BMW Group is a German car and motorbike manufacturing and financial services company. It operates in 14 countries in the world. The company was incorporated in 1916 and the focus of the company has always been the automotive segment. The number of employees in the company is 134,682 and 90 % are employed in the automotive segment while 2.8% is the motorbike and 6.6% in the financial services. The company has 30 manufacturing units that have able to provide 2,490,664 units of cars since its incorporation.
BMW is considered as one of the pioneers in luxury car manufacturing. It has been continuously gaining success in the automotive industry (BMW Group, 2019). To gain further success. Porter’s five forces model is presented for BMW Group with respect to the global automotive industry to provide clear insights for developing future strategies.
Competitive Rivalry
The luxury automotive global industry has multiple large companies that offer highly luxurious cars all across the world. The German and American companies are considered as the Pioneers for luxury car manufacturing along with the presence of Japanese companies. The major players in the global automotive industry include Audi, BMW, Bentley, Lexus, Lincoln, Chrysler, and Porsche with a massive brand worth and positive image in the minds of customers. Germans are leading this industry and the accumulative share of BMW, Audi, and Daimler in the global luxury car market is 80% of the total share (PR Newswire, 2018).
These are providing tough completion to each other with the prominent presence of American companies like Volvo. Volvo is expected to gain a 10 % share of the global automotive market in luxury cars within the next 3 years (Leggett, 2018). Keeping in view the strengths of multiple players in the automotive industry, competition in the industry is high.
The Threat of New Entrants
Car manufacturing is a complex business as it requires a large amount of capital with massive facilities and expertise. There are several raw materials and operations included in the manufacturing of business that makes it a complex business. Along with these hurdles, it is difficult for new entrants to convince the customers as the purchase of a luxury car is a high involvement decision.
The customers are vulnerable to making a decision in favor of new entrant for purchasing an expensive luxury car that increases the complexity of the marketing department of a new entrant (Thulasi & Raju, 2018). All of these factors contribute towards the hurdles for a new entrant to enter into the global automotive industry. Therefore, the threat of new entrants in the global luxury car manufacturing industry is low.
Threat of Substitutes
The luxury car provides several benefits to purchasers that include style, design, convenience, facilities, comfort, status symbol, and authority of having a personal vehicle for transportation. The threat of a substitute will arise if there is a product that provides something extra along with all these faculties. The convenience and features that a car provides cannot be attained by private Jet or a bullet train.
Currently, there are no products available that have the ability to provide the mentioned benefits and features along with the extra value (Manoukian, 2017). This absence of close substitute for luxury car manufacturing is the reason for a low threat of substitutes for the industry players such as BMW Group.
Bargaining Power of Buyers
The presence of multiple options with high brand value, trust, reliability, comfort, and luxury for the buyers to choose from, the bargaining power of buyers is high. It is a high involvement product, and the buyers compare each little thing for different companies for a luxury car. The buyers have multiples options, and the switching cost of the buyer is moderate.
All major companies in the luxury car market provide several standardized basic features with differentiation in some feature that makes it further easy for the buyers to switch (PR Newswire, 2018). Therefore, the buyers are enjoying high bargaining power in the segment of the global automotive industry.
Bargaining Power of Suppliers
The bargaining power of suppliers is moderate for luxury car manufacturers across the globe. The suppliers for basic raw material for car manufacturers such as steel, entertainment, and tires are available in excess and companies are bargaining with strength with those suppliers. But there are some suppliers that provide complex raw materials such as engines are not available in as excess as the suppliers for basic materials.
There are some suppliers that have a competitive edge of implementing the Just in Time inventory concept that increases their worth in the eyes of the company and the suppliers set their terms in a few areas of the contract. All of these factors are the reasons for moderate bargaining power of supplier.
References
BMW Group. (2019). Company. Available at: https://www.bmwgroup.com/en/company.html
Leggett, D. (2018). Global Automotive market report – Q2 2018. Available at: https://www.just-auto.com/analysis/global-automotive-market-report-q2-2018_id183996.aspx
Manoukian, J (2017). The Psychology Of Luxury Car Buyers: 7 Considerations. Limelight. Available at: https://www.limelightplatform.com/blog/psychology-luxury-car-buyers-considerations
PR Newswire. (2019). Global Luxury Car Market Assessment 2018: BMW, Audi and Mercedes-Benz Account for Approximately 80% Share of the Global Luxury Car Market. Available at: https://www.prnewswire.com/news-releases/global-luxury-car-market-assessment-2018–bmw-audi-and-mercedes-benz-account-for-approximately-80-share-of-the-global-luxury-car-market-300767403.html
Thulasi, P., & Raju, V. (2018). Factors Influencing Consumer Behavior for buying Luxury Cars. International Journal of Civil Engineering and Technology (IJCIET),9(4), 292–297,