BMW Company’s Business Environmental Analysis

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Summary

Bayerische MotorenWerke (BMW) is a German-based automobile manufacturing company that was founded in 1916 by Franz Joseph Popp. Today, the company is the leading manufacturer of premium automobiles and motorcycles globally, with production facilities in more than 14 countries and a global sales network. Some examples of products manufactured by the BMW Company include motorcycles, automobiles, and plug-in electric cars. Having dominated the market sector for the longest time possible, the BMW Company has a symbol of standards. This has not only increased its profits but also inspired a loyal customer base all over the world. The company’s long-standing marketing message has been “the ultimate driving machine.” It has a corporate and a strong business strategy that can be characterized as product differentiation, focusing on design and digitization. While this might be the case, the company offers solid and reliable vehicles that are different from their competitors, making them widely valued by all automobile buyers. This report looks at the macro-environmental factor that impacts the business operations of BMW and conducts the Pestle and the SWOT analysis of the industry. Additionally, the paper critically evaluates the impacts that both macro and micro factors have on the organization’s business objectives and decision-making.

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Macro Environmental Factors That Impact the BMW Business Operations

Every business is affected by a myriad of factors. The overall assumption of operating any business is that there is no organization or a business that can operate in a vacuum. In broad terms, the availability of these factors, which affect the business’s overall operation, forms the business environment. One of these business environments is the macro-environment. This form of the environment has an effect on how businesses operate, perform and engage their stakeholders in effective decision making (Wetherly and Otter 2014). This environment is quite dynamic, meaning that it enables the business to track its changes constantly.

These are external factors that affect the company, and it cannot control them, and they include economic factors, demographic factors, technological factors, natural forces, political factors, and social and cultural factors. The macro-environmental analysis will allow the management of BMW to understand the external factors and how they affect the industry’s overall operation. PESTEL analysis framework will be significant in understanding these impacts, which positively and negatively influence the business operation.

PESTEL Analysis

When there prevails a high level of uncertainty due to significant changes that may be witnessed in the BMW Company’s operation, it may become difficult to predict the external environment that may hinder strategies. In this type of scenario, the future of the organization would be determined through an analysis that is done to evaluate the organization’s business environment effectively. In order to reach this conclusion, it would be important to conduct a PESTEL analysis that plays a critical role in identifying and predicting future scenarios as well as the most important drivers of change. In broad terms, PESTEL analyzes the macro-environment of the organization. It touches on aspects of political, economic, social, technological, and legal spheres that influence the operation of the organization.

Political Factors

Political factors refer to the government laws and regulations formulated by the government to control most of the automobile industries’ performance. This regulation may include the imposition of taxes and duties both at the local and international levels. Additionally, the government may set environmental pollution standards that may require the BMW Company to facilitate a pollution-free environment.

Economic Factors

One of the most common economic factors that would determine the BMW Company’s future is the reduction of euro exchange rates in the European automotive market. The adverse effect of this is the reduced prices of the BMW automotive. Another economic factor is the presence of global economic conditions that may affect leading brands such as BMW. There has also been witnessed a high amount of revenue in the marketing as well in new product designs. It is believed that the excess capacity of cars produced has championed this. In this regard, there has been a lot of revenue withheld, even though the demand was less than the supply.

Social Factor

Social factors include cultural factors, which may lead to changes in global buying patterns and the consumer’s capacity. These factors have a serious impact on the Automobile industry, and one of them is changes in customers’ buying patterns. Another social factor is the changes in consumer specifications in terms of fuel efficiency and low emission cars. Awareness of the harmful emissions through automobiles may also be another social factor.

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Technological Factors

Well known, the automotive industry is advancing at a fast rate, thus leading to the manufacturing of more technologically advanced vehicles. Some of the vehicle manufacturers by various companies use more technology, thus owing to consumers’ rising demands. The utilization of modern technology cuts down various costs, such as fuel costs, and promotes comfort to the consumer. In this case, the majority of consumers may shift to technologically advance automotive.

