Introduction
The economies of modern era are volatile, and they are influenced by the rapid changes that are occurring throughout the world. However, an on-going position of an organization in the market depends on the evaluation as well as analysis of the surrounding. The successful organizations conduct environmental scans on periodic basis in order to analyze what the competitors are doing but their main focus is to consider those aspects that can help them in winning the race (Harari, 1994). BMW, i.e., Bayerische Motoren Werke is one of the leading players in the industry dealing with car manufacturing. It has occupied remarkable position because of the powerful strategic intend, which has enabled the company to perform its functions smoothly. But, adoption of some alternatives can also help BMW to further perform its functions in an effectual manner. In this paper, key events, initial strategies adopted for the positioning of the BMW, Porter’s five forces for logical assessment, alternatives for ensuring the sustainable and strategic growth are discussed in detail. The recommendations and implementation of the strategies are also provided at the end for further betterment of company’s operations.
Facts
Bayerische Motoren Werke was established in 1917, have headquarters in Munich Germany. BMW group is operating 29 assembly as well as production facilities in about 14 countries. The company has its global network for dealing in above 140 countries. In 1923, the company shifted its operation to the motorcycle production because of the restrictions imposed by Versailles Armistice Treaty. The company again started the automobile production in the years 1928-1929. In the year 1930, with German rearmament, BMW again started the production of aircraft engines for Luftwaffe. Further, the company produced turbo jets in the years 1944-1945. In 2012, BMW was regarded as the top luxury brand in the United States of America (David & David, 2013).
Additionally, the success of company can be analyzed from the fact that in the year 2012, Forbes magazine has listed BMW as world’s top most reputable organization. In May 2013, the BMW has reported best sales, but in August the sale of company decline because spare parts were not easily available (David & David, 2013). The company has adopted differentiation strategy by using Luxurious as well as high quality material. The company is focusing on the branding, provision of the better services, designing a remarkable image of the company, leadership in innovation and research.
Tools Assessment
In order to conduct the company assessment Porters five forces model is used. The Porter five forces are used in order to analyze the current strength, current competitive position and the position where the company is considered move into. It helps to understand where the power and strength lies so that advantage of the situation can be taken for improving the weaknesses, and staying away from taking wrong actions in the business.
The Porters 5 forces are Threat of New entrants, bargaining power of buyers, threat of substitutes, bargaining power of suppliers, and rivalry among the competitors. The impact of the Porter five forces in relation to the differentiation strategy is described in detail as follows.
Threat of Substitutes
The threat of substitutes is low. Substitutes indicate those products that fulfill the same demands, needs, and requirements of the customers, and replace the product (Macpherson, 2012). BMW is defending itself by facilitating the customers with unique value, and by investing more in the projects such as rental and automobile sharing. The brand loyalty of the BMW customers is high, and in order to compete with BMW, the substitutes have to provide the same product in order meet the needs of customers, and to break the loyalty of the customers (Hill & Jones, 2012).hence, it is difficult to substitute the products of BMW easily. Moreover, BMW is more advance in innovations as compared to other companies, if is enjoying joint-partnerships with the companies that have expertise as well as technology such as Toyota, in order to ensure continuous innovation.
Rivalry among the Competitors
The rivalry is medium-high in the case of BMW, this is because there are many competitors that are competing within the same segment of the market; an example of such competitor is Mercedes-Benz. These competitors have an aim of providing similar products and serve the same group of customers whom BMW is serving. The Asian Manufacturers are also competing on the price and focusing on delivering innovative and high quality products such as Lexus (Miltenburg, 2005). When the competition increases, the prices decrease. Profit decreases if the cost of production remains constant or cannot be decreased. But, a customer will willingly pay even a high price if he/she is finding a product or service with exceptional and unique value that he/she is unable to find anywhere.
So, the differentiator is helpful in this regard as it helps in holding up the high prices. It also helps in the case of an intensification of the competition because of the customer’s loyalty. The unique value describes the difference in price up to a certain limit. Further, the differentiator remains stable even in the case of the fierce competition and threat from more competitors. This can be justified with an example that the company has successfully sold BMW 7 series even at the higher price and also retained the customers (Flint, 2002).
