Abstracts

Every company that operates in todays world face few challenges, either in the form of
intensive competition, natural resources or other factors. Some companies however, strive to
convert those challenges into their strengths to stand out of competition while others may not
even be able to secure their opportunities and fail to gain any competitive advantage. To
analyze the current position of companies and ease comparison we apply various methods of
evaluation. This report will use PESTNED analysis, Porters 5 forces and Porters 3 Generic
Strategies to be implemented on BMW to draw an appropriate conclusion.

PEST-NED Analysis:
This technique analyzes the company in 5 different aspects; political, economic, social,
technological, natural environment and demographics.
Political:
The BMW Company has many political constraints on its future performance as government
interference in all over the world especially North America has increased in the recent years. It
is not surprising that government interference and regulations have intensified in past years on
companies producing products that are harmful for the environment. Go green is a common
phenomenon in countries worldwide forcing companies to produce in an environmentally
friendly way and reduce carbon dioxide emission released by vehicles. These laws will increase
costs for BMW as it will force them to replace their production plants that are environment
friendly.
Economical:
The US GDP per capita in 2012 was $51,746 according to the World Bank data (The World Bank,
2014). http://data.worldbank.org/indicator/NY.GDP.PCAP.CD However, according to IMF it is
estimated to increase by more than 20% by 2019 (IMF, 2014). This suggests that US economy is

going to have a healthy growth in the next 5 years increasing chances for BMW to distinguish
them in the market and generate outstanding performance.
As BMW is also known because of its exceptional financial services, interest rates would have
huge impact on its performance. Tailored financing including various insurance policies can and
may generate good profits for BMW but only if it anticipates the future interest rates. As BMW
financing involves fixed term contracts at fixed percentages, volatile state interest rates can
create undesirable performance for the group.
Another common problem that could be a hurdle for BMW is inflation. As there is expected
recovery in US economy, rising prices will be inevitable. For BMW, rise in prices of raw materials
mainly, steel and aluminum could be very dangerous as wrong anticipation could make their
products underpriced and incur lower profits and even losses while at the same time higher
prices could leave their products over prices and therefore uncompetitive in the market.
Social:
BMW has always achieved an edge in social aspects as their products are for various age groups
in the markets. From ultimate luxury for older people to sports and convertible for younger
generation gives BMW a unique position in the market. The new strategy of economically
priced average sized sedans and hatchbacks have created new demand for BMW products in
developing economies.
Technological:
Increased awareness all over the world has increased demands for technologically advanced
products. Although BMW has already strived in this field with increase in spending on research
and development (R & D) year by year but still the competition is tough. In 2011, BMW had
spent almost 6 % of its revenues on R & D and this increased around 18% in 2012 (BMW FS,
2012). With its production of more environmentally friendly cars such as hybrid and hydrogen
driven cars, BMW has managed to maintain its position in the market. If intensive development
is not taken place in new and better technology, BMW may be outturned by its competitors.

Natural-environment:
Due to the nature of vehicle production, environment is always a sensitive issue around the
world. Recycling of waste products and environment friendly production plants is essential for
companies these days to stand out of competition. It produces a positive image in the eyes of
end user and also helps cut costs and produce more efficiently. BMW has however, invested in
producing more green cars and has made a positive image by providing hybrid and hydrogen
driven cars.
Demographics:
BMW has a product for almost every age group; this distinguishes it from its competitors. They
also provide customized experiences for individuals to provide a more favorable market image
in consumers. However, BMW should still work on more economically priced cars for middle
class of the economy. This would increase their target audiences and reduce risks.

