Current Position in the Market
BMW operates in the automobile industry, with the main focus of the manufacturer being the luxury cars segment, and in recent years, the company has dedicated efforts to developing a luxury autonomous vehicle. The current BMW’s position in the market can be outlined as relatively stable since the company makes sure it pushes its boundaries and creates additional growth opportunities. Based on the case study, it may be concluded that BMW’s research and development unit performs at the highest level. The contribution that the company’s initiatives make to the organizational ecosystem is essential because they establish a positive image for BMW across the majority of potential and existing customers. BMW must provide an adequate response to other automotive brands that focus on luxury and user-friendliness. Overall, BMW may be placed among the top five car manufacturers worldwide, considering its persistence and blunt designs.
Analysis of the General Environment
In terms of trends, the socio-cultural trends particularly, COVID-19 has affected the people’s perception of public transportation. This major disruption caused governments to implement restrictions on how many people can be transported in a single public transportation unit, which may cause an inclination for people wanting to purchase a vehicle that will substitute public transportation, increasing the overall demand.
Economically, some downward trends may be linked to employment and a decline in consumer spending, linked to the COVID-19 pandemic. For instance, the unemployment rates in the United States have been record high in the last months. Next, technological trends are the major driver of change for the automobile industry, mainly developing smart technologies that help the driver control the car. The steps were taken towards manufacturing the fully autonomous cars taken by dominant car manufacturers. From a global perspective, the Chinese market and the developing economy’s importance to car manufacturers are increasing (Hitt, Ireland, & Hoskisson, 2017).
Porter’s Five Forces
Threat of New Entrants
The threat of new entrants into the luxury autonomous automobile market is low, mainly due to the high costs needed to develop and launch a vehicle. The current companies in this market are well-established, have been operating for decades, and have a range of models offered to their customers. However, considering the development of autonomous vehicles, which is the focus of this analysis, technology-driven businesses can partner with manufacturers to introduce cars that use advanced technology to the market.
Bargaining Power of Suppliers
In terms of the supplier’s bargaining power, it is mixed or average. On the one hand, the automotive industry and its luxury segment are well-developed and have a set of established players, providing more power to the automobile manufacturers. Most car manufacturers, including BMW, have vertically integrated supply chains (Hitt, Ireland, & Hoskisson, 2017). On the other hand, autonomous driving technology is a new development that may disrupt the market and cause automobile manufacturers to rely greatly on outside vendors.
Threat of Substitutes
For the autonomous vehicles, a substitute would be transportation means requiring limited input from an individual, including public transportation, car sharing, or taxi services. The first option is becoming less attractive with the restrictions that arise due to the global pandemic. The latter two are valid options. However, the cost of them can be high when considering long-term use on an everyday basis. Hence, the threat of substitutes for autonomous vehicles is currently moderate, there are options, but they do not satisfy all the consumers’ needs.
Bargaining Power of Buyers
In the current conditions, the bargaining power of buyers is average since even the luxury market offers many options to consumers. Still, the number of autonomous vehicles one can purchase is limited. This includes Mercedez-Benz, Audi, BMW, Lexus, Tesla, and some others, each offering a set of different vehicles to the buyer. Autonomous vehicles, however, are currently not offered by many companies, with “Google for a Toyota car, Volkswagen’s Audi, and Mercedez Benz” currently having on-site tests in California (Hitt, Ireland, & Hoskisson, 2017). Hence, in the market of luxurious autonomous vehicles, buyers’ bargaining power is lower for luxury autonomous vehicles than that of luxury vehicles in general.
Even when considering the autonomous vehicles market, the rivalry between different manufacturers is relatively high because a large number of manufacturers are fighting for the consumers. The differentiation between the different cars and brands is limited, especially for the autonomous segment, mainly explored by the luxury vehicle manufacturers. Since companies understand that autonomous vehicles are the future of the industry, they invest in developing this technology. However, current regulations, technology development, and lack of road tests limit the ability to use these cars and, therefore, manufacturers’ ability to sell them to consumers.
The main competitors for BMW in the luxury autonomous vehicles segment are Audi, Mercedes-Benz, and Lexus. Figure 1 presents the main competitors in the luxury vehicles segment, where luxury attributes and innovation are used as comparison factors. Here, Mercedez-Benz appears to be the most successful due to its focus on luxury and that they already have a patent to texas autonomous vehicles in California (Hitt, Ireland, & Hoskisson, 2017). Hence, this market group’s general strategy is to offer the most up to date driving technology combined with the luxury interior of a car to the consumers.
In general, both the automotive and the autonomous vehicle industry is attractive for existing players and unattractive for new entrants due to the high costs needed to introduce a new brand to this market. BMW is well-prepared to cope with the environment’s needs due to the high levels of investment in the new technologies. However, their position against the competitors is not advanced, since other luxury car manufacturers offer similar luxury vehicles and invest in autonomous driving.
The bottom line is that BMW currently works on developing an organizational ecosystem that would focus on driver and pedestrian safety, which would become an essential asset for the company in the long run. Other marketplace rivals tend to overlook the importance of communicating with their stakeholders regarding safe driving. Therefore, BMW has all the chances to cope with the potential threats related to the environment and marketplace rivalry. The fact that BMW is ready for the transition to hybrid energy also proves that the company cares for the environment and tries to establish an even larger follower base. When comparing the company’s positioning to other manufacturers’ approach to the market, it may be concluded that BMW copes with the pressure well and nurtures fundamental strategic partnerships while supporting its competitive rivalry vision at all times.
Hitt, M., Ireland, R.D., Hoskisson, R. (2017). Strategic management: Competitiveness & globalization, concepts (12th ed.). Cengage.