Short description of the Company:

History
In 1913 Mr. Karl Rapp found the company Rapp MotorenwerkeGmbH, which in 1917 was changed
into BMW GmbH. Already in 1918 BMW became a joint stock company and was from now on
called the BMW AG. BMW has survived three major crises that have threatened the company's very
existence: The World War I, World War II, and a takeover bid by Daimler Benz. BMW AG became
famous from that point on as Max Friz invented a new engine for planes that were so efficient that
BMW AG received an order of 2.000 engines over night.
BMW now
Today the Bayerische Motorwerke AG (BMW) is a German OEM for automobiles, motorcycles and
engines operating globally. The headquarter of the company is based in Munich (Germany). In the
year 2007 BMW has sales revenue of 48,999 Billion Euros and a net profit of 2,874 Billion Euros.
The whole BMW cooperation has around 106.000 employees worldwide who are responsible for a
production of 1.373.970 automobiles (1.185.088 und the brand BMW) and 100.064 motorcycles
last year. BMW is a car manufacturer that focuses on the premium segment in the car industry. With
brands as MINI, Rolls-Royce and their own brand, BMW offers a wide range of high quality cars
from small to very big and luxurious.
Figures
BMW is the third efficient car manufacturer world wide placed directly behind Porsche and Toyota.
The return on investment for the last year was estimated at 8% and BMW still counts to the few
independent OEM on the market.
As the latest information launched on the official website www.bmw.com we found that sales of the
BMW Group went down 8.3% in October due to the general financial crisis this year. But
nevertheless strong brands as MINI, that belong to the fastest-growing premium brands are sold and
produced constantly more compared to the month of the last years.

Furthermore, the BMW Group has increased its year-to-date sales by 0.7% compared with the same
period last year and even managed to increase the number of BMW, MINI and Rolls-Royce brand
automobiles sold by 8,492 vehicles to 1,226,990 units (prev. yr.: 1,218,498).

Production.
The worldwide production network of the BMW Group is the backbone for growth in all global
markets. Thanks to the close cooperation between all of the plants, manufacturing takes place
quickly and flexibly. This creates significant advantages in the international market. The BMW
Group currently has 17 production facilities in six countries:
Berlin plant, Dingolfing plant, Eisenach plant, Contract production in Graz (Austria), Goodwood
plant (GB), Hams Hall plant (GB), Landshut plant, Leipzig plant, Munich plant, Oxford plant (GB),
Regensburg plant, Rosslyn plant (South Africa), Shenyang plant (China), Spartanburg plant (USA),
Steyr plant (Austria), Swindon plant (GB), Wackersdorf plant.

Assembly
The BMW Group currently engages in assembly with the help of external partners in the following
countries:
Jakarta, Indonesia; Kaliningrad, Russia; Cairo, Egypt; Kuala Lumpur, Malaysia; Rayong, Thailand;
Chennai, India.

Management
The BMW Group Management Programme is structured with a clear international focus. In the
matrix below you can see which competences are requested for the program for further
development:
Macro environment of the company

The macroenviroment will be described by the PEST analysis, which helps

to analyse general, long-term market influences.

Socio-Cultural (Demographical / Sociological):

An on average older population in European countries forces car manufacturers to develop new
strategies in relation to their target groups. This is also required in view of the fact that increasingly
higher numbers of commuters and the demand of lower consumption cars show an attitude change
regarding transportation, potentially causing image problems for companies producing higher-
consumption cars. A generally lower average income may lead to lower demand for cars, especially
in the luxury segment.
Nowadays people concerned heavily on the look of the cars rather than quality issue. This means
that customers perceive cars as the object that can tell others about their status and taste.

Automobile customers use motor design and brand appeal as the main factors when they come to
buy cars. Thus, this changing demand and lifestyle influenced car manufacturers to concentrate on
the look of their motors and build powerful brand to gain small gain rather than loosing market
share.

Ecological:
In view of high media covering, ecological influences become increasingly important. Especially
automobile companies have to show that they responsibly use the available resources and care for
the environment. Following, BMW reduced plant emissions and vehicle consumptions, which
required improvements in engine technology and aerodynamics. The program for the reducing of
consumption and increase of efficiency of products of BMW Group is known as EfficientDynamics.

