Future of the Autonomous Automobile A Strategy for BMW Case Solution

BMW possesses a high brand value, as it was ranked #21 world’s most valuable brand in 2019 (Forbes, 2021).  

The automobile corporation invests heavily in R&D for its hybrids, autonomous, and electric cars, enhancing its long term sustainability (Taylor, 2018). 

Inter Brand ranked BMW 11th strongest brand out of the top 100 global brands in 2020. Because of its solid reputation as a luxury brand, BMW dominates purchasing decisions (InterBrand, 2021). 

ii. Weaknesses

BMW is recalling nearly 357,000 older models in the U.S. and over 1.4 million globally to replace faulty Takata airbags, with this move reducing its reputation significantly (ABC News, 2020).

Unlike its competitors such as Volkswagen that owns numerous top brands, BMW’s portfolio lacks product differentiation and consists only of BMW, MINI, and Rolls-Royce. The lack of product diversification leaves behind untapped potential for expanding BMW’s market share (Banks, 2019).  

Despite BMW’s request for subsidies from the German government to soften the effect of the pandemic, the executive paid more than $1.7bn in dividends. This was met with opposition from even the most loyal customers (Financial Times, 2021).

BMW’s debt stands at a whopping €104.5 billion, limiting the company’s ability to invest in R&D and launch innovative vehicles. 

iii. Opportunities

By expanding into the Self-Driving Sector like Tesla and Google, BMW can attempt to exploit the rising demand for self-driving cars in the future (Bloomberg, 2020).

By offering Eco-friendly Mobility as one of the leaders in the electric car market, BMW is well placed to cater to the needs of an increasingly eco-conscious population of consumers (Jolly , 2019). 

iv. Threats

During global recession such as the recent coronavirus pandemic, consumers eliminate luxury expenses such as buying BMWs due to economic instability (Baldwin, 2020). 

In a hypercompetitive luxury automobile industry, BMW is vulnerable to loss of customers and market share to innovative competitors like Mercedes and Lexus (Carbrey, 2020).

Due to Rising Manufacturing Costs, BMW has had to experience occasional declines in its profitability. In 2019, BMW’s second-quarter earnings dropped by 48% due to an increase in the cost of manufacturing (Reuters, 2019).

2. Five Forces and Regulations Analysis

i. Bargaining Power of Customers (High)

In times of economic recession, customers are more inclined to purchase cheaper cars. With the availability of increasingly reliable sources of information to bank on, customers obtain intricate details of their options before choosing a luxury car. In the luxury car industry, high brand loyalty is an influential factor which further boosts the bargaining power of customers.  

ii. Bargaining Power of Suppliers (Low)

The bargaining power of BMW Group suppliers is insignificant. BMW group has about 13,000 suppliers of various sizes and the importance of establishing business with a well renowned company such as BMW for each supplier holds vast importance. Most products and services provided by the suppliers are not unique. Additionally, BMW’s product differentiation strategy ensures that the cost of supplies relative to the selling price of its vehicles is minimal. 

iii. Threat of Competitors (High)

BMW’s rivalry with its competitors is intensive. The fierce competition within the luxury car industry coupled with the degree of differentiation between vehicles of each brand is significant. Advertising expenditure plays a vital role in the luxury car segment since BMW competes with these companies to charge higher prices for the perception of status, achievement, recognition and success associated with owning their vehicles. 

iv. Threat of Substitutes (Low)

The threat of substitute products or services is very minor. Substitute products and services for cars comprise of bicycles, motorcycles, subways, buses and other types of public transportation. Unlike the regular automobile industry, BMW cars are meant for people purchasing cars to develop a self-perception of status, success and achievement. Hence, the threat of substitute products for BMW is negligible, because of the status symbol associated with owning a BMW.