Strategic analysis automobile industry Assignment

Strategic analysis automobile industry Assignment Words: 2295

There are many factors that are affecting BMW current situation (see Appendix 1 ,2. 3 and 4), however the focus in this section of the assignment is the main factors from each of the analysis that have been completed. The following Information was collected using the PESETA framework. “The PESTLE analysis categorizes environmental influences into six main types, political, economic, social, technological, environmental and legal. It is particularly important that PESTLE is used to look at the future impact of environmental factors, which may be different from their past Impact” (Johnson and Schools 2002).

Environmental Influences Political “the Government’s own analysis shows that keeping motoring costs constant, by increasing fuel prices, will help it meet its targets to reduce congestion and pollution’ (Friends of the Earth, 2003). With an increase of prices customers will change to fuel-efficient cars, BMW must take note of this and manufacture those types of vehicles” (Appendix 1). Currently Bum’s have large liter engines making them expensive to run. Economic “The table below shows that consumer expenditure and savings have been growing in real terms since the mid-sass along with PDP”.

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This will increase productivity for Mini and it wows that BMW is an expanding business, which is good news for its shareholders. It should also help to keep its image high as any company that boosts employment is always seen as a positive input in to the community. Technological “If BMW can convert Europeans to automatic cars then they will be able to cut costs, as they will only be making one type of transmission. For the customer a reduced cost in the transmission system, will thereby reduce the overall cost of the vehicle” (Appendix 1).

As I have said above standardization reduces the overall costs but it also reduces choice for the consumer. Using the latest computer technology to create virtual Bum’s means they do not need to test, for example, structural problems on a mock up car” (Appendix 1). To introduce this technology probably cost BMW a fair amount of money but the benefits out way the cost. It is far cheaper to test hypotheses and theories on a computer generated vehicle than on a test car. It should also decrease the time it takes to create new vehicles. A new type of fuel has been introduced it is called Liquefied Petroleum Gas (ALP). A liter of ALP allows a vehicle to travel around 80% of the distance it could travel on a liter of petrol. If BMW could alter current car designs in order to use this fuel, conventional petrol car” (Appendix 1). Not only are there benefits in terms of lower costs for the customer, ALP is also kinder to the environment. Environmental “Carbon Dioxide is the most significant of the greenhouse gases contributing to Climate Change.

Cars are thought to make a significant contribution to overall emissions of CO in the I-J (Vehicle Certification Agency 2003). Basically if BMW can keep their cars CO levels as low as possible then their damage to the environment will be low” (Appendix 1). Watching out for the consumer or Social Responsibility is en important in the eyes of the public, if they can keep their CO levels low then the environmental groups will see they are trying to do a good Job in the environment and Bum’s image will increase. Legal “European legislation sets tougher emissions standards’ (wry. Sec. Be 2003) BMW will have to comply with this as it is Health and Safety law” (Appendix 1). Increased costs as BMW will have to spend more money on Research and Development to make sure all the vehicles they produce comply with European standards. All of the above BMW has little or no control over so it is wise that they have a plan or n idea to counteract any problems that could arise in the future. Competitive Forces The five forces framework was used to gather information on Bum’s current competitors and any new competitors that may enter the industry. The five forces framework helps identify the sources of competition in an industry or sector. Although initially used with businesses in mind, it is of value to most organizations” Monsoon and Schools 2002). Threat of New Entrants “However if an established car producer decides to introduce a car into the luxury market using unique strategies then there is little BMW can do about it” (Appendix 2). This is a very scary prospect for BMW because potentially any of their competitors in the market today could create a luxury car and then end up competing with BMW head on.

The Threat of Substitute Products or Services “There are many other manufactures of cars which compete with BMW, for example, Mercedes, Volvo and Lexus to name but a few but as long a BMW can be seen substituted” (Appendix 2). Currently BMW are trading on their brand image and as long as that is not damaged then customers are likely to remain loyal. “The threat of substitutes is rising because of the Government’s support for light rail ND the Ex.’s pressure on fuel emissions. The I-J will always have a strong loyalty to the car but the market could decline if rail becomes more competitive” (Appendix 2).

In the future BMW may not be competing with Just other car manufactures but they maybe completing with public transport as well. Competitive Rivalry “Volkswagen (W”): who own amongst other things Audio, which directly competes with BMW”. BMW will be very interested in keeping an eye on Soda (owned by W”) because they have launched the Superb, which is yet another car in the luxury market. “Daimler-Chrysler: Mercedes are included within this company. It was Daimler-Benz that purchased Chrysler and in doing so ‘left smaller, specialized carmakers looking vulnerable’ (Leonine, V 2001)” Appendix 2).

Mercedes in particular are changing the level of technology in their vehicles; they are adding more gadgets in order to appeal to the very wealthy customers in the luxury market. Jaguar: are launching a diesel car and they came top in the BBC Top Gear Customer Survey (covering factors like reliability and customer support etc), this shows Jaguar (under Ford ownership) are continuously improving their vehicles, which directly competes with BMW. The target audience that buys Bum’s want BMW to supply the best quality, reliable, luxury cars to the higher end of the market.