Porters 5 Forces
Bargaining power of suppliers:
BMW as being the manufacturer of various vehicles around the world, catering the private
individuals have extensive production facilities. Their main raw materials would range from
metals to aluminum to plastic and rubber for cables. Due to their production size of vehicles
and spare parts, BMW may have the negotiating power over its suppliers. Although quality is a
very essential component in BMW production and this may lead to limited suppliers creating a
balance over supplier negotiations.
Bargaining power of customers:
For any company to be successful customers are the most important part. It is always easy for
consumers to switch to other brands if they are dissatisfied by the company products.
Especially in car industry switching costs of customers is relatively low. However, for a luxury

car manufacturer this makes it more vulnerable for customers to switch between products.
Sheer luxury is why the customers pay more for BMW while they can still travel in much less
cost on a Toyota. If they wont get what they are looking for, they will easily switch to other
brands. BMW in this regard provide customers with exceptional CRM and financing services
that makes them feel important and increases brand loyalty. These services are important for
securing customers especially for a luxury brand like BMW.
Threats and barriers of new entrants:
In every industry there is to some extent a threat of new entrants, it even does in the transport
industry but in the case of BMW, there are many barriers to entry.
Manufacturers like BMW charge excessive premiums on their prices because of extensive
spending on marketing, promotions, research and development and distribution networks. For
any company to enter in such industry would require exceptionally high amounts of capital
investment in setting up advanced production plants and competing with brands such as BMW
and Mercedes which already enjoy economies of scales and brand loyalty from their customers.
Therefore, there are fewer threats of new entrants and pervasive barriers to entry.
Intensity of Rivalry amongst Competitors:
The market is without any doubt very competitive in luxury vehicles. German and other
European brands have among them fierce competition. Due to their reach all over the world
with efficient distribution channels and internet, companies have tried to mark themselves with
competitive advantage. Due to high marketing budgets of these companies have further put
competition to no limits, the very recent advertisement of Jaguar depicting Cat like reflexes in
reply to Mercedes Magic body control is an example of the intensity of competition.
Influence of Compliments:
BMW has strong influence over complimentary products. Fuel for example is a very strong
compliment to vehicles and fluctuation in its prices may damage the demand of transportation
in private cars. However, in the case of BMW, it is much more than just a means of

transportation as customers are willing to spent way more on a BMW while there are cheap
options available. Thus, oil prices or other compliments might not as much affect the demand
of BMW.

Porters 3 Generic Strategies:

Cost Leadership:
Companies fall in this category when they provide services at a very competitive cost. In the
vehicle industry examples for this category would be Toyota and Nissan. However, as BMW
charges premium price from their customers, they dont have cost leadership in the market.
Focus:
Companies in this category provide their products for a particular group or sector on the
economy, often called as niche marketing. However as for BMW, they provide range of vehicles
for various demographics including aged and youth. Thus, there are no signs of BMW adopting
niche marketing strategy.
Differentiation:
Companies here try to stand out of the crowd by providing some sort of exceptional service.
BMW seem to have differentiating strategy in place as it strives to provide sheer luxury and
service that distinguishes it from its competitors. Customers know BMW and are loyal to the
brand due some very unique comfort and luxury in its vehicles that they dont find in other
brands. Their slogan The Ultimate Driving Machine explains a lot about their strategy.

BMW Mission Statement

The BMW Group is the world's leading provider of premium products and premium services
for individual mobility

BMW Vision Statement

Three brands, one vision - to become even better

The BMW Group mission and vision statements are very short, clear and understandable. They
have not made it complicated or difficult to understand like some other companies. Anyone
unaware of BMW can clearly find out by their mission statement that they provide luxury
products and services in the form of individual vehicles.
Their vision statement is likewise very briefly explaining that BMW strives to become even
better. The word even has a meaning that they are already better but it does not stop here as
they want to be even better. Although it couldnt be clearer but still a little more about their
vision and mission would have helped consumers to make a more complete image of BMW. In
their statements they provide absolutely no information of what sort of individual mobility they
provide. Of course they dont tend to complete nor provide any exotic sports cars such as
McLaren or Koenig. Similarly in their vision statement they dont give enough information about
their three brands and what exceptional every brand offers.
Therefore,

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