BMW: case study analysis
Q1: Business environment and main trends in 2004
The global car market started decline in 2003, led by market falls in North America and Western Europe. Other regions of the world led by East Asia are seeing further car market expansion in 2003. In 2004, projections for livelier economic growth underpin the resumption of car market growth in Western Europe and North America. (Langley 2004, p691-711) Although the more stringent laws can eat away at companies' earnings, they also provide the stimulus to develop new technologies and markets. Another major external factor affecting the current situation of BMW is that industry structure is becoming more and more concentrated. In this era of auto-industry consolidation, BMW is seen as a medium-sized business which could face problems in the future if it doesn't take into consideration strategic alliances. One of the external economic factors is that in the last years a large degree of overcapacity has been experienced in the car industry running at 20% to 30% in Europe. This overcapacity has been caused by a drop in demand and sales, probably because of a global economic instability which has led consumers to reduce spending on non essential goods. (Johnson 2008) The decline is brought about by lower car demand in North America and Western Europe, both relatively mature car markets that have been adversely impacted this year by high energy prices and fragile consumer sentiment. (Lynch 2005) The automobile industry is becoming more and more competitive, with 6 major groups which have been formed in the last 3 years. Strategy is a perceived pattern in actions past or yet to come. It is a label applied to patterns in action; strategy evaluation requires a consideration of both current and likely future results against the resources committed to the strategy. This is only an overview of the major concerns and findings from Johnson G. Scholes K. and Whittington R. (2005). Key environmental influences like any modern industry, car manufacturing today is strongly affected by external social and environmental pressures, which influence both current production practices and the development of future products and technologies. Environmental standards are mostly set by government regulation and even associations within the automobile industry. These acts aim to as anti-emission laws get stricter every year, and companies look to double or triple their fuel efficiency, alternative technologies are being developed to replace the traditional gasoline engines, and have started to hit the market. Increased fuel-economy and decreasing vehicle weight are gradual changes that slowly improve automobile performance; disruptive technologies include new fuel sources such as electricity, solar energy, and fuel cells. (Jarzabkowski 2004, p539-60) Below is the graph showing the production of car's in UK 2003-04.
Global production per car manufacture
Source: International Organisation of Motor Vehicle Manufacturers
A stage has been reached in which a change in thinking is required. In addition, global economic activity has been influenced by falls in equity prices and geopolitical tensions, including the related threat to oil prices, all having a negative impact on the economy. These factors have also influenced development in the majority of the world automobile markets. Increases in safety standards for automobiles, also mean that nowadays cars take longer time to be developed and manufacturers should now focus on pre-marketing activities, making cars look more desirable to consumers due to their safety. (Stacey 2007) Competitive Forces Competitive forces determine the relative market power of competitors, the kind of competition they engage in, the factors that give some of them a competitive advantage, and the relative attractiveness of that market compared to others. BMW's rival Daimler-Chrysler continued competing in the traditional...