During the period of 2003-2004, the business environment as well as the automobile marker in Europe and globally developed according to the ideas of more progress and innovation, providing the necessary conditions for the significant competition within the industry on the question of price.
Thus, price, brand image, and the company’s reputation became the key factors to determine the customers’ attitudes and the competitive advantage of firms within the market.
To overcome the depressed demand, the companies focused on the principles of differentiation, brand image and identity, building of emotional connections with customers in order to attract them to buy the products because the factor of quality ceased to play the main role to determine the customer’s choice.
Much attention was paid to brand image and appeal and design in order to differentiate the products and influence the customers’ buying behaviours. These factors became to affect the competitiveness within the industry significantly.
BMW took the leading positions within the European and US markets during the period of 2003-2004, while producing luxurious or high performance automobiles. To analyse the competitiveness within the industry and market in 2004, it is necessary to refer to Porter’s five-forces framework.
Potential Entrants
The threat of entrants can be discussed as rather high, if the possibility of the world successful companies to produce the new models of luxurious cars is taken into consideration. In this case, the entrant abilities depend on the effectiveness of branding in relation to Ford, Toyota, or Lexus models.
Potential Substitutes
The potential threat of substitutes for BMW luxurious automobiles can be discussed as medium or high, if the idea of changing the signs of luxury is discussed.
From this point, buying luxurious BMW automobiles, customers prove their high financial status and satisfy the needs in relation to luxury, but these needs can be also satisfied with references to the other products symbolising the elements of the luxurious life. Furthermore, customers can choose the other vehicles instead of luxurious automobiles in order to respond to their needs.
Power of Buyers
The power of buyers can be discussed as low because they cannot influence the process of the company’s development and process of producing luxurious automobiles significantly. The success of BMW automobiles depends on reputation and effective price and quality policies.
Power of Suppliers
BMW focused on developing the close relationships with suppliers which guarantee the effective control over them provided by the company. Moreover, such relationships are based on providing BMW with the whole set of instrumentation by one or two suppliers, and this fact limits the suppliers’ power. Thus, the level of the suppliers’ power can be discussed as low.
Competitive Rivalry
The competition within the industry is high, and it is rather difficult to develop a strategy according to which the definite brand can become leading within the market because of decreasing the importance of such factors as design and quality.
As a result, price remains to be one aspect to affect the competition within the market. To rely on the further extreme development of the brand identity, it is necessary to provide a unique model, but innovations are associated with many products within the industry.
Future Changes
The focus of BMW on the US and Asian markets in 2003 is closely connected with the further orientation on many new markets, while proposing the innovative models. To realise this strategy, it is necessary to pay more attention to differentiation and identification.
The intentions to produce smaller cars in order to attract new customers are important for the company’s development as well as the tendencies to intensify the brand identity and the concentration on the whole consolidation of the industry. Being highly competitive, the industry can develop only with references to the companies’ cooperative ties.
The critical success factors which are necessary to operate within the industry are correlated with the BMW company’s competencies and strategies directed to forming the competitive advantage. It is important to determine such factors as the effective policy in relation to providing the quality of the product, orientating to customers, controlling the supply chain, and reducing costs.
Thus, the stable high quality of products is based on the effective relationships with suppliers and on the complete control of the supply chain because of the possibilities of such large company as BMW. Moreover, the effective company’s image and brand play important role in increasing the competitive advantage.
BMW’s sources of competitive advantage depend on the route or strategy of differentiation chosen by the company for progress. To respond to the principles of this strategy, BMW focuses on improving the product, on contributing to creation of the brand awareness and use of the brand reputation in order to promote new models.
Thus, BMW is inclined to draw the customers’ attention to the important fact that the company’s products differ from the others significantly because of their high and proved quality along with the innovative approaches and because of the brand reputation.
As a result of the prolonged process of performing within the competitive market successfully, BMW developed two main effective strategies oriented to product and market development. Product development is associated with implementing innovations in models and using new technologies in order to improve the quality of products.
Thus, the significant strategy to launch new models during several months was proposed in 2003 in order to increase the competitive advantage in relation to the premium automobiles. The effective market development strategy is based on exploring such new markets as Asian markets in order to find more buyers and respond to their needs with references to the local differences and possible changes in demands.
The corporate strategy issues associated with BMW are connected with the implementation and management of strategies to control a range of products. Thus, the work with different groups of products and promotion strategies require various approaches to realising them. As a result, the company needs effective strategic management in order to operate effectively within the market and industry.
For instance, it is important to avoid the fact of cannibalising the 3 series models with 1 series ones because of implementing more effective strategies for promoting these automobiles within the market. Furthermore, it is important to regulate the problematic financial questions and to overcome the pressure on costs with the help of adequate policies realised by the strategic managers within the company.
The next issue is connected with the question of controlling all the company’s departments and with the problem of the associated control of market segments. The increase of competitive advantage also depends on the effective management and control.