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SWOT ANALYSIS

BMW

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Introduction:

Bayerische Motoren Werke AG is commonly known

as BMW. It translates to English as Bavarian Motor

Works. BMW-AG is a German automobile,

motorcycle and engine manufacturing company

based in Munich, Germany. BMW started as a

manufacturer of aircraft engines in 1913, but in 1919

following the armistice (Treaty of Versailles)

German military was prohibited to produce aircrafts.

Following years saw, the company manufacturing motorcycles due to the Treaty of Versailles

imposed conditions. The first BMW car was manufactured in the year 1928. Currently, BMW

is the parent company of Rolls Royce Motor Cars and MINI. Besides being one of the ten

largest car manufacturers in the world, it also has a strong market position in the motorcycle

sector under BMW Motorrad. BMW AG is one of the “German Big 3” luxury automakers

with Audi and Mercedes Benz.

In June 2012, BMW was listed as the #1 most reputable company in the world by Forbes.com

and also the same year, Dow Jones Sustainability Indexes named it the world’s most

sustainable automotive company for the 8th consecutive year (first automotive enterprise to be

in the Index). Rankings were based on willingness to buy, recommend, work for and invest in

a company. Since its first motorcycle rolled out in 1923, BMW has been engaged in

motorsport activities as well. BMW has been official sponsor for London 2012 Olympics,

United States Olympic Committee, PGA Championships, BMW Italian Open (Golf) and

Bundesliga (football). It is the charter member of US Environmental Protection Agency’s

National Environmental Achievement Track, which recognizes companies for environmental

stewardship and performance. BMW is ranked 3rd place in Carbon Disclosure Leadership

index across all industries.

SWOT Analysis:

Strengths:

1. Strong Brand Reputation :

In 2012, BMW was listed as the most reputable business in the world by the Forbes

magazine. The strong brand reputation of BMW is the result of effective marketing

strategies. Consumers’ perception has been associated with the brand image. With

$29 billion, BMW brand is the third most valuable automotive industry brand in the

world.

2. Environmental Friendly Technology :

BMW is known for its innovation and technological advancements. The company

develops environment friendly cars, with its engineers working on developing new

types of fuels, such as hydrogen. BMW AG offers nearly 20 models emitting CO 2 as

low as 140g/km. In 2013, BMW-AG announced launch of its first fully electric car

range, starting with BMW i3 in 2014.

3. Highly Skilled Workforce :

Quality cars require premium materials and skilled workforce. BMW has set up

assembly plants mainly in USA and Germany, which have the most skilled vehicle

assemblers.

4. Corporate Social Responsibility (CSR) :

The company invests large sums in employee health management, balanced work life

programs, zero waste at its plants and suppliers’ sustainability. It is committed to

employee-community well-being and environment protection programs.

5. Quality Products :

BMW is a world renowned brand for its engineering potentials, skilled workforce and

quality products. BMW aims at technological advancements, ‘green’ vehicles and

new innovative quality products.

6. Competitive Customer Service :

BMW works efficiently on long-term post sales customer service practices catering to

the needs, problems and any issues faced by its customers. Customers spending so

many amounts of money on quality products look for superior after-sale services,

which BMW knows very well how to fulfill.

Weaknesses:

1. High cost structure :

For production of high-end, luxury products; hiring skilled workforce and new

technological components leads to high costs for the business. BMW’s cost structure

is higher than that of its competitors like Audi, Toyota, GM and Volkswagen.

2. High prices perception :

Compared to its competitors, like Audi; BMW’s luxury cars requires higher cost

structure. Thus, BMW follows a premium pricing strategy leading to high price in

comparison with other cars.

3. Too few acquisitions and strategic partnerships :

The lack of strategic partnerships with other organizations is another weakness of

BMW-AG. BMW’s 10% growth is credited to acquisitions which makes hard for a

company to grow. In order to grow remarkably, a company has to acquire more

brands and enter into more strategic partnerships.

4. Weak brand portfolio (only three brands) :

BMW manufactures and sells only 3 brands: BMW, MINI and Rolls-Royce. The lack

of differentiation in brand portfolio may have negative impact on long-term growth of

the company. It may put the company in jeopardy to external shocks and economic

crisis in the future.

Opportunities:

1. Increasing fuel prices :

With the current economic instability and growing fuel prices, large markets can

welcome the new range of BMW hybrids and hydrogen cars. BMW has been working

on developing the i-BMW concept which includes fully electric cars leading to

emission reduction and cost efficient cars.

2. ‘Green’ vehicles and new emission regulations:

With customers becoming more conscious about the environmental protection and the

negative aftermaths of petrol and diesel cars, BMW’s emphasis on ‘green’ vehicles

will definitely create strong position in the automotive industry in the future. The firm

produces most ecological vehicles which comply with the new reduced vehicle

emission regulations.

3. Changing customer needs :

Unique selling proposition and continuous brand building with the help of new

innovative technologies can help BMW to cater to different target groups. BMW

takes into account the changing customer needs before launching and developing new

products.

4. Strategic alliances with other automobile companies :

BMW can plan to increase its presence globally by taking in to account the possibility

of strategic alliance with other companies. Strategic alliances can help large

companies to explore the markets of countries that have limited themselves to

particular companies.

Threats:

1. Increasing prices of raw materials :

Auto manufacturers are facing issues due to rise in costs or raw materials leading to

lesser profits and higher input costs.

2. New competition :

In developed countries, markets are saturated for luxury cars, intensifying

competition. With increasing competition from competitors like Audi, Mercedes

Benz, Toyota, etc. BMW tends to compete more on price rather than differentiation.

3. Euro exchange rates :

Exchange rate fluctuation can be a major threat for BMW if euro appreciates against

other currencies because a huge part of it profits come from other currencies.

4. Malfunctions :

Another threat for BMW can be the product recalls which compromises its claims of

high-end quality products affecting its brand image. E.g. in July 2014, the company

announced recall of 1.6m 2000-06 3 series models due to passenger-side airbag

issues. Similarly, in April 2014, BMW recalled 156,137 luxury cars and SUVs due

possibility of faulty engine bolts.

5. Shale Gas Extraction :

With increasing emphasis on shale gas extraction, future fuel prices may drop making

electric, hybrid and hydrogen cars less attractive. This in turn can be an area of

concern for the company who is spending a major portion of its reserves and profits in

developing the i-technology electric and hydrogen cars.