Political:
Politics can have an influence on companies in an industry. One example is the German VAT
increase from 16 to 19%. Additionally, reforms put further burdens (e.g. increased health service
contributions) on customers.
This may reduce demand and could have an effect on the automobile industry.
Political climate in Europe had a huge impact toward BMW who has to expand more production in
the US and China. The uncertain political environment in the European Union market gave climate
contributed toward the decline of motor sale with exception for the UK, some Scandinavian
countries, and China which were reported to have above average of motor sale.
After the liberalisation of the automobile market through the EU, a VW-dealer is also allowed to
sell BMW. This strengthens the position of dealers in relation to the manufacturers.

Economical:
However, the economic environment for automobile companies in Germany can be described as
difficult. In particular, challenges arise from the co-occurrence of adverse currency factors
(especially for BMW the weak dollar) and above-average raw material prices. Also, the increased
petrol prices lead to a reduced car demand.
The global economy experienced a sharp downturn in 2001 which lasted well into 2003, and this
affected the motor demand.
The equity prices had fallen until late in 2003, coupled with geopolitical tension and concern about
oil supplies, added to the uncertainty about economic and political environments. This fuelled the
decline in motor sale.
In 2008 the economy of the developed countries as well as from the emerging markets experienced
a dramatically decrease in growth. The automotive industry lost a huge part of its usual profits.
These changes lead to a change in demand; costumers are not ready and not able to pay former
prices for the cars. Some competitors of BMW decrease there price level already.

Technological:
In the automobile industry, companies are forced to invest huge sums into R&D measures to foster
technological development and be cutting-edge. Currently, the focus lies in the fields of security and
alternative energies, e.g. hydrogen, electricity.
Technology has become a solution for prestige vehicles and automobile manufacturers employ the
use of technology by adding gadgets into their motors. For example, add iDrive in its BMW 7-
series.
Advance technology is used by BMW to increase engineering and the quality of the models which
are the route to competitive advantage

Porters Five Forces for BMW

According to the book Strategic Management Porters Five Forces is a good tool for analysing the
current market situation of a firm. By looking close to the essential points products, competitor,
buyer and barriers we were able to rank the market BMW AG in. How the market environment of
BMW is determined based on the P-5-F model you will see in the following paragraphs.

Threat of New Entrants - Very Low

In order to enter the automotive market on a competitive way big money for efficient investments is
needed. Furthermore, knowledge and explicit experience in this field is essential and can not be
gained after a short period of time already. That’s why we think that BMWs market is assessed with
a “Very Low” on behalf of Thread of New Entrance.
Threat of Substitutes ' Medium
Here it is important to mention that people always have substitutes available. Not only other
branded cars but also public transport as boats, aircraft, buses and trains. In addition to that, other
conventional means of transport such as walking and bicycling create an opportunity as well.

Power of Suppliers ' Medium

Some suppliers are small companies and that’s why they will not have much power compared to
BMW in order to determine conditions. However, BMW basically is supplied by the bigger
companies that are ranging from middle to big player on the market. So, in the BMW scenario we
assume bigger influences of the supplier on the conditions, which lead us to the decision rating the
factor “Power of Suppliers” at a Medium level.
Power of Buyers ' Medium
Due to the fact that buyers are individuals and not grouped together it is hard to determine one
single unit of power. But we know that information gained from the buyer as special desires and
pricing are crucial in order to be able estimating the market right. Depending on the buyers situation
BMW has to implement strategies and adjust conditions to make the produced BMW disposable.

Competitive Rivalry - Extremely High

We can say that every direct competitor of BMW is a big player on the market with huge different
product ranges, high assets and a strong global presents. The word “Image” plays a big role in this
scenario and not only in the segment of luxury cars but in every segment cars can be divided in.
Especially the Asian companies as Toyota and Honda are trying to show the world their competitive
quality for cheaper prices.
Conclusion
The automotive market in general already gives BMW a save market environment which is
dominated by just few manufacturers. The most dangerous point in this market for BMW would be
the competitive rivalry because cheaper brand now creating