Strickland 2005), Maturing industries Challenges are mainly the Slow Growth in demand which generates more head to head competition, Buyer become more sophisticated more familiar with competing brands with hard bargaining due to repeated purchases, More focus is on Service and Price combination Competition, Challenge of innovating new product feature of find further use of the product current features to keep attracting buyers attention, Globalization competition for new International markets, Pressure on the Industry profit margin.Strategic Success for Competing In Maturing industries by Introducing a wide selection of features in the products, Enhancing the Industry value chain for example increase use of advanced technology , Integrate the Suppliers by internet to streamline various value chain activities , Drive down unit cost , developing more economical product design , Increasing Sales to present customers using promotions or more services, Acquiring rival firms at bargain price , expanding internationally , Adapting core competency according to customer requirements and expectations and pushing it towards distinctive competency where the firm better then rivals .2. BMW & Automotive industryA. Introducing Bayerische Motoren Werke 'BMW''BMW was found in 1913 by Karl Rapp as an aircraft engine design shop. After WWI, it started building motorcycles and then expanded into motor vehicles industry during the 1930's. After WWII, the company suffered again but survived later when Herbert Quandt took over the control in 1959. The company rapidly grew considerably and reached a market value of nine billion U.S. dollars in 1979.'(BMW 2006, Corporate)However, it was still small compared to the big U.S. automotive manufacturer. Profits continued to grow up quickly. By 1995, BMW had (34) wholly owned subsidiaries,(14) in Germany and (20) around the world, BMW is not only a car maker; they are one of the world leaders in motorcycle production, aircraft engines, in addition to marine engines. BMW has a long history of providing the best engineering possible in the market.B. BMW External Environment Competitive Forces Porter's 5 Forces and Resources Competitive Positions (SWOT)Strengths with respect to Rivalry among Competing SellersBMW is having a repetition of building a driving machine that respond faithfully and enjoyably to their driver's commands while also providing the safety, style, quality, reliability, and durability that help make long - term ownership. And their dealer's attention to service. Leading to a strong BMW valuable 'Distinctive Competency' Facilities. On the other hand BMW's factories are considered very flexible and most productive in Germany utilizing the latest technology in each phase of it's value Chain; its suppliers are the industry's best; and the workforce among the industry's most talented.BMW attractive product variations were a very good source of strength , for example the MINI Car released with navigation systems and sunroofs along with BMW brand Quality leading to unexpected increase in the MINI sales , also BMW is Enhancing the Value Chain Activities (Specially The Supply Chain) Using the Shared components. BMW is able to keep overall costs down by using shared components across its similar-sized cars. For example, the 5 Series shares components with the X5 and the 6 Series, and the 3 Series shares with the X3, and the 1 Series.All the above Strengths and Many others has places BMW in a good position with respect to The major Strong players in Terms of Performance, Features, dealer networks , Foreign Markets, for example Lexus, Mercedes-Benz, Audi, and even Cadillac .Where Rivalry among these competitors increases when they Competes Globally in US car market, Europe and ,Eastern Europe and South-east Asia, But BMW Strong Brand is more costly to be Switched Specially for Quality Conscious Customers which makes strong competitors .Weaknesses While Moving towards Globalization and Potential Entry of new CompetitorsLooking too far ahead too fast Rolling out a new or updated model nearly every three months ,may shift emphasis on getting a new model to market rather than focusing on issues that may develop with existing models, issues such as software, and mechanical problems.Manufacturing costs. Compared with other volume producers, BMW's manufacturing costs are much higher, its product development process more costly, and its purchasing costs are higher. Reflecting these risks, BMW shares have slid 41% to $32 from a year ago (2002) .Need Web Reference OnlyRelying on 1 Series. BMW is relying to heavily on one model, the 1 Series to maintain its high margin. They are also realizing profits due to the strong sales of the loaded models of the Mini, but need to diversify, or in other words not keep all their eggs in one basket.Shared components. Although this can also be identified as a strength it can also be a true weakness. If cars are using shared components or if they are too similar, it could lead to cannibalization of the sales of higher priced models, in BMW's case the 3 Series.Threats and Increase in Buyer Bargaining PowerStrong Competition with the major players that BMW needs to look out for , Lexus, Mercedes-Benz, Audi, and even Cadillac. As an example, the Lexus RX300 SUV rivals the BMW X5; the Mercedes E-Class still outsells the BMW 5 Series worldwide; Audi 3, 6 and 8 Series compete directly with BMW's 3, 5 and 7 Series; Cadillac which has a whole new generation of models on the horizon , leaving Buyers with Strong power in building preferences and getting more information from different and in general reduces the cost of switching so finally create a major 'Driving force' for competition .Receptiveness of '1' Series may diminish the BMW brand in the eyes of the '7' Series buyers. The '1' Series models may be viewed as cheaper cars with less quality. It could also be viewed as a tactic for BMW to obtain higher sales volumes .Outsourcing. To speed the X3 to market, BMW outsourced development and production to Austria's Magna International Inc. 