Introduction
The BMW group is a renowned maker of premium automobiles. It targets the global market when manufacturing cars. The company has remained operational for close to a century now since its foundation in 1916. One critical aspect that has been successful in sustaining the group’s many years of business and production is its focus on sustainability management (BMW par. 1).
More importantly, the BMW Group has succeeded in formulating a practical business strategy, with the intention of minimizing risk, optimizing new business opportunities, as well as overcoming emerging social and business tough times in advance. This paper seeks to explore the resource based view and the dynamic capabilities of the firm.
In particular, the paper will investigate these important business aspects with respect to the company’s recent acquisition of a carbon fiber plant, the prospects of BMW working in partnership with Toyota in the future, as well as its anticipation of turning ecological in its operations.
Resource Based View
The BMW has continued to expand its strategic potential by investing heavily in new resources with the ability to assure its great success. This innovation has not only been focused on the internal capacity of the firm, but to the external capability as well.
In 2010, for instance, the BMW Group initiated plans with a partner firm, SGL Group, to form the SGL Automotive Carbon Fibers (BMW Group par. 1). This significant resource that the firm opted to build sought to establish an elaborate and modern carbon fiber manufacturing plant worth more than US$ 100 million.
The BMW group had plans of developing sufficient infrastructure to make CFRP for sale to other car manufacturers who want to incorporate the CFRP technology into the future concepts of car making. This special resource has since boosted BMW’s capability for a new car model that is targeting urban mobility (BMW Group par. 1).
Furthermore, the automotive carbon resource boosts BMW’s focus on achieving sustainable business operations at a time when environmental pressures faced by automobile manufacturers have grown in magnitude. The location the plant in Moses Lake, WA was a tactful move to take advantage of the available hydropower, which is both recyclable and environmentally friendly.
In addition, it was aimed at maximizing the benefits of the cheaper energy available in Washington. Other than energy reasons, the BMW Group decision to establish the carbon fiber plant in Washington targeted the favorable infrastructure conditions in the state, as well as the elaborately existing utilities, and the comprehensive skilled labor force available.
The combination of these strategically critical resources helps the BMW to boast of immense core competency that is not enjoyed by other industry players who also emerge as greater competitors. Valuable resources of any firm are characterized by uniqueness in terms of being hard to imitate. They should also be constantly upgradable.
The BMW Group’s carbon fiber plant passes as a hard resource to imitate, especially given the resources required to set up a similar plant (“Economic Indicators” 71). Additionally, since the inception of the plant, BMW has been planning for the gradual expansion of its production capacity from the current 3,000 tons to a larger capacity of 9,000 tons by the beginning of 2015.
Although other automotive players have explored on the carbon fiber technology, BMW’s venture makes it more valuable in the market because it entails a large scale productivity arrangement that makes it cheaper to employ in manufacturing vehicles.
In analyzing the above resources of the BMW, it is quite significant that the car manufacturer is seeking to uphold both resource heterogeneity, as well as resource immobility. Establishing the carbon fiber plant underpins BMW’s focus on addressing the heterogeneous and dynamic situation in the market, where the comparative advantage targeted is to ensure that a sustainable solution for car materials is provided before the need arises.
The most significant pillars of BMW’s resource base view and performance include the proprietary process, as well as equipment that the firm has built over time, significant knowledge and skills owned by the employees, and the necessary external learning acquired mainly from other partner firms.
The BMW has also channeled its resources to the production of its high-end brands to maximize the advantage of their premium features. Therefore, the company is betting on the Rolls-Royce, the MINI and the BMW brands to perform exceptionally. It has further established a strong position within the motorcycle market sector, in addition to operating a financial services division.
It has spread the proprietary knowledge and equipment to other strategic locations in the world, including the UK, South Africa, and the USA. Noticing the growing economic capability of China, BMW has further opened a production plant in the country and extended the same to Italy and Australia.
The firm protects its proprietary knowledge, while also seeking new knowledge from external partners by signing production contracts with third party players in some of the key international markets that it operates in. This has, in turn, presented the firm with an opportunity to offer appropriate product solutions to rising global market demands.
Another important production knowledge held by BMW, the “completely knocked down” (CKD) technique of production, enables it to connect its manufacturing plants in six different locations with partners who are based in Thailand, Russia, Egypt, Malaysia, as well as Indonesia and India. In Brazil, the initiative has focused mainly on linking the firm’s production plant for motorcycles with the relevant partner firms.
In the recent years, BMW has taken the necessary steps ahead of all its major competitors in the world to patent the electric turbocharger design to help provide a lasting solution to the challenges that have continuously occurred regarding this technology. Despite turbo engines having been existent for long, a major challenge that comes with the use of this technology is its failure to give maximum results, whether with small or large turbo designs.