Bargaining Power of Buyers
The bargaining power of buyers is low-medium. This is because of the fact that the unique products decrease the opportunity and chances of switching to other brand. Being a leader in innovation and technology, BMW is providing most demanded products to the customers, whose substitutes are not easily available. Since, these products are not available elsewhere so the power of customers is less in this regard as they have limited choice and options. According to Hill and Jones (2012), it is necessary that the company should avoid charging more; it should charge the price that the market is willing to pay for the distinctiveness and uniqueness. The company should describe the increased cost of production prior to the addition of the product value because the customers will not be willing to accept the higher cost otherwise. (Lynch, 2007). So, the focus of BMW should be on the development of entire market, and it should be pioneer for introducing new trends as well as fundamental changes.
Bargaining Power of Suppliers
The bargaining power of suppliers in BMW is low medium. This is because the switching cost to the alternative suppliers is high, there is licensed production, and the loyalty of customers is high as they are even willing to pay increased price but up to a certain extent. The company is in the position to hand over the increase in the costs associated with the suppliers to the customers because of the high loyalty of customers with the brand. Additionally, the customers will pay high price as they have already paid the higher prices. But, there will be limited room if the value and the brand stagnate. BMW has ensured proper management of the supply chain. In September 2013, the sales of company’s products declined as spare parts were not available, and then the company introduced a new supply management system in central warehouse in Germany for the timely shipment of the components (David & David, 2013).
Threat of New Entrants
The threat of new entrants is, however, low, because the car manufacturing industry is a capital intensive industry, the proprietary skills, knowledge, patents, and the loyalty of customers restricts the entry of the new entrants as well as protect the industry from the substitute products. Additionally, in case of the innovation from the existing company, the threshold becomes high for the new entrants because the customers then expect something new from them. BMW is continuously innovating and creating new value with its powerful and strong position as a leader of technology and innovation.
Alternatives
Considering the above mentioned factors there are some alternatives for BMW in order to further ensure sustained and strategic growth in the company.
An alternative for strategically growing and sustaining this enterprise include development of the more short films of BMW. The advantage includes the fact that the demand as well as appetite is still there, and many visitors of the website i.e., www.bmwfilms.com still ask and demand for more. Further, it will increase the momentum and the energy that was created by the BMW the Hire series. Moreover, the communication via internet will be still attractive to the BMW customers that use internet on regular basis. The disadvantage of this development is that it is expensive.
Another alternative in this respect is the development of the feature length movie. The pros of this development include, it will reach wide audience, high revenue in case of success of the movie, making of movie for the first time by the car manufacturer, and increased demand from the viewers who like to watch 2 or 3 hours movies. The cons of this movie development include high cost and a long time of nearly 1 year in order to produce the movie, having no experience in making movie can pave the way to failure of the movie, and such movies can even damage the brand reputation. Further, it is also possible that in such movies the original message could be lost in the long story, and more expose will reduce the exclusivity of BMW.
Furthermore, increasing the availability of the short films of BMW and moving on towards traditional methods of advertisement and introduction of computer games. Adoption of this alternative will help the company to differentiate itself from all the competitors. Further, it will help to create higher impact, to target the customers in different methods, and create a potential in order to shift the customers towards the brand from other brands. The disadvantages of this alternative include high cost and more time required for the implementation, high cost is required for the development of the computer games, and there is a risk of failure in case the games are not appealing to the customers.
Another alternative that can help in the growth of company includes organizing events in different countries in order to show the advanced and latest features as well as effectual designs of BMW products. These events can, however, be integrated with the marketing strategy focusing on endorsement of celebrity. Advantages of this alternative include creation of awareness among BMW customers regarding latest features offered by the company in the product, and this will also help in attracting more customers. Disadvantages include time, and cost. High cost is incurred in organizing such events, and endorsing celebrities. Time and skills are required in order to organize such events in properly.