Environmental Factors

The automotive industry is facing much criticism as far as environmental issues are concerned. Similarly, BMW is facing such criticism from the environmental sector through the global warming awareness as well as the go-green concept. This has ended up drastically affecting the sales of BMW automotive. The majority of consumers are inclined to the more comfortable, fuel-efficient, and eco-friendly vehicles and this affects the BMW market. There have also been changes in tastes and preferences of buyers and consumers all over the world towards BMW automotive.

Legal Factors

Some preventive measures and local norms on environmental measures have been applied to many automotive companies, including BMW, to ensure more fuel-efficient and go-green vehicles. Other countries have also imposed strict measures that impact the initiative of the BMW automotive industry.

Internal and External Analysis of BMW and MINI John Cooper Works

Internal Analysis

Different types of BMWs have been launched by the BMW industry, ranging from BMW1 to BMW3. These brands’ prices are almost the same, and the customers have remained very loyal to these brands. Buyers of the buyers of BMW are typically from the age of 45-54 years. Recently, it has been observed that these customers have a positive attitude toward purchasing electric cars, although the high price of these cares is restricting their purchase intentions. Research has shown that those who purchase electric cars in the BMW industry are older adults such as men and women aged 55 years and above. Furthermore, customers across the major cities such as London have shown the most interest in purchasing BMW automotive. Looking at the MINI John Cooper Works, the company is viewed as a British car marque that BMW owns, and it is used explicitly in its mini vehicles. It was founded in 2002 by Michael Cooper, and the company is praised for its ability to produce the racing car in the market. This has made the company remain competitive in the market, and having the capacity to effectively execute its operations.

External Analysis

With the high technological advancement, the European market faced fierce competition, thus leading to a drastic decline of the opportunity for product differentiation. BMW was also affected by this change, and its selling power also decreased. However, due to consolidation, massive production of vehicles was experienced in the European market. This made price competition the prime strategy for the majority of manufacturers. In the case of BMW, even if this means a loss to the company, it was an effective strategy to strengthen its market ground for future growth.

Changes in customers’ specifications, petrol prices, and environmental factors also helped create a harsh environment that enables the BMW industry to rethink its business strategy to survive the competitive market. It can be argued that the perspective of the long survival of BMW in the market is the result of the industry’s ability to adapt to the external forces and influence exerted by the external environment. In response to these forces, the industry formulates strategies to cope with stiff competition and maintaining the marketing share, thus retaining its profitability. For the case of MINI John Cooper Works, the company has been well known internationally for the production of race-car-like quality with a unique look. They are also known for the production of small cars available in almost all the places in the world. This has made the company remain competitive in the market, despite the rumors of the company’s collapse.

Strengths and Weaknesses of BMW and MINI John Cooper Works

With the help of these companies’ internal and external analysis, it is easier to identify their strengths and weakness. One of BMW’s strengths is the ability to produce different types of vehicles that meet the needs of all its customers. For example, the company can produce both electric and petrol generated vehicles to win the desires of its range of consumers. For the case of MINI John Cooper Works, the company has been producing unique and racing cars for the longest time. Vehicles produced by this company are also all 4-wheel drive, and they have an available automatic transmission. This has enabled the company to remain competitive in the market.

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Looking at their weaknesses, it can be seen that BMW has not been able to produce environmentally friendly and entirely electric vehicles. This is because of different preferences by consumers towards the use of electric and petrol or diesel vehicles. While addressing the issue, BMW intends to meet the needs of its customers, and as a result, it has not been in a position to produce a vehicle that is environmentally friendly, and which will be accessible to people of different socioeconomic classes (Wetherly and Otter 2014). On the other hand, MINI John Cooper Works produces small cars, which are also said to be expensive. Their specialization in these small cars’ production has affected them a lot since most people prefer bigger cars.

