BMW (Bayerische Motoren Worke) AG is a German luxury automotive manufacturing multinational company. Franz Josef Popp, Camillo Castiglioni, and Karl Rapp started the automotive company in 1916. Today, we’ll discuss Porter’s five forces analysis of BMW; bargaining power of suppliers and buyers; threat of new entrants and substitutes; and intense rivalry as competitive forces in strategic management.
Porter’s five forces analysis of BMW would analyze the bargaining power of suppliers and buyers; the threat of new entrants and substitutes; and intense rivalry as competitive forces in strategic management. Here’s BMW Porter’s five forces analysis of the luxury automotive business as follows;
Porter’s Five Forces Analysis of BMW
Let’s discuss Porter’s five forces analysis of BMW as competitive forces in strategic management and they’re as follows;
Bargaining Power of Suppliers in BMW
The bargaining of suppliers is low in the automobile industry as competitive forces in strategic management. Some of the main factors impacting the bargaining power of suppliers in BMW Porter’s 5 forces analysis of automotive business are as follows;
I-Supplier Regulations
BMW has established a worldwide reputation as a premium luxury automobile brand. Therefore, the automotive company carefully chooses its suppliers, raw materials, and automotive parts and equipment providing firms. In fact, the company has set a strict code of conduct, quality standards, and guidelines for its suppliers. The luxury brand only deals with suppliers that comply with the company’s regulations and quality standards.
II-Large Suppliers Network
According to an estimate, BMW deals with approximately more than 12000 suppliers in various countries across the globe. The company carefully collaborates with them to ensure quality and on-time delivery of equipment and components. However, the luxury brand could easily switch from one brand to another without incurring any cost.
Bargaining Power of Buyers in BMW
The bargaining of Buyers is Higher in the luxury automotive business as competitive forces in strategic management. Some of the main factors impacting the bargaining power of suppliers in BMW Poerter’s 5 forces analysis of automotive business are as follows;
I-Well-Aware Customers
Internet and digital technology have increased the customer awareness level. BMW precisely targets the brand and status-conscious customers. In fact, the company doesn’t manufacture automobiles for ordinary working-class customers. Even brand-conscious customers have a lot of options for choosing from luxury automobiles. This is because there are companies operating their business in the luxury automotive industry.
II-Lower Switching Cost
As mentioned earlier there are various automotive companies operating their business in the premium luxury category. They all have established a strong brand name with unique factors and differentiated features. Premium-class customers could easily switch from one automobile to another without incurring any cost.
Threat of New Entrants in BMW
The threat of new entrants is low in the automotive business and BMW is a competitive force in strategic management. Some of the main factors impacting the threat of new entrants in BMW Porter’s 5 forces analysis of the luxury automotive industry are as follows;
I-High Capital Investment
BMW is operating its business in the premium luxury automobile industry. The company has maintained a strong reputation and brand image by manufacturing high-quality luxury automobiles. In order to maintain its standards, the company invests a significant amount of capital resources in research and development for launching innovative features. On the other hand, many new young brands don’t have the luxury of heavy R&D expenses and technical expertise.
II-Strategic Alliance
BMW has developed a strategic alliance with other automotive parts and components manufacturing companies. It helps the companies to ensure the smooth supply of quality parts based on their needs and requirements. The new firm won’t have industry awareness, no partnership and alliance, and no access to the components and equipment.
Threat of Substitutes to BMW
The threat of substitute products and brands is moderate in the automotive business as competitive forces in strategic management. Some of the main factors impacting the threat of new substitutes in BMW Porter’s 5 forces analysis of the luxury automotive industry are as follows;
I-Quality & Status Conscious
The target customer market of BMW is the status quo, quality, and brand-conscious customer market. The automotive brand invests a significant amount of capital resources on continuous improvement to offer a great customer experience. However, various other premium luxury automobiles could be a substitute for the luxury brand BMW.
II-Electric Vehicle Trends
The trend of electric automobiles is growing with the increasing emphasis on environmental sustainability. Many other luxury brands like Mercedez-Benz and others are developing electric automobiles. In order to attract and retain the attention of environmentally conscious customers, BMW has shifted its focus to the development of electric vehicles.
Competitive Rivalry in BMW
The competitive rivalry among automotive brands is very high as competitive forces in strategic management. Some of the main factors impacting competitive rivalry in BME Porter’s 5 forces analysis of the luxury automobile industry are as follows;
I-Tough Competition
The premium luxury automotive market has become highly competitive. BMW needs to invest a significant amount of capital in the development of new features, better service, and improved quality. It would help the company to differentiate itself from the competitors in the market.
Conclusion: BMW Porter’s Five Forces Analysis |5 Forces Analysis of BMW
After an in-depth study of Porter’s five forces analysis of BMW; we have realized that BMW is the world’s leading premium luxury automotive brand. If you are learning about BMW Porter’s five forces analysis of the luxury automotive industry; then you should keep in mind the abovementioned bargaining power of suppliers and buyers; threat of new entrants and substitutes; and intense rivalry as competitive forces in strategic management.
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