Porter's 5 Forces - Model & Analysis for All Industries

Key Facts Name Bayerische Motoren Werke AG Industry Automotive Founded 7 March,1916 Headquarters Munich, Germany CEOs Oliver Zipse Revenues €111.2 billion,2021 Profit €12.46 billion, 2021 Competitors Toyota, Mercedes-Benz,Volkswagen,Ford,Honda Company Overview Headquartered in Munich, Germany BMW operates in Automotive, Motorcycles Financial Services and Other Entities segments. The famous brands under Automotive segment are BMW, MINI and Rolls-Royce.It was founded in 1916, formerly Rapp-Motorenwerke GmbH, which started producing aircraft engines and supplied for 1ST World War. Its reported revenues are €111.2 billion with net assets valued at €229.52 billion as of December, 2021.BMW’s brand value is estimated at US$ 24.8billion, experienced an increase of 21% compared to previous year, by reaching a globally ranking of 71st , in Year 2021,decalare by Statista. Porter’s Five Forces Analysis Porter’s Five Forces Analysis is a widely used model to evaluate companies’ strategies in reference to its industry for neutralizing the competition and increase the margins, it is developed by Professor Micheal E. Porter in 1979,at Harvard Business School. BMW Rivalry among Existing Competitors: BMW Business Segments: The Company’s main business is to manufacture, assembles and sells the cars under Automotive segment with over 30 production sites globally and having a sales & distribution network in more than 140 countries. The other 3 main segments are Motorcycles,Financial Services and Entities. Financial Services focuses on credit financing, leasing to retail customers and Entities focuses on group holdings and financing activities. BMW Global Operations Year 2021: The Company has manufacturing and assembling facilities in India, South Africa, United Kingdom,United States, Mexico and China.Only in 2021,the Group sold848 million units in China while 682 million units in Europe. The highest revenue generated from Europe 42.4%, Asia second largest market 32.5%,Americas 22.8% and other regions 2.3%. Mercedes-Benz is also proved to be one of key players by giving a record sale of US $ 167.9 billion, an increase of 9% from US $ 154.3 billion compared to previous year, in Year 2021.The Group sold 2.75 million units in Year 2021.The Company also introduced a 4 battery electrical vehicle. The ESQ electric flagship program get immense success with a record orders of 20,000 cars out of which 3600 cars will be in the market in January, 2022. Toyota gave tough competition to BMW by generated a record sales of US$276.57 billion , with a net income of US$ 21.1 billion, an increase of 9% from 19.2 billion compared to previous year, declared by Toyota, Financial Year ending March 31,2021.The main regions comprises of sold units are North America with 2,313 million units, Japan 2,125 million units , Europe 959 million units ,Asia 1,222 million units and other regions 1,027 million units. Volkswagen gave a record sales of 250.2 billion euros, retains a 6.4% global automotive market share after Toyota .It is also ranked 10th amongst the most valuable brand in automotive sector. Investment in Research & Development-Marketing Cost and Brand Image: The existing battles among the brands with a challenge of changing trend towards electrification requires high investments in research and development to better design the product for an accelerated customer satisfaction. BMW also needs to focus the marketing cost to increase the brand image and better customer loyalty. BMW Threat of New Entrants: Global Automotive Industry: It is estimated that global automotive industry will grow to US$ 9 trillion by 2030, only new sales vehicles will be 38% of this value. Any technological giants like Tesla can enter the industry considering other factors. High Capital Investment- Trained Human Resources: The new entrant will be requiring high capital investment, with extensive and sophisticated manufacturing-assembling structure so it is discouraging barrier for any new entrant. As due to the specialised nature of the product only limited human resource can handle such high-end products. High Research & Development Cost: High research and development cost is required for launching any new product in the current automotive industry. Technological Advancement: Due to the changing trend in automotive industry towards mobility and electrification only high technological advance companies or groups can enter such a market. BMW Bargaining Power of Suppliers: Supplies Industry Influencer: As due to sourcing premium quality raw material BMW is an influencer and educator to the supplier industry and being an established brand suppliers are attracted to be attached. Suppliers are asked to follow BMW’s code of conduct. Suppliers Collaboration: BMW has a supplier network of 3,200 at 4,500 production locations in 50 countries. The company has close ties and collaboration with the suppliers, also acknowledged 70% of BMW’s value creation due to it’s suppliers at Fifth BMW Supplier Innovation Award. BMW Bargaining Power of Buyers: High Product Differentiation: Due to highly sophisticated and technological advanced product the buyers have less knowledge and influence over the company’s decisions. Customer Satisfaction - After Sales Services: The requirements of car industry is better defined as a circle of complete experience included the after sales services. As it is a high-end product customer feedback, customer satisfaction and continuous innovation is important to retain the market share. BMW scored 81/100,an increase of 3.8% compared to previous year in 2021,in U.S. consumer satisfaction survey having an industry average of 78 respectively on 100 point scale. Government Rules & Regulations: Changing government rules and regulations are formulated in the favour of customers which added in the buying bargain power. BMW Threat of Substitute Products or Services: Electrical Vehicles: The overall Automobile Industry is moving to electrification, BMW held 4.82 % market share in plug-in electric vehicle while Tesla, an American multinational ranked best selling in this category, with a 14% market share in Year 2021. Brand Loyalty: As due to the nature of the product segmentation of Luxury cars, motorbikes and sport cars the company attracts a niche market so any substitution can only be replaced at the cost of brand loyalty. Post-COVID 19 Market: Mostly all companies in automotive sector faced a decline in sales in 2020 due to COVID 19.Any such future calamities may shift the consumption patterns and affect the sales. References: Forbes, Profile,BMW Group Statista (November, 30,2022) BMW - Statistics & Facts| Statista. Statista.Available at Statista Statista (July, 14, 2021) Global Revenue of BMW Group from FY 2007- FY2001 (in million euros)| Statista. Statista.Available at.Statista. The BMW name and it’s history Statista (July, 14, 2021) BMW’s global brand value from 2010 to 2021 (in bilion U.S. dollars)| Statista. Statista.Available at Statista Business Segments, BMW Statista (September,28,2022) |Consumer Satisfaction with BMW in the United States from 2006 to 2021 (index score) | Statista. Statista.Available at Statista. Toyota News Room,(May 12,2021) TMC Announces Financial Results For Fiscal Year Ended March 31,2021 .Available at Toyota News Room Mercedes-Benz Group Full Year Results and Annual Report 2021.Available at Mercedes-Benz Group Statista (March,22,2022) |BMW Group’s global automobile deliveries from 2007 to 2001 |Statista. Statista. Available at Statista Statista (May, 24, 2022) |BMW car sales in Europe from 2011 to 2021 | Statista. Statista.Available at Statista Pressclub Global. Article BMW Group recognises suppliers for outstanding innovations (November,22, 2018) available at Pressclub Statista (November,29, 2022) |Volkswagen Group –Statistics & Facts | Statista. Statista.Available at Statista Statista (June,10, 2022) |Volkswagen AG’s sales revenue from FY 2006 to FY 2021 (in billion euros) | Statista. Statista.Available at Statista

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