BMW has moved with haste to solve the challenging scenario by creating a turbo engine design that will give optimum performance results, whether the engine is running at low-end power or at high-end power. The patenting of the BMW electric turbo charger has happened at a time when the production prospects for a car with such technology still lies in the future.
Thus, with regard to the resource base view, the firm has already moved to fill a void, using its technology, which promises to offer a superior engine response compared to what is available in the market. This is a significant competitive advantage for the firm, as the patenting implies that no rival car manufacturer can adopt the use of the technology without seeking BMW’s authorization. Moreover, the company is in a position to enhance the technology further to keep it competitive.
Dynamic Capabilities
BMW Group’s significant dynamic capabilities equally stand out to underscore the firm’s potential in integrating and building a stable internal competency as a means of addressing the fast changing industry environment. The idea of building a carbon fiber plant is a perfect example of the firm’s efforts to develop its dynamic capability.
In other words, the BMW management envisioned a future where the demand for using lightweight plastic material in the manufacture of vehicles would increase, thereby occasioning a gradual move from the current materials used. In essence, the firm saw the need for working in partnership with an expert company, the SGL, in manufacturing automotive carbon fiber to build a comprehensive ability to address the material transformation beforehand.
While this will serve as the main source of material supply for the BMW’s own internal needs, it also positions the firm as a major supplier of the material in the overall car manufacturing industry. This will ensure an optimized result for BMW in terms of its revenue performance, in addition to enhancing its market performance.
The BMW Group has equally initiated talks with one of the biggest car manufacturers in the world, Toyota Motors Company, with a view of achieving certain strategic advantages (Roberts par. 1). Most importantly, BMW’s cooperation with Toyota is targeting to acquire dynamic skills in hydrogen fuel cell technology, improve its modern battery technology, as well as the electric sports car technology.
Given that Toyota has registered great success in these fronts, the BMW Group considers the cooperation as an opportunity for it learn and integrate some of these crucial car design skills. The future of the car industry is gravitating towards a more eco-friendly automobiles, with greater efficiency in terms of fuel performance.
The exchange of ideas on the BMW i3 electric car model and Toyota’s hybrid car technology is likely to benefit both firms with crucial dynamic capabilities, as they target the growing hybrid and electric car market (Roberts par. 1). More important, Toyota boasts of a well-developed fuel cell technology, which it seeks to employ between 2015 and 2020 as it launches environment-free engines for its car models.
While the close partnership with BMW will help the firm to understand more about the technology, it will also open up an opportunity for the firm to integrate new ideas on how to improve on what already exists. Efficient engines with the capability of running on alternative fuels that are considered friendly to the environment remain as the next competitive battle for car manufacturers in the coming future.
The fact that BMW is already building this capability by virtue of its partnership with Toyota indicates its focus on building a significant dynamic capability that will enhance its position in the market. BMW’s extensive expenditure in the area of design and development (R&D) has equally sustained its dynamic capability in car production.
The trend in car manufacturing relies heavily on the tastes in the market regarding the design shapes and operational capacities of cars. Thus, BMW has adopted a proactive approach, which mainly relies on continuous research and development activities to ensure that it remains at the forefront as far as the development of new car models and designs is concerned.
The research laboratories initiate investigations seeking to incorporate new ideas and technologies, with a view of designing highly efficient cars. The firm has also established a strong human resources policy that seeks to retrain employees periodically to increase their productivity in design and engineering.
The employees are also rewarded competitively to motivate them in their performance in terms of increasing the company’s competitive advantage over other industry players. With the increasingly advancing technological skills, the efficient performance of the R&D function at BMW has enabled the firm to take advantage and initiate unique designs that have not previously been witnessed in the industry (BMW par. 1).
PESTEL Analysis
Politically, the car industry is facing new laws passed either by individual countries or by regional trading blocs, such as the European Union (EU), which require cars to meet the new carbon dioxide emission standards. These pressures have remained challenging for the BMW Group, as it requires extensive expenditure on new technologies to address them effectively.
The move by BMW to manufacture ecologically friendly cars, such as the BMW i3, underscores its greater focus on meeting the new policies being adopted in the market. Moreover, BMW’s intended cooperation with the Toyota Motors Company further seeks to expand the firm’s technical knowledge in the area of hydrogen fuel cells, as well as battery technology.
Despite these new technologies serving to address such new challenges relating to emission and pollution, car manufacturers like BMW are faced with the threat of new policies and laws that might seek to offer regulation on the overall aspect of car innovation. This might result in huge losses for the firms, as they will have already spent huge amounts of resources on research and development work.
Economically, the global motor vehicle industry experienced high inflationary pressures occasioned by the global financial crisis. Prices of raw materials increased as suppliers sought to sustain their businesses, making it costly for the manufacturers to acquire the same and sell to the customers at affordable prices.
