BMW Automobiles Case Study: Pest Analysis

The BMW group is a leading manufacturer of premium automobiles which has manufacturing facilities on 24 sites across 13 countries. In 2009 it sold 1.3million vehicles across a brand range that includes BMW, MINI and Rolls Royce

BMW was founded in 1917 when the company formerly known has Rapp-Motorwerke was renamed Bayerische Motoren Werke GmbH at that time its business was the production of aircraft engines.

During the war the company flourished expanding its production capabilities by building a new production facility right next to the Oberwiesenfeld airfield in Munich where it continued to produce aircraft engines for the German armed forces until 19181

After the war the company was bound by the Treaty Of Versailles so aircraft engine production was suspended .In 1923 BMW started the production motorcycles as the terms of the treaty were relaxed and then in 1928-1929 gained a foothold in the automobile industry when it bought the Eisenach automobile plant one of a number of strategies that it would repeat throughout its history to reduce costs and gain market share. The first BMW automobile went on sale in 1929 based heavily on the Austin Seven but with a number of body shapes, the popularity of the small car helped BMW survive through the worst of the depression2

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Over the years BMW have built up a reputation for innovation with a number of industry firsts ranging from the first all aluminium V8 engine to being the first company to sell a production car fitted with a turbocharger which all contributed to the BMW brand being recognised for its engineering excellence.

In the early 1990’s the company decided to diversify and increase its market range which was one the reasons for the 1994 acquisition of the British Rover Group which gave it control of the Rover, Land Rover, MINI, and the MG brands it then followed this up 1998 by buying the rights to the luxury carmaker Rolls Royce from VW with an agreement not to use the brand until 2003.

BMW has a long history; in recent years the BMW Group has demonstrated ever more incisively its versatile potential. The former niche supplier has evolved into the world’s only multibrand car manufacturer with a portfolio exclusively comprising premium marques, all the way from the micro-car to the luxury segment, BMW designed.

BMW has a diversity of products, it designed BMW brand cars such as 3 Series compact and 3 Series Cabrio and then recently it introduced the MINI brand with high-performance model. It continues innovating and developing its products and in fact this is adapted to the product life cycle concept.

If BMW can do more investment and try to enlarge its market size and do not just focus in European countries, it may have the potential to be the market leader in the car marketplace. Nowadays, the BMW Group has now expanded its international production network with a new plant in Northeast China. BMW automobiles have been rolling off the assembly line in the new Shenyang plant, located in Liaoning province, since September 2003, the plant is a joint venture between the BMW Group and Brilliance China Automobiles for the Chinese market within several years. Production began with automobiles of the BMW 3 Series, followed by those of the BMW 5 Series. If the BMW Group planned to launch the MINI into China’s car mar the fundamental objective of the BMW Group is to continue the process of profitable growth by concentrating on high-profit market segments. Precisely, this is why the BMW Group will use the potential of the BMW brand to an even greater success in a future.

The production of BMW Group is developed to satisfy different customer’s needs, providing a variety of models for luxury, middle and low segments of market. Company constantly works out new technogical decisions and improvements and nowadays set new standards in production.

BMW has already achieved fulfilling indivual requests. Now its objective is to provide every customer with there individual, personalised car on a defined date agreed in advance. Moreover, BMW Group is setting a new benchmarks process lead times required for a new car in distribution and production.

BMW Group takes its advantages of high technology and appropriate management to dominate most of the automobiles market. Its strong position in the market will benefit its future.

PEST analysis

The PEST analysis is used for all external activities that could affect the business. External activities are things that the business can have no control over. PEST stands for Political, Economic, Social and Technological. The PEST analysis examines the impact of each of these factors on the business. The results can then be used to take advantage of opportunities and to make contingency plans for threats

Political factors

“The political factors have a huge influence upon the regulation of businesses, and the spending power of consumers and other businesses. A business must look at issues such as how stable is the political environment, will government policy influence laws that regulate or tax your business, what is the government’s position on marketing ethics.” (http://www.coursework.info/e/page.cgi?page=view;link=34947&d=1&s=324c21ac2c8ea5e2496907309fd18780&U=rabbitwendy)

In 2002, the EU end-of life vehicle directive was enacted into law in all countries of the European Union, coming into force in Germany on 1 July 2002. The BMW Group has recognised provisions in the balance sheet to cover the obligations relating to the risk of collection, treatment and recovery of all end-life vehicles sold by the BMW Group to date. Provisions are also being recognised on an on-going basis for new vehicles as a result of its activities in vehicle recycling and the progress made in “Design for Recycling”.

