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Understanding Strategy of BMW GroupBy . .Thesis submitted to theUniversity of Liverpoolin partial fulfillmentof the requirements for the degree of .201
Understanding Strategy of BMW GroupAcknowledgementThis would not have become a success without the contribution of many. And I make this theopportunity to thank all of them who gave the support.I would like to extend my sincere gratitude to . for her guidance andconstant supervision in completing the project.My thanks and appreciations also go to my colleague in developing the report and peoplewho have willingly helped me out with their abilities.Thank you. 2 Page
Understanding Strategy of BMW GroupTable of ContentsPart 01: Analysis of strategic options . 4A.What is a strategy? . 4B. Strategic analysis for the external environment . 6C Other Strategic Tools . 12Part 02: Business Strategy Learning Log and Reflective Statement . 19A. Business Strategy Learning Log . 19B. Reflective Statement . 20References . 213 Page
Understanding Strategy of BMW GroupPart 01: Analysis of strategic optionsA. What is a strategy?Gerry Johnson and Kewan Scholes, (1998, p.18) find that the concept;“Strategy is the direction or scope of an organization in the long term which achieves theadvantage for the organization through its configuration of resources within a challengingenvironment in order to meet the needs of the market and to fulfill stakeholder expectations”By analyzing the above definition, it can clearly identify that there are few components of astrategy. Strategy is something that the organization is trying to achieve in the long run Strategy deals with the markets n which the organization is expecting to be operated Strategy shows how the considering organization outperform its competitors withinthe market Strategy will tell what external environmental factors would have an impact over theability of the organization to compete in the environment Strategy will set out what are the underlined values and expectations of theorganizationThese levels can be divided into three major categories based on the different levels of anorganization as follows. Corporate level strategiesThese are the strategies that deal with the highest level of decision making. Most ofthe time top management will involve in this level of strategies. These strategies willgenerally deal with the areas such as decisions on long term direction of theorganization, decisions on acquisition and mergers, allocating resources andcoordinating activities of different strategic business units of the organization. Business level strategiesThese types of strategies can be seen in the organizations which carry out its activitiesunder different strategic business units (SBU). These SBUs are separate units that arefocused on a particular/independent segment in the market. These strategies willanswer the areas such as developing objectives for separate SBUs, allocation of4 Page
Understanding Strategy of BMW Groupresources among the SBUs and coordination of the activities among the SBUs. Thisbusiness level strategy is something that further explains the corporate level strategy. Functional level strategyAs described by its name, functional level strategies deals with the functions such asproduction, marketing, finance and human resource management within anorganization. These strategies are restricted to a certain function and issues associatedwith that function.This theoretical aspect of strategy can be explained in relation to a real world organization,The BMW Group, one of the Germany’s largest industrialcompanies founded in 1916.The BMW Group does its business activities in the industryof automobile by offering three strongest brands in theindustry namely BMW, MINI and Rolls-Royce. In additionto the strong position held by The BMW Group in theautomobile industry, it also offers number of financial(http://www.bmwgroup.com)services in the financial market.In 2007, The BMW Group adopted a new strategy, “Strategy Number One”. This strategywas focused on providing a new strategic direction to the organization by having a greateremphasis on profitability and long-term value enhancement. Accordingly, The BMW Groupis mainly focused on its premium segment, International Car Market. Here, the missionstatement of The BMW Group for year 2020 has been set as follows;“World’s leading provider of premium products and premium services for individualmobility”The mission of The BMW Group is then further explained by the objectives of theorganization and those short term objectives are further divided into several strategies that theorganization is trying to achieve.Here, The BMW Group has come up with a strategy called “Strategy Number One” which isfocused on increasing profitability and increasing long term value in terms of change.5 Page
Understanding Strategy of BMW GroupThe major objectives embedded in the strategy of The BMW Group are Striving for ecological and social sustainability along the entire value–added chain Taking full responsibility for its products Giving an unequivocal commitment to preserving resourcesAs a result of these high-end objectives, The BMW Group has identified as the mostsustainable company in the automotive industry (World’s Most Sustainable Car Company in2012; Dow Jones Sustainability Index).B. Strategic analysis for the external nvironmentMicroEnvironmentMicroEnvironmentChart 1.1- Environmental FactorsMichel Porter (2008, p.24) find that the concept any kind of an organization is unable tooperate in alone. It will influence and be influenced by the environmental factors. Thisenvironment can be divided into two categories as follows. Internal Environment- This is the environment the management of the organizationcan’t control. This is also referred as the task, immediate environments. Thisenvironment will normally consist with the parties such as managers, employees,owners, organizational resources, organizational structure, organizational culture etc.For analyzing the internal environment, it can use the tools such as Resource audit,SWOT analysis and value chain analysis. External environment- This is the environment that the organization has a less or nocontrol. This can be further divided into 2 categories namely;6 Page
