SWOT Analysis of BMW

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Introduction: Bayerische Motoren Werke AG is commonly known as BMW. It translates to English as Bavarian Motor Works.

BMW-AG

is

a

German

automobile,

motorcycle and engine manufacturing company  based in Munich, Germany. BMW started as a manufacturer of aircraft engines in 1913, but in 1919 following the armistice (Treaty of Versailles) German military was prohibited to produce aircrafts. Following years saw, the company manufacturing motorcycles due to the Treaty of Versailles imposed conditions. The first BMW car was manufactured in the year 1928. Currently, BMW is the parent company of Rolls Royce Motor Cars and MINI. Besides being one of the ten largest car manufacturers in the world, it also has a strong market position in the motorcycle sector under BMW Motorrad. BMW AG is one of the “German Big 3” luxury automakers

with Audi and Mercedes Benz. In June 2012, BMW was listed as the #1 most reputable company in the world by Forbes.com and also the same year, Dow Jones Sustainability Indexes named it the world‟s most

sustainable automotive company for the 8th consecutive year (first automotive enterprise to be in the Index). Rankings were based on willingness to buy, recommend, work for and invest in a company. Since its first motorcycle rolled out in 1923, BMW has been engaged in motorsport activities as well. BMW has been official sponsor for London 2012 Olympics, United States Olympic Committee, PGA Championships, BMW Italian Open (Golf) and Bundesliga (football). It is the charter member of US Environmental Protection Agency‟s  National Environmental Achievement Track, which whi ch recognizes reco gnizes companies for environmental envi ronmental stewardship and performance. BMW is ranked 3rd  place in Carbon Disclosure Leadership index across all industries.

SWOT Analysis: Strengths: 1. Strong Brand Reputation: In 2012, BMW was listed as the most reputable business in the world by the Forbes magazine. The strong brand reputation of BMW is the result of effective marketing strategies. Consumers‟ perception has been associated with the brand image. With

$29 billion, BMW brand is the third most valuable automotive industry brand in the world.

2. Environmental Friendly Technology: BMW is known for its innovation and technological advancements. The company develops environment friendly cars, with its engineers working on developing new types of fuels, such as hydrogen. BMW AG offers nearly 20 models emitting CO2 as low as 140g/km. In 2013, BMW-AG announced launch of its first fully electric car range, starting with BMW i3 in 2014.

3. Highly Skilled Workforce: Quality cars require premium materials and skilled workforce. BMW has set up assembly plants mainly in USA and Germany, which have the most skilled vehicle assemblers.

4. Corporate Social Responsibility (CSR): The company invests large sums in employee health management, balanced work life  programs, zero waste at its plants and suppliers‟ sustainability. It is committed to

employee-community well-being and environment protection programs.

5. Quality Products: BMW is a world renowned brand for its engineering potentials, skilled workforce and quality products. BMW aims at technological advancements, „green‟ vehicles and new innovative quality products.

6. Competitive Customer Service: BMW works efficiently on long-term post sales customer service practices catering to the needs, problems and any issues faced by its customers. Customers spending so many amounts of money on quality products look for superior after-sale services, which BMW knows very well how to fulfill.

Weaknesses: 1. High cost structure: For production of high-end, luxury products; hiring skilled workforce and new technological components leads to high costs for the business. BMW‟s cost structure

is higher than that of its competitors like Audi, Toyota, GM and Volkswagen.

2. High prices perception: Compared to its competitors, like Audi; BMW‟s luxury cars requires higher   cost

structure. Thus, BMW follows a premium pricing strategy leading to high price in comparison with other cars.

3. Too few acquisitions and strategic partnerships: The lack of strategic partnerships with other organizations is another weakness of BMW-AG. BMW‟s 10% growth is credited to acquisitions which makes hard for a company to grow. In order to grow remarkably, a company has to acquire more  brands and enter into more strategic st rategic partnerships. partnership s.

4. Weak brand portfolio (only three brands): BMW manufactures and sells only 3 brands: BMW, MINI and Rolls-Royce. The lack of differentiation in brand portfolio may have negative impact on long-term growth of the company. It may put the company in jeopardy to external shocks and economic crisis in the future.

Opportunities: 1. Increasing fuel prices: With the current economic instability and growing fuel prices, large markets can welcome the new range of BMW hybrids and hydrogen cars. BMW has been working on developing the i-BMW concept which includes fully electric cars leading to emission reduction and cost efficient cars.

2. „Green‟ vehicles and new emission regulations: With customers becoming more conscious about the environmental protection and the negative aftermaths of petrol and diesel cars, BMW‟s emphasis on „green‟ vehicles

will definitely create strong position in the automotive industry in the future. The firm  produces most ecological vehicles which comply with the new reduced vehicle emission regulations.

3. Changing customer needs: Unique selling proposition and continuous brand building with the help of new innovative technologies can help BMW to cater to different target groups. BMW takes into account the changing customer needs before launching and developing new  products.

4. Strategic alliances with other automobile companies: BMW can plan to increase its presence globally by taking in to account the possibility of strategic alliance with other companies. Strategic alliances can help large companies to explore the markets of countries that have limited themselves to  particular companies.

Threats: 1. Increasing prices of raw materials: Auto manufacturers are facing issues due to rise in costs or raw materials leading to lesser profits and higher input costs.

2.  New competition: In developed countries, markets are saturated for luxury cars, intensifying competition. With increasing competition from competitors like Audi, Mercedes Benz, Toyota, etc. BMW tends to compete more on price rather than differentiation.

3. Euro exchange rates: Exchange rate fluctuation can be a major threat for BMW if euro appreciates against other currencies because a huge part of it profits come from other currencies.

4. Malfunctions: Another threat for BMW can be the product recalls which compromises its claims of high-end quality products affecting its brand image. E.g. in July 2014, the company announced recall of 1.6m 2000-06 3 series models due to passenger-side airbag issues. Similarly, in April 2014, BMW recalled 156,137 luxury cars and SUVs due  possibility of faulty fault y engine bolts.

5. Shale Gas Extraction: With increasing emphasis on shale gas extraction, future fuel prices may drop making electric, hybrid and hydrogen cars less attractive. This in turn can be an area of concern for the company who is spending a major portion of its reserves and profits in developing the i-technology electric and hydrogen cars.