Further, the company can adopt viral marketing technique as an alternative. This technique is effective in order to target the customers and to spread the marketing message globally. The disadvantage of the viral marketing, however, includes the higher susceptibility to the manipulation as well as spamming.
Finally, BMW can use sale promotion alternative in order to boost the sale and increase ensure the strategic and sustained growth of the company. The company can provide short-term incentives to the prospective customers for committing to the purchase of the products and services. For example, sale promotion can be offered on the anniversary of company. Advantages of sale promotion include the provision of detailed description and information regarding product, and availability of product with some discounts. The disadvantage includes the fact that if the sales promotions are used in repeatedly manner it will pave the way to the depreciation of the brand value.
Recommendations and Summary
The strategies that I recommend include development of short films, making improvement in the availability of the short films, and focusing on the development of computer games and traditional advertising, and organizing the events. Development of the short films will help promoting the products, the development of the computer games and tradition advertisement is effective as it helps in differentiating the products of BMW, and attracting the customers via the blend of the entertainment as well as branding. The customers will feel easier to adopt this blend. The organization of the events helps in delivering consistent message and the product information to the customers. These methods are selected because they can effectively create the awareness about the product by giving detailed information, describing unique features of the product.
Firstly, the implementation of the alternative that deal with development of short films include making 5 films, time period of 2 months is required, budget is $15 million, the films will be packed in DVD format, awareness of the films will be created via television and magazine. For advertisement on television, a 40 second trailer will be made, and magazines such as Vogue will be considered.
Secondly, availability of the short films will be improved by providing free DVDs to the clients and customers, facilitating the customers will the free delivery when they place an order online, and providing the free DVDs by attaching them with magazines. Further, computer games will be available on the website of BMW; the games will indicate the successful stories of BMW.
Thirdly, in order to organize event shopping malls will be considered. This is because people love to visit shopping malls as they can get everything under one roof. Further, female models will be considered so that they can provide the relevant information to the customers about the products.
In a nutshell, BMW is performing well and is earning profit by providing unique and innovative features in its products. The company has focused on the differentiation of the product so that it can provide exceptional products to the customers that cannot be substituted easily. The threat of substitutes is low, the rivalry is medium-high, the bargaining power of buyers is low-medium, the bargaining power of suppliers is low medium; the threat of new entrants is low. The company can use several alternatives such as development of short films and improving their availability, development of computer games, use of traditional advertisement, development of feature length movie, viral marketing technique, and sale promotion technique, in order to ensure sustainable growth of the company.
However, among these the development of the short films, computer games, using traditional methods of advertisements, and organization of the events are the most effective methods because they deliver information of the product in a detailed manner. Further, the company has autocratic functional structure of the organization where there is no COO or CEO, and divisional president (David & David, 2013). In order to further ensure proper control and smooth functioning in the company COO, and CEO can be appointed so that functions can be performed more smoothly, and in case of any internal conflict, timely solution becomes possible because conflicts can be solved in an effective manner in the presence of higher authorities and executives. Further, in BMW, the employees and just given their salaries and not the commission on sale, so for retaining the customers the company should introduce rewards, incentives, and commission based on their performance because they help motivating the employees as a result of which they work with more dedication in order to ensure the growth of the organization.
References
David, Fred R., & David, Forest R. (2013). Strategic Management: A Competitive Advantage Approach, Concepts and Cases. Pearson Education, Inc, New York.
Herari, O. (1994). The Hypnotic Danger of Competitive Analysis. Management Review. 83(8)
Hill, C., & Jones, G. (2012). Strategic Management: An Integrated Approach. Nelson Education Limited, Canada
Flint, J. (2002). Luxury Maddness. Forbes. Retrieved from:
http://www.forbes.com/2002/10/22/1022flint.html
Macpherson, D. (2012). Economics: Private and Public Choice. Nelson Education Limited, Canada
Miltenburg, J. (2005). Manufacturing Strategy: How to Formulate and Implement a Winning Plan. Productivity Press, New York
Lynch, R. (2007). Corporate Strategy. Pearson Education, Inc., New York