High taxation in some countries, imposed on imported cars as a way of discouraging further acquisition of cars, also contributed towards making cars less affordable, as the prices remained exorbitant for the buyers. This had a negative impact on the market demand levels by lowering the disposable income for individual buyers significantly.
BMW suffered immensely, given that the recession hit hard some of its lucrative markets, including the EU and the USA. In some of the developed markets, such as the USA, credit facilities remained unavailable to the buyers, making sales of vehicles to drop significantly. The BMW Group implemented job cuts in some of its plants, as a move to cut down on employee-related costs.
The firm also lowered its overall production as the demand in the global car market also plummeted significantly (Papasolomou and Kitchen 63). In terms of the social characteristics, the EU market that is crucial for BMW’s business performance has been experiencing a general shift as a result of its gradually ageing population.
On the other hand, the developed countries are also characterized by rising life expectancy, as well as changing consumer attitudes that have witnessed potential car buyers consider saving their resources, as opposed to spending. This implies that most of the buyers in the markets, given that they are not youthful, are not interested in acquiring expensive stylish designs for their choice of cars.
These trends have triggered a design revolution in BMW, as the firm seeks to develop car models that can effectively appeal to the ageing customers. However, the changes in design also imply that the firm is spending a significant fraction of its resources to develop the alternative cars that can appeal to the market, which increases the cost of production.
The technological transformations in car manufacturing have been immense, as more manufacturers are targeting to release highly efficient and top quality products. The pressure from environmentalists and the growing concern from consumers to address the issue of emissions are creating a bigger challenge for car manufacturers to design new car models that have the ability to limit degradation effects.
BMW has undertaken significant innovations to integrate the latest technologies in the car manufacturing business. The most noteworthy technological innovation pursued by the firm has been the development of green technologies to reduce environmental degradation caused by fuel-run engines.
Additionally, BMW has sought to work in cooperation with Toyota Motors Corporation to learn how to integrate the hydrogen fuel cell technology, as an alternative to the fossil-fuel run engines. Other technological efforts involve integrating internet-enabled features within its range of new car models released to the market.
On the legal front, the car industry is faced with regulatory and control pressures, both within the local and the regional markets. Car models that fail to fulfill these strict legal requirements are barred from accessing the markets, thus making it mandatory for the manufacturers to put appropriate measures in place.
Additionally, in this era of high innovation, car manufacturers are patenting their innovations as a way of avoiding imitations from other industry competitors within the market. The existing legal frameworks are supporting the manufacturers in their quest to protect their innovations from being copied by other industry players. The car manufacturing industry is also witnessing an increase in the number of partnership deals pitting different brand owners, with the need for gaining mutual benefits.
The partnership deals are enforced through binding legal contracts signed between parties involved to ensure protection of the firms from losing. BMW has sought to register its patents and copyrights as a way of protecting its innovations from being copied by other manufacturers in the industry.
Most importantly, the firm has patented its turbo electric engine innovation as a way of dissuading other firms from emulating and employing its application on their respective car models. Additionally, the firm has patented its battery technology that it uses on its electric car models to protect the innovation from being copied. It has signed a binding legal contract with Toyota that spells out the extent to which the association between the two firms will go.
The ecological environment equally presents a challenging stance for car manufacturers across the world, with the most significant one being the need for firms to design cars with minimum degradation effect on the environment. The level of pressure faced by the manufacturers is further influenced by the growing demand from car buyers to only acquire models that have limited impact on the environment, in terms of reduced emissions.
BMW has been at the forefront to meet these ecological demands with its extensive research and development operations. The BMW i3 car model is as a result of the company’s efforts to design cars that can run on alternative energy sources like electricity, which have limited effects on environmental degradation.
Additionally, the decision to sign a future cooperation deal with Toyota Motors Corporation seeks to increase BMW’s potential to manufacture hydrogen fuel cells offer more practical alternative to the ecological-sustainability efforts by the firm.
Porter’s Five-Force Model
The car industry’s entry threat is significantly low, owing to the huge capital outlays required by firms seeking to venture into the industry. New firms require building manufacturing plants with extensive capacity to manufacture cars at low costs and reliable supply and distribution channels that are expensive to achieve in a short period.
Moreover, new entrants require highly trained technicians on various car concepts, but most of these technicians are expensive to maintain. Brand loyalty is also a huge barrier that new players can hardly achieve within a short period of their entry to the industry. BMW boasts of a strong brand name that has existed for many years, especially in the premium car market.
Its superior R&D operations that have seen the firm produce state-of-the-art car models, such as the eco-friendly BMW i3, makes it difficult for a new entrant to achieve or surpass within the short-term. It has developed a highly efficient and reliable workforce trained over the years of their service at the firm and compensated well to enhance their motivation standards.
Threat of Substitutes
The car industry’s substitution threat is considered moderate