Application paper #2 (High cost consumer goods)
For this assignment, I chose the automobile industry. This paper will focus on BMW key competitors and competitive forces using the Porter Five forces Framework.
The globalization is influencing the automobile industry. Auto dealers encounter less and less restrictions to operate in overseas market. However, competition is rough with innovation and the increase of people’s sensibility to respect the environment limits and be more sustainable. Competition is an external factor that drives changes in a firm’s strategy. How does BMW deal with competition?
BMW (Bavarian Motor Works) is a German automobile engineering manufacturing company founded in 1916. They are considered as one of the three best selling luxury automakers in the world, along with Audi and Mercedes Benz. Headquartered in Munich, Germany, BMW produced over 2 millions of automobiles sold all over the world.
Using the Porter Five Forces, we will evaluate BMW attractiveness as a company and determine the industry’s profitability.
The Five forces are:
The threat of new entrants
It is relatively complicated for new entrants to get into the automobile industry due to the large capital required to set up a manufacturing plant, advertise and sell the car. It would be a huge risk for a firm to get into such a competitive industry. It is even riskier for a new entrant to compete with BMW, which already has a great reputation with the best technicians, engineers, and designers who help develop new model cars.
This refers to the raw materials, parts and services of a BMW product. Automobile companies rely on suppliers as they have power on the price tag for the raw materials. BMW, by its maturity and good reputation, has a good supply chain management and a long relationship with its suppliers. Materials from suppliers could be defective sometimes and affect the manufacturing of cars and cause a call...
References: “Strategic analysis of automobile industry” by Marco23 http://centraldomino.com/essays/Strategic-Analysis-Automobile-Industry-65055421.html
“P5F automobile industry” by Andrew Patterson.
“BMW strategic analysis” by Rodrigo
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