Five Forces Analysis

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Read the case, and consider the following questions:

1. What main trends are identifiable in the business environment in general and in the automobile market in particular in 2004?

• Equity prices had fallen until late in 2003: this, coupled with geopolitical tensions and concerns about oil supplies, add to the uncertainty about the economic and political environments

• From the mid 1990s automobile producers strove to improve engineering adn quality of vehicles as a route to competitive advantage or, in many cases, to catch up with competitors

• Players in the automobile industry as a whole stepped up price competition

• Customers' expectations would become a very powerful barrier to increasing prices later

2. Using Porter’s five-forces framework, attempt an analysis of the competitiveness in the automobile industry in 2004; adopt the BMW perspective. Consider the time horizon of strategic planning, and attempt to identify what future changes are likely for that period in the light of the factors at play in the macro-environment?

Potential entrants

• well built

• reliable

Product substitutes

• design

• brand appeal

Power of buyers

• product excellence

• cost of ownership

Power of suppliers

• lavish high-tech design laboratories

• art studios

Competitive rivalry

• brand identity

• high quality

• fuel economy

Future changes

• low cost

• best design

• high quality

3. What were the critical success factors in the market segments in which BMW competed? How do BMW’s competences compare to these? Was BMW able to acquire and maintain a sustainable competitive advantage?

• manged to build a perception of valuable differences in the minds of their buyers

• combined to sustain its competitiveness

• BMW's technology had been advanced, but not exceptionally...
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