Analysis of BMWs Performance

Abstract
This analysis touches on strengths and weaknesses that the BMW Group
(hereinafter called BMW) shows in domestic and international operations and
on opportunities and threats that BMW faces in both environments (see figure 1).
The international part zooms into the operations and the environment in the
Asian area. A short introduction to the company lined with up-to-date facts and
figures is followed by the internal and the external analyses and the conclusion.

Introduction to BMW
BMW is a German car and motorcycle manufacturer headquartered in Munich,
Germany and operating in more than 150 countries1. It counts as one of
Germanys largest industrial companies with total sales of 2,117,965 automobiles
in 20142 and 110,351 people employed3. BMW was able to celebrate its 4th
consecutive record year of sales2. BMW represents three of the strongest
premium brands in the automobile industry: BMW, MINI, and Rolls-Royce 4;
additionally motorcycles and financial services were successfully offered. For
2013, the corporation recorded revenues of 76,058 million and an EBIT of
7,986 million3.

Internal Analysis | Strengths

BMW aims at offering highest standards in terms of aesthetics, dynamics,
technology, and quality. This is achieved by the embedded long-term thinking
within the company3. In September 2014, BMW was announced the most
sustainable company in the automobiles & components industry by the Dow
Jones Sustainability Indices Review (DJSI)5.
The following part will work its way along Porters Value Chain 6 (see also figure 2).
Primary activities - operations: BMWs production network compromises a total of
30 locations in 14 countries1. Zooming into the presence on the Asian market,
numerous locations can be detected. There is the joint venture BMW Brilliance in
China and several assembly plants in India, Indonesia, Russia, Malaysia, and
Thailand3. Its Asian production network enables BMW to be on-site serving the
market efficiently and to reduce costs due to omitted import tariffs.

Primary activities - outbound logistics and sales & marketing: In order to offer
worldwide supply, BMW has developed a worldwide distribution network 3. A
special strength of BMW is the financial services which offers tailored financing
and an award-winning customer service7,8. BMWs offer also includes countryspecific option packages in order to satisfy their customers needs. Touching upon
the topic of CSR, BMW diversifies its activities9 in order to be tolerated and
appreciated. The CSR activities in China span, amongst other things, resources
innovation, education, and cultural exchange & social inclusion 10.
Support activities: One of the most significant characteristics of BMW is its major
stakeholder, the Quandt family. Together they hold 46.7% of the shares 11 and
guarantee the companys long-term oriented and sustainable development. A
good example for the emphasis on sustainability is the joint venture SGL ACF that
ensures the supply of carbon fibers, especially for the new electrical vehicles.
Innovation is one of the key strengths of the Group: 11,359 employees are
engaged throughout BMWs global research and innovation network which is
spread over five countries. R&D expenditures rose by 21.3% to roughly 5,000
million in 20133.
Internal Analysis | Weaknesses
Despite the great success of BMW, there are some mentionable weaknesses. The
promise of high quality standards is frequently overshadowed by quality-based
product recalls both in domestic and foreign markets 12.
In spite of the creation of a pension fund outside the company, there stills
remains a noteworthy portion of unfunded pension obligations inside the
company. The costs are volatile due to the macro economic factors (interest
rates) and the mortality rate.
Looking at the automobile market as a whole, BMW is only a small player
compared to Toyota, Volkswagen or General Motors. Thus, a smaller number of
cars has to bear all companys costs. Though, BMWs holds a strong position in
the premium segment based on a consistent brand portfolio.
External Analysis | Threats
A choice of external factors on the business situation of BMW will be assessed
through a PEST analysis13 (see figure 3).
BMWs role as a small player might became an obstacle when unfavorable
political, economic, and social factors result in a collapse of the demand for

premium cars. This worst case scenario is on the radar of BMW. Notwithstanding,
there are other more relevant threats that keep BMW occupied.
One of the broader political issues are the strict regulations concerning exhaust
emissions. BMW and the whole automobile industry has to endeavor to
constantly reduce fuel consumption and exhaust emissions. The laws require
massive R&D investments from BMW as its product portfolio offers mainly
powerful premium cars with higher fuel consumption.
An economic issue that concerns BMW is the currency fluctuations. Currently,
BMW benefits14.
Looking at the PEST factors in the Asian market, BMW faces further political
threats such as tariff and non-tariff based import barriers, local content
requirements, changes of Government, new unexpected laws and political unrest.
The social threats are manifold. There are language barriers for products,
especially when it comes to man-machine-interface. Hence, differences in
culture, desires and needs have to be identified, carefully researched, and
eventually integrated in all primary activities.
External Analysis | Opportunities
In defiance of challenges and threats, BMW has been able to demonstrate
increasing results over the past five years and there is a great amount of
opportunities that enables BMW to set ambitious goals for the years ahead.
Firstly, there is a growing global market for premium cars, led by the impressive
increase in the overall Chinese passenger vehicle market 15. The ongoing
urbanization in Asia and the global demand for sustainability fuels the market for
megacity vehicles and electric vehicles16. A product that meets the new needs is
the BMWi series3. Highlighting mobility services, BMW created the joint venture
DriveNow with the Sixt Group in order to profit from the new mobility trends in
German cities. The successful car sharing concept has already been expanded to
other European countries and the United States. Asian markets might not be
ready yet but the two parent companies have the resources to enter those
markets eventually.

Conclusion

The strong position in the premium market, the long-term orientation and the
robust focus on R&D combined with the broad global presence will enable BMW
to take advantage of the mobility, sustainability and urbanization trends and to
continue their path to success.

Limitations
Due to the limited frame, this analysis only touches on points that seemed
important to the author. The figures in the appendix comprise further aspects.

Word count 1054

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Appendix

Portion of
unfunded pension
obligations
Product recalls
in objection to
quality promise
Small player in

Margin

--

Strong position in the

premium segment
Robust focus on R&D
Various product offers
Efficient Dynamics
Far-reaching distribution network
Quandt
asfor
a major
Growingfamily
market
premium cars

S THREAT
NESSES WEAK-

TUNITIE OPPORGTHS STREN

Figure 1: Own Diagram on the SWOT Analysis for the BMW Group

Activities Primary ties Activi ort Supp

Increase in Chinese
passenger vehicle market
[see PEST analysis]
- Urbanization
- Sustainability focus
- Development of mega cities
-Figure
Demand
for illustration
a variety of of Porters Value Chain for the BMW Group
2: Own
Administrative, finance infrastructure major shareholder, AG
(corporation)
HR Management fixed and variable salary components, future talent
program
Product and Technology Management efficient dynamics, sustainability
Procurement automotive carbon fibers (SGL)
Inbound
Logistics

Operation
broad
presence,
assembly
plants

Outbound
Logistics
Great
distribution
network

Sales and
Marketing
BMW Welt

Servicing
financial
services,
customer
service

Figure 3: Own chart of the PEST Analysis for the BMW Group
_Political unrest
_Emission regulations
_Tariffs as import barriers
_Local content
requirements
_Changes of government
_New enforced laws
_Quality perception of
locally manufactures cars
_Language barriers
_Declining birth rate in
Germany
_Extreme sustainability
trend

PE
ST

_Currency exchange rates

and currency fluctuation
_Financial crisis
_Shortage of skilled
workers in Germany
_Increasing non-wage
labor costs
_Innovative technologies of
competitors (Google car,
Teslas batteries)
_Danger of hacker attacks
on cars as complex
electronic systems