These are known as critical success factors, “critical success factors are those product features that are particularly valued by a group of customers and, therefore, where the organization must excel to outperform competition” Monsoon and Schools 2002). BMW can either lead or follow in the market. However the choice is not entirely up to them because of consumer spending and other such factors that they have no control over. Internal Factors Two frameworks were used to identify Bum’s internal factors, these were the source audit and the value chain analysis. A resource audit identifies and classifies the resources that organization has, or can make use of to support its strategic aims and objectives” Monsoon and Schools 2002). “The value chain describes the activities within and around an organization which together create a See appendix 3 and 4 for more information. Well skilled people – the use of well skilled people should lead to a better quality car, however skilled people are more expensive than low skilled people or assembly machines. Patents – BMW must make sure they renew and patent new technologies, this gives hem a competitive advantage which helps them stand out from the opposition.

Strong brand – any company wishes to have a strong brand because this lead to loyalty and repeat purchasing. Branding is incredibly important as “the ease of identification of the product as the point of sale and the connotations of quality and familiarity” (Broadcasting and Appetite 2000). Strong branding leads to loyalty to the company and in the future repeat purchasing. Outbound Logistics – “BMW transports their own vehicles via shipping and lorry to their intended destinations” (Appendix 4).

This gives BMW control over all the operations but it also leads to high costs in terms of lorry maintenance, driver wages Marketing and Sales – “Bum’s were mainly recognized as performance cars that, reflected the models imported in the sass’s. A secondary objective was to improve Bum’s reputation as prestige vehicle manufacturer” (Appendix 4). Without advertising it could be argued that BMW would not exist today, they require it to keep their customers up to date with their latest cars and to get new customers interested in their products.

Service – “They have an inventory of spares in order to do their Job efficiently and effectively” (Appendix 4). It maybe effective and efficient but it costs BMW money in terms of storage/warehouse space. Technology Development – “BMW have changed to creating ‘the most relevant and thoughtful technology’, the Japanese especially have utilized the latest technological advances in their vehicles” (Appendix 4). If BMW does not keep up with what others manufactures are doing then they are likely to loose sales to their competitors.

BMW has control over its internal factors and should therefore try to make sure everything runs as efficiently and effectively as possible. Recommendations Analysis of Bum’s objectives: refit per vehicle, but their competitors are making more vehicles in total. 2) To plan and undertake staff training so that their company can be a successful competitive business in their market. As they employee highly skilled staff they are giving their business a reputation for quality and reliability. ) To generate shareholder value by seizing opportunities in the market world-wide, building on their current business and focusing on high growth segments, while playing their part in the community and achieving the highest standards of integrity, customer satisfaction, and employee motivation. Except for the Rover crisis, which was the biggest problem BMW has faced in a long time, they appear to be trying to get into the American market, which will give them access to a relatively untapped sector. 4) Committed to fair-trading and aim to follow the best sales and marketing practice.

They have not had many problems in terms of sales and advertising. 5) To achieve best practice in their standards of business integrity for all of their activities around the world. They are seen as a company that provides quality luxury vehicles. On the face of it BMW does not seem to have anything to worry about, this is not true forever here are number of recommendations for BMW to take into account: Porter Five Forces Framework shows us they must keep an eye fixed on the competition. They are in a highly competitive market and practically the only thing differentiating them from their competitors is their brand name.

As the larger firms have bought a lot of the smaller companies, BMW is on its own now. They are at risk of being bought out themselves, but luckily they have a large loyalty base, which should keep them in business. Bum’s current strategy is to manufacture luxury cars. Maybe they should also ranch into other segments, for example, when Mercedes created the A-Class Hatch Back. They have already started by creating the Mini, but that is only a start, if they could make luxury cars for both businessmen/women and, for example families, they would have entered a totally different market.

Relying on Just the luxury car market is risky and apart from specialist car manufactures BMW is practically the only firm that does only operate in one market. BMW needs to constantly monitor the critical success factors because they need to outperform in each category (reliable, quality, luxury cars) in order to surpass their imitators and become the market leader. BMW could use the Internet to sell directly to the consumer, giving them more control has been passed which says no car garage can be exclusive to one brand of vehicle, whereas the Internet can.

In terms of advertising BMW could, for example, focus on safety in their cars or place their Encamp results in the commercial. This would tell potential and current customers that they are attempting to out perform their competitors in terms of the critical success factors (providing luxury, quality, reliable cars), they would also stand UT from the competition as no other luxury car company shows this type of information in their advertisements. If they do not have a plan to counter act any problem or opportunity that could arise in terms of competition or technological advances etc then they should create one immediately.

Lexus are trying to get into the company car market using the skills they have developed for making low cost Toasts; they can produce more Lexus vehicles quicker than BMW. If BMW used more overseas suppliers as they are trying to do this should help them to lower their costs. Using the money they saved they could undercut Lexus and get themselves into the company car market and earn substantial profits. The Value Chain Analysis shows us that BMW manages their own distribution network.

This requires them to own and maintain their fleet of lorries, it maybe cheaper for them to use a separate firm for delivering their vehicles. From the PESETA analysis it was evident that particularly for England where fuel prices are highest it maybe wise for BMW to concentrate on fuel-efficient cars, as that is what customers will be asking for. They could also solve this problem by designing ALP, more efficient Diesel or dual fuel cars (which use both fuels). The Value Chain Analysis has also identified that BMW holds an inventory of suppliers in their repair garages.

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