Bmw Group Case Study
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Introduction
Fundamentally, the automobile industry is a textbook example of an industry where economies of scale pay a very important role. While there may be dozens of players around the world who produce, support and work with the industry, there are only a few producers who can claim to have a significant share of the market. Similarly, even though cars are produced in almost every developing and developed nation, only a few countries contribute in a significant manner to the global car production and consumption statistics. This can be attributed to the fact that the first automobiles were produced and developed soon after the industrial revolution by countries that had the required infrastructure and engineering skills. For example, the first steam powered three wheeler was built in France in 1769 and the first internal combustion engine was built in Belgium while the Germans made the predecessor of the modern car in 1885. Ford started his assembly line plans in 1896 and the mass production of motor vehicles was created as an established industry (Baki, 2004).
Car industries are noted to be one of the most essential means in the major part of the market worldwide. Nevertheless, with the existence of business environment of globalization and the competition in the automobile industry, the competition has become fierce. Primarily, this paper will analyze BMW and the competitive environment through the use of Porters Five Forces Model.
Overview of BMW
The BMW Group is the only automobile and motorcycle manufacturer in the global market which focuses entirely on premium standards and excellent quality for all their brands and across all significant segments. With their brands like MINI, BMW, and Rolls-Royce Motor Cars, the industry has been emphasizing on selected previous segments in the global auto markets since the year 2000. In the succeeding years, the introduction of the BMW 1 Series meant an extension of the model range in the premium segment of the lower and average class and the BMW 6 series did likewise in the segment of the Large Convertibles and Coupés. The MINI marque was introduced in 2001 and the production started in the Oxford plant. In 2003, this automobile industry assumed marque accountability for Rolls-Royce Motor Cars.
BMW is a global brand and it has to position itself according to the global market requirements for high end cars. The automobile industry was established during World War 1 to produce engines; in year 1945, the industry was still considered as the leading manufacturers of aero-engines in Germany. However, the company diversified into what in 2000 to produce cars and motorcycles. After their diversification, the company has maintained its position to be the largest and most successful German companies. However, the road for sustainable advantage for the company has been affected by various market environmental factors. In this regard, it is important to analyse competition in automobile industries in 2004 through the use of Five Forces Model by Porter.
Porters Five Forces Model
Accordingly, an industry is a group of firms that market their products nearly related and substituted from one another (Porter, 1980). It has been stated that some industries tend to become more profitable and competitive than their rivals; thus, industries like automobile industry should be able to maintain competitive advantage through their business strategies (David, 2001; 2008) to sustain their competitive position. Porters (1998) competitive analysis identifies five fundamental competitive forces that determine the relative attractiveness of an industry: new entrants, bargaining power of buyers, bargaining power of suppliers, substitute products or services, and rivalry among existing competitors. Competitive analysis leads to insight in relationships and dynamics in an industry, and allows a company or business unit to make strategic decisions regarding the best defendable and most economically attractive position.
New Market Entrants VERY LOW
The first factor to be given emphasis in the market environment is the threat of threat of new entrance of new automobile industries. With the emergence of globally competitive automobile industries naming BMW, Honda, Ford, Toyota or General Motors, the threats of entry in the car industry can be considered to be very low. New entrants threats is very low since a new car industry will need more capital investment and financial resources to pursue the business along with high proprietary technology to manufacture or product automobiles that would compete strongly with the existing models made by the industries mentioned above. Moreover, new entrant threats are also very low because of the strong brand identification of companies like BMW in the global market.
BMW is an automobile industry which is a prime example of how economies of scale and costs to entry act as a barrier to entry for new manufacturers and it is unlikely that too many companies in the world would have the finances to take on the giants in the industry. However, it can be said that entering into the market as a niche producer of super luxury, super utility or super cars for that matter might be possible. This is because establishing a niche in the market where everyone else is factory producing their cars could be one of the only ways in which brand differentiation can be established. Even then, a company would need to establish itself as a brand over time and custom produce cars until they could get to a point where mass production is possible.
It can be said that entering in automobile industry In the automobile industry is very complex since there are different barriers for entrants. Although in the case of car industries, the barriers to entry