Porter’s 5 forces analysis of BMW
Background information on BMW
The Bavarian Motor Works is popularly known as the BMW and it is a premium brand in the automobile industry. BMW was founded in 1917 and has had a legacy of high quality, great efficiency and hi-tech innovations. This popular brand is known for all over the world for powerful vehicle brands such as the Mini and Rolls Royce and the BMW. It has a wide range of top brand vehicles and many consumers go for the high quality and innovativeness of these brands.
Analysis of Porter’s five forces for BMW
The Porter’s five forces analysis is one of the methods of evaluating competitiveness in an industry. Invented in 1979, this analysis technique can help determine the level of competitiveness in an industry and how a particular company fairs in the market. In analyzing BMW, there are five forces that can be scrutinized:
- Substitutable products. Even though there are many brands of vehicles, it is difficult for BMW consumers to substitute the brand. This is because the automobile company has invested heavily in producing high quality and innovative vehicle brands. Both the Rolls Royce and BMW brands cannot be found elsewhere in the market because of their unique features. However, there are other automobile companies that manufacture luxurious vehicles which some consumers may prefer to the BMW brands. There are also government policies that may encourage consumers to use public transport to reduce environmental emissions and traffic on the roads. This may lead to the substitution and usage of private vehicles with public service vehicles. Ultimately the BMW users will always prefer the strong and top quality brand.
- Barriers to entry. In order for a new company to penetrate the automobile industry, it needs to have massive capital and also highly skilled personnel. To reach BMW standards, a new company must invest a lot of money on setting up shop, advertising and hiring highly skilled designers, engineers and technicians. This gives BMW a competitive edge because new entrants cannot be a threat considering that the company has been in existence for close to a century and is one of leading companies in the industry.
- Buyers’ power. Generally the automobile industry has demanding consumers. Considering the amount they cost, the buyers of luxury cars are a demanding lot. BMW has to provide updated information and advertise its products in order to reach out to its clients. This also entails ensuring that the company receives good reviews on newspapers, magazines and online articles because buyers rely on the reviews for information regarding price, features and latest models.
- Suppliers’ power. Suppliers in the automobile industry play a major role in the businesses. This is because automobile companies like BMW rely on the suppliers for various vehicle parts, raw materials, labour and other services. If an automobile company works with an unreliable supplier, it can have problems in delivering its products and distributing them to consumers on time. BMW is very particular about working with the right suppliers because this affects the quality of its vehicles. If suppliers are expensive, the end product tends to be expensive as well.
- Competitiveness in the market. The automotive industry is highly competitive and BMW has to compete fiercely with both automobile and bike manufacturers. Amongst the main competitors that BMW faces in this market include, Mercedes Benz and Audi vehicle brands. Bike brands such as Yamaha and Ducati are also considered high competitors for BMW. In the recent past, BMW has incorporated the manufacture of hybrid vehicles into its production line. This is because of the rising demand that has forced manufacturers to consider environmental friendly and fuel efficient brands to meet the taste of demanding clients. This focus has helped BMW maintain its share in the automobile market.
In conclusion, BMW has continued to prove itself by innovating and producing high quality cars and this has helped it attract and retain its clients over the years. The fact that it has now started hybrid productions gives it a competitive edge in the automobile industry.
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