Understanding Strategy of BMW Group Micro environment- This environment will include the factors that areoutside the organization and these are the factors that create the industry ofthe organizationSome of the examples for the parties in this environment are customers,employees, suppliers, shareholders, media and competitors.For analyzing the micro environment, it can use Michel Porter’s five forcesanalysis, Critical Success Factors, Benchmarking and core competencies soon. Macro environment- This will include the factors that are out of the controlof the organization and have a far influence to the organization. This willconsisted with the major environmental forces. Economical environment,social environment, technological environment, ecological environment andlegal environment are some of the factors/forces that come under macroenvironment.For analyzing the macro environment, it can use tools such as PEST.According to the above classification, it can use Michel Porter’s Five Forces Analysis foranalyzing the micro environment and PEST for analyzing the macro environment in relationto the selected organization The BMW Group.PEST analysisPEST analysis can be identifies as a major tool that is usedin analyzing the macro environmental factors of anorganization. The Term PEST represents the variableswhich are analyzed.P- Political EnvironmentE- Economical EnvironmentS- Social EnvironmentT- Technological environment7 Page
Understanding Strategy of BMW GroupPEST variationsMost of the time, this term PEST/STEP is extended by adding some other environmentalforces STEP PEST in more positive approach. STEEP PEST Ethical Environment SLEPT PEST Legal Environment PESTEL PEST Environmental Legal Environment PESTELI PESTEL Industry analysis STEEPLE PEST Environmental Legal Environment Ethical Environment STEEPLED STEEPLE Demographic Environment PESTLIED PEST Legal Environment International Environment Environmental Demographic Environment LONGPEST Local Environment National Environment Global factors PESTIn relation to The BMW Group, the PEST analysis can be done as follows. Political Factors- This will include the legal rules and regulations which will have aconsiderable impact over the organizationWith respect to The BMW Group, the following can be identified; Taxes and foreign policies of the government will have a significant influenceover both the internal activities and exports of The BMW Group. New rules and regulation related with the environmental issues associatedwith the automobile industry will compel the organization to modify itsproduction activities in order to be in line with those environmentalregulations Rules and regulations on pollution norms in European and US markets Economical factors- These factors will be related with the areas such as exchangerates, economic growth rate, and inflation and so on.With respect to The BMW Group, impacts of following economical factors are highlyimportant.8 Page
Understanding Strategy of BMW Group Because of the credit crunch in USA and in other countries, there is a decreasein the demand for the automobiles. Recent emergence of the developing countries such as China and India andtheir increased purchasing power Social factors- This deals with the social factors such as culture, social norms andother demographic variables. With regarding to The BMW Group, there are someclearly identifiable features in the social environment as follows People are tend to focus on green/eco-friendly automobiles than before Harmful impacts upon the buying pattern/purchasing power of the customersbecause of the economic downturn. Increasing the level of awareness and consideration of the people aboutenvironmental issues and harmful gas emissions of automobiles. Technological factors- These factors relates with the technology which is used by theindustry or the organization.Followings are some of the concerns of The BMW Group in relation to technologicalenvironment Movement towards the technologies that are eco-friendly and reduce theemission of harmful gases and other chemicals Widely spreading trend of using technology as a way of getting competitiveadvantage in the automobile industry Innovations based of new energy sources (Solar power) Sophisticated designs of automobile designs with increased safety and comfortMichel Porter’s five forces analysisThe forces which are in the micro environment will make the industry of an organization. Theimpact of these factors can be analyzed by using the Michel Porter’s five forces analysis.Here, the main focus of this 5 forces analysis is focused on identifying the relativeattractiveness of a certain industry. Generally, the analysis under five forces strategies is done9 Page
Understanding Strategy of BMW Groupfrom an existing player’s point of view, but still it can be done in relation to a new entrant’spoint of view also.Michel Porter’s five forces analysis will consist with five major components as follows.Threat of newentrantsBargaining powerof the suppliersRivalry amongexisting playersBargaining powerof the customersThreat fromsubstitutesChart 1.2- Major components of Michel Porter’s five forces analysisEach of these factors can be explained as follows. Threat from new entrants- This will deal with the potential threat from a newentrant to the industry. If a new player enters into the industry, it will bring extracapacity and more competition to the industry. Therefore in order a certain industry tobe attractive, there should be a lower level of threat from new entrants.In relation to The BMW Group, it can identify that there is a lesser threat from the newentrant. This is because that the industry in which The BMW Group operates issomething that requires huge capital investment and specialized knowledge. At thesame time The BMW Group has created a very strong brand position in the marketwhich is invaluable. But in relation to a new entrant, it will not possess such capacityor knowledge and therefore there is a less threat for new entrants for The BMWGroup. Threat from substitutes- This involves the products produced by other competitorsthat gives the same benefit. The level threat from substitutes will be depend on thefollowing facts. Consumers propensity to buy the substitute10 P a g e
Understanding Strategy of BMW Group Buyer’s switching cost Number of substitute products availableAn industry to be attractive, this threat from substitutes should be in a lower level.In relation to the motor vehicles provided by The BMW Group, the automobilesproduced by the companies such as Ford, Mercedes, General Motors and Toyota canbe identified as the major substitutes. Bargaining power of the customers- This deals with the customers’ ability tobargain over the products. Generally, customers prefer to have a higher qualityproduct at relatively a low price. This
The BMW Group, one of the Germany’s largest industrial companies founded in 1916. The BMW Group does its business activities in the industry of automobile by offering three strongest brands in the industry namely BMW, MINI and Rolls-Royce. In addition to the strong position held by The BMW Group in the