How Strengths and Weaknesses of BMW Interrelate with External Macro Factors

BMW’s internal and external factors can be used to enhance the process of decision-making as far as management issues are concerned. It is evident that due to the company’s inability to balance the needs of the customers with environmental concerns, the company will be affected due to the alliteration of the present environmental regulations. However, BMW is a solid and popular industry that is known for its solid customer base. With the help of this form of popularity, the industry’s management can expand their firms in new developing economies. While ensuring this, will be beneficial for the company because it will be in a position to attract many customers due to its strong brand and lack of competition. The BMW brand fails to cope with the current trends in the business sector regarding environmental concerns. In order to overcome this challenge, the management should try to associate with the other industries that produce environmentally friendly vehicles and conduct business with them. Additionally, the industry can incorporate the latest technology in order to increase its efficiency and understand the current business trend in a more precise way.

SWOT Analysis of BMW

Strengths

BMW has a brand that is recognized all over the world. In fact, the BMW brand is the top five of the world-known automotive brands. In this regard, the industry enjoys a reputation at the global level. This high level of recognition has attracted not only many customers but also a highly trained workforce. BMW industry also the manufacturing of eco-friendly vehicles. In terms of market, BMW has a strong market in China. As per the buying and selling statistics of BMW, it is evident that the sales have significantly increased in China and other developing countries. This is likely going to increase their purchasing capacity and the economic growth in their domestic economy.

Weaknesses

One of the BMW industry’s weaknesses is charges higher costs for its products more than their competitors, such as General Motors and Volkswagen. The high price is based on the assumption that quality products come from expensive materials. Another weakness is that the industry has few brands, namely Rolls Royce, Mini, and BMW. This makes it difficult for the company to serve the more extensive section of consumers who may be in need of diversification. The industry also lacks significant alliances and partnerships. As a matter of fact, the industry operates purely on its own and has few partnerships and alliances. This makes it difficult to experience technological growth and a higher quality engineering level.

Opportunities

The need to conserve the environment has been the priority of every industry. BMW has embarked on the production of eco-friendly vehicles. Some of these vehicles use electricity and hydrogen gas with little or no CO2 emission. In general terms, BMW is well known for conserving the environment and this does not affect the industry financially because it follows these environmental norms. Having these strict environmental regulations, BMW industry can experience a significant growth because it produces fuel-efficient models.

Threat

BMW faces competition from other world-leading automotive producers, which poses a threat by sharing the market, thus leading to a reduction of sales. There is also a growing price of raw materials that makes the BMW automotive more expensive than that of their competitors. Falling fuel prices may also negatively impact the BMW industry considering that it produces low fuel consuming cars, thus reducing fuel expenses of consumers.

Impacts That both Macro and Micro Factors Have Upon Business Objectives and Decision-Making

Macro-environment is more general, and it basically refers to the environment in the economy itself. It affects how all business groups operate, perform, make decisions, and form strategies simultaneously. This environment is quite dynamic, an indication that any business has to constantly be in a position to track its changes (Wetherly and Otter 2014). For the case of BMW, macro-environmental factors can decrease or increase the need for the product. The cists for raw materials may also be driven up or down. Micro-environmental factors include the inner strengths and weaknesses of a company. They affect how the company meets its objective and consumer’s decision-making when it comes to buying. Some of the factors that form the micro-environmental factors include business location, utilities, equipment, and human resources such as employees and target audience.

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Conducting a business operation for the BMW helps in understanding how the business operates. The various micro and macro-environmental factors and their impact on the business operation presents valuable insights into how the industry can address various issues that it may face both internally and externally. These factors are clearly outlined with the help of PESTEL and SWOT analysis. Through PESTEL analysis, it becomes easy for the BMW industry to establish the external factors that could impact the organization’s decisions. With the help of SWOT analysis, it is easy to evaluate the BMW industry’s internal and external environment by identifying strengths, weaknesses, opportunities, and threats. It helps the company build what it does well, address what it lacks, and take the most significant possible advantage of chances for success.

Reference List

Wetherly, P. and Otter, D., 2014. The business environment: Themes and issues in a globalizing world. Oxford University Press.

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BusinessEssay. 2022. "BMW Company's Business Environmental Analysis." July 31, 2022. https://business-essay.com/bmw-companys-business-environmental-analysis/.

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