'Magna Steyr' is dedicated an entire factory in Graz to making up to 150,000 X3s per year, leaving a question mark on BMW quality control on the product .OpportunitiesAttractiveness of the Success of new series . BMW has been successful with the release of the Mini throughout Europe and the US. To continue with this success, they are also offering a diesel version released in the spring of 2003. Also, BMW is offering the new '1' Series subcompact that goes head-to-head with the Audi 3, Mercedes A-Class, and high end versions of the Volkswagen Golf. Also the X3, a downsized version of the X5 sport-utility vehicle. In addition, BMW also introduced the 6 Series convertible and a station wagon version of the 5 Series.Changing Social Concerns , life style , Strong potential in targeting customer groups that are not or not primarily targeted by BMW yet, but are interested in the brand and have high buying potential in BMW's products currently or in the near future due to changes In life style . These groups include students and women, with students becoming part of the target market with the start of their careers, and women providing sales opportunities due to increasingly higher level of completed education as well as higher paid jobs compared to a decade ago.Sellers Substitution productsBMW did not yet Take the Clean Fuel Move , While hydrocarbon-based fuels make cars go, the automotive industry moves forward on a very different fuel--silicon chips. Advancements in chip technology are widely acknowledged as a major driving force in the communication, computer, and consumer-appliance market segments. These advancements, with clean energy Trends can be Substitution threat for many automotive manufacturers, although there is no notices sales and brands for such clean fuel cars it can be a real threat in the future .Supplier Bargaining PowerWith a Brand like BMW, and a strong potential and position the suppliers bargaining power become very week , although some of the BMW critical technology components still provided by limited dominant suppliers , but in general BMW has a power over it's suppliers , suppliers factories are always near BMW main factories to provide the Just - In - Time production components , also the Quality control is a major process takes place before producing the final product .Competitive Strength analysisAssumption :Competitive Strength Assessment (From The Web , BMW , Merche, Audi ,,( >>C. BMW 'Differentiation focus' Competitive Strategies :BMW Differentiation focus Successful Competitive Strategies is based on the brand image of BMW as a favorable and strong, BMW reflects mostly style, high quality, up-to-date engineering and high performance to a target audience of highly brand-aware individuals, The BMW Group concentrates on selected premium segments in the automobile market. This means that it is the only multi brand automobile manufacturer in the world that is not active in the mass market, i.e. the volume segments of the automobile market, BMW achieve higher revenues per Sold Car, on the basis of a high value and quality product Content and an unmistakable brand profile "premium brand strategy". The BMW Group pursues this premium brand strategy with the BMW and MINI brands, and, since 1st January 2003, with Rolls-Royce. This means that it will cover the premium segments from the small car to the absolute luxury category.D. BMW Competitive Strategy Fitting with the Maturing Automotive industryLooking on the Automotive Industry in general we can see that it is in a maturing life cycle, where nearly all potential buyers are already users of the industry products , Demand consists mainly of replacement , with growth totally depends on the Competing firms abilities to attract new buyers and convince existing Buyers to upgrade their usage , also the Key success factor (KSFs) is mainly the cost efficiency.BMW is Tailoring it's Strategy to fit with it's current maturing Phase of the Automotive ILC, By focusing on the Supply chain activates enhancement , the outsourcing of the 'Magna Steyr' is a good example for a fast low cost product production , This move could be an innovative alternative to building new Costly plants, but this strategy leaves BMW with only limited control over the final product .BMW took good steps in driving the High cost down with again focusing on the design and production activates 'Operation Activity in the Value Chain', although the shared component is a good idea for cost reduction , but also BMW High different in the Prices of it's product series could be an important factor in customer perception to the concept of the product features and design, perhaps focusing more on other cost reduction areas and avoid disturbance to customer perception can be a recommended option .As part of BMW Strategy Tailoring by developing more economical product design, and focusing more on the technology innovation that reduces the cost in the over all value chain , for example BMW has achieved a big mile stone in automotive finishing by using the RoDip-3 technology, a new method for pretreatment of the electro coating vehicle bodies that provides many enhancements and reduce cost to this process as explained by Christoph Klocke from BMW group'The First of these new pretreatment and electro coating plants to be installed any where in the world is now operating in BMW group'(Paintandpowder 2003, p23-28)Being one of the Market Leaders, BMW was very successful in adapting it's Sales strategy with customer new needs and new preferences , BMW offered the 'BMW financial Service ' to facilitate the customer financial payments Utilizing the Internet technology and many payments facilities .


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