The change in fuel prices, partly affected by the market and partly by the government tax policies, and the requirement to reduce the fleet fuel consumption and CO2 emissions set high demands on engine and product development.

The tax changes proposed by the German Government, in particular the tax treatment of company cars, could have a negative impact on car sales of the BMW Group in Germany.

The decision of the EU Commission relating to the new Block Exemption Regulation for the sales distribution of motor vehicles will require substantial legal and structural changes to the current sales distribution system. The BMW Group has initiated measures, including the restructuring of sales distribution networks, in order to both counter the risks for sales and brand positioning and to avoid any possible negative impact on the high quality, safety and environmental standards of the BMW Group.

Economic Factors

“Marketers need to consider the state of a trading economy in the short and long-terms. This is especially true when planning for international marketing. A business needs to look at the Interest rates, the level of inflation, income growth, debt & saving levels (which impact available money) and consumer & business confidence.” (http://www.coursework.info/e/page.cgi?page=view;link=34947&d=1&s=324c21ac2c8ea5e2496907309fd18780&U=rabbitwendy)

The strong growth of the BMW Group achieved on all major international markets means that global key data such as the development of currency parities and financial markets are very significant. The BMW Group mitigates these risks by intensive monitoring of the markets and by the use of hedging instruments.

Economic fluctuations represent risk factors for future development. The BMW Group anticipates these risks by monitoring the market in detail and using early warning indicators. Risk is spread due to the worldwide activities of the BMW Group.

An escalation in the global political tensions could have a negative impact on the oil price and the economic situation as a whole, which, in turn, would have a negative impact on the business development of the BMW Group.

Social Factors

“The social and cultural influences are the elements that build society. Social factors influence people’s choices and include the beliefs, values and attitudes of society. So understanding changes in this area can be crucial. It is very important that such factors as changes can impact purchasing behaviour consumer attitudes to your product & industry – environmental issues, the role of women in Society, attitudes to health, attitudes to wealth, attitudes to age (children, the elderly, etc.) Added complications when looking at social and cultural factors are differences in ethnic and social groups.” (http://www.coursework.info/e/page.cgi?page=view;link=34947&d=1&s=324c21ac2c8ea5e2496907309fd18780&U=rabbitwendy)

According to the concept of “green image” products, people would like to purchase green goods rather than demerit goods. The BMW Group has already accepted this challenge, and developed a technology that represents the future of motor fuel. BMW Clean-Energy uses the most primary of all natural cycles: the water cycle. This cycle is the central concept of BMW Clean-Energy. Liquid hydrogen is generated from energy and water. In the engines of BMW hydrogen vehicles, the hydrogen combusts with oxygen again, and returns to water. BMW Clean-Energy simply follows the principles of nature.

Technological Factors

“Advances in technology can have a major impact on business success as technology is vital for competitive advantage for example; think about the potential impact that video-conferencing could have on the business travel market.”

(http://www.coursework.info/e/page.cgi?page=view;link=34947&d=1&s=324c21ac2c8ea5e2496907309fd18780&U=rabbitwendy)

In information technology, the BMW Group undertakes various measures relating to employees, organisational procedures, applications, systems and networks in order to protect itself from unauthorised access or misuse of data.

As a car producer, the BMW Group has to be ware and be wise to the current situation of car market. At recent day, cars are becoming one of the most primary transports in the society; this condition indicates that the car market will become more furious. As long as the prevalence of private cars, car sales are increasing sharply, this could be good or be bad for the BMW Group. The BMW Group can gain more profit from the increasing sales if it produces its cars with high quality and good service constantly, people will be loyal to the BMW and wish to purchase its cars even though there is various different brand cars can be chosen. A good reputation is the principle of business. Otherwise, if the BMW Group fails to be high quality of its cars but produce overfull cars, it may harm its prestige and affect its stock control.

Moreover, the BMW cars are considered as the high-class cars, most products are applied to rich people but not the poor people. If it can produce some normal car that can apply to the middle-class people, its market share can be expanded. On the other hand, its accessories and hardware of cars are expensive for maintenance, which can reduce the desire of people purchasing its cars.

In conclusion, the BMW Group has an efficient management and high standard production; its future depends on the external environment and internal activities. The potential opportunities are not just from outside environment but also the internal factors.