This essay will be dealing with BMW´s strategic management
within the UK automotive market.
In the first part the Five Forces of Porter will be broken
down and applied to BMW´s strategic management. This is done in order to conduct
a full Industry Analysis. According to Stessen
(2016) this is the most prominent tool for this instance.
The second part will further examine how relevant BMW´s current
strategy is and weather the company is capable of dealing with upcoming
changes. Therefore, I will be utilizing a SWOT analysis followed by a critical prediction
of the development of the BMW Group in the UK.
The UK has a key role within the BMW Group because all of
their brands as BMW, MINI and Royce Motor Cars are presented by manufacturing
According to their homepage (BMW Group 2017), BMW currently employs around 8,000 people
directly in the United Kingdom with an additional 14,000 in its 147-strong retailer
network representing BMW and MINI brands. Since 2000 BMW group invested nearly £2
billion in its UK operations, setting big expectations as an outcome. To this date,
the UK is BMW´s fourth largest sales market in the world.
Porters Five Forces
“Understanding the competitive forces,
and their underlying causes, reveals the roots of an industry’s current
profitability while providing a framework for anticipating and influencing
competition (and profitability) over time.”
– Porter 2008
In 1979 the young economist and associate professor, Michael
E. Porter published his Five Forces framework as a tool to analyse competition
of a business.
It aims at multiple aspects of the industry’s competitive
structure and economic environment, which includes the bargaining power of buyers,
the bargaining power of
suppliers, competitive rivalry, the threat of new
entrants, and the threat of
It is mandatory to
identify, evaluate and manage these Forces in order to get a profound overview
about a clearly defined industry. Since then, Strategist and Experts in executive
positions have been utilizing this concept as a baseline to their strategic
management. The ultimate goal of this analysis is to help managers set their
profitability expectations because profitability decreases as competition
According to Wilkinson
(2013) the idea is to look at each of these factors and determine the
degree to which they increase competition in the industry. If the forces are powerful,
then the competition will increase. Whereas if the forces are weak, then they
decrease competition. Porter’s five forces definition can be utilized by any
business. In addition, it can be applied to any industry.
As Wilkinson (2013)
said, competitors amongst an industry tend to pressure each other to the extent
to which both risk to lower their profit potential, so the business is less
viable. He points out the example of a highly aggressive environment between
competitors, that are targeting each other`s market and try to offer cheaper
products to win the battle. This scenario results in big costs for all competitors
within the industry.
On the other hand, less competitive activity saves lots of
costs, resulting in superior profit potential for the companies.
In general, the Intensity of rivalry in the automotive industry
is very high. The UK market is no exception here, the market shares are very
low. Low market shares are a sign for numerous competitors. According to Autocar (2017) all BMW Group Brands
look quite stable, but this is not a good sign because their biggest
competitors Mercedes Benz and Audi were able to increase their market share. BMW
with 6.77% is now 4th behind Ford (11.38%), Mercedes (7.04%) and
Audi (6.88%). Besides Ford cannot be seen as direct competitor because different
costumers are targeted since BMW is in the upper middleclass segment, whereas
ford belongs to the middle segment.
With the new Phantom and Cullian SUV being released in 2018,
I highly believe Rolls-Roys market share will climb eventually.
BMW Group sets his Company ahead of competitors especially
for the future because they are planning to create a premium mobility, geared
fully towards their customers needs, which will keep them fascinated and excited
to buy and use their products. BMW group is highly shooting to reach
technological breakouts by focusing on their cooperative spirit with new IT
players entering the market.
In the electro car department, they are already ahead of Audi
and Mercedes. With the release of a MINI e-car in 2019 the UK automotive market
will not have anything equal to offer because MINI is very unique in its style
and the other car companies are still lacking in the electronic car sector,
especially the middle class.
Another Force is the Power of Supplier. This does not only
relate to actual materialistic suppliers, but in many cases, reflects on other
parts of the supply chain such as supporting services, financial resources and
know-how. According to Wilkinson (2013),
strong suppliers negatively affect the industry by raising prices, even
lowering product quality and controlling product availability on top of that.
Meanwhile weak suppliers make an industry less competitive and more profit can be
In the automotive industry
the companies are highly dependent on their suppliers. BMW Group (2017) states on their homepage, that their supplier
network makes a major contribution to their success. They are working with
around 13,000 suppliers in 70 different countries.
Being as independent BMW has to identify and analyse potential
sustainability risks throughout the supply chain in order to react properly.
Since 2009 BMW Group works together with their suppliers to assess their
sustainability management. This highly reduces the risk of major problems with
the suppliers. On top of that, the BMW group collaborates with their suppliers
to strengthen their potential to manage their resource efficiency and offering training
courses to their employees. This management strategy leads to a strong bound
between BMW and their supplier and reduces the risk of the Supplier to misuse
their power by stopping to deliver parts for example and harm the industry.
There is another problem with the suppliers, that can occur soon.
All these innovative technologies rising up for the automotive industry are
getting more and more difficult to replicate, therefore only a few suppliers
remain. Those can demand horrendous prices for their products, and BMW Group
has to manage this to remain in competition with the other big brands, such as
Mercedes and Audi.
The power of buyer is another force which shapes the competitive
structure of an industry. As Wilkinson (2013)
said, the bargaining power of buyers in an industry has a massive impact on the
competitive environment and profit making. He further declared, that strong buyers
force the industry to better product quality, lower prices and improved
services. All these components reflect costs for the seller, which lowers the
Meanwhile on the other hand, a weak buyer is satisfied with
the seller´s price and quality and has low claims. This results in a less competitive
industry and increases the profit potential dramatically because less
expenditures have to be made.
Wilkinson (2013) worked out an overview as well how to spot
a High or Low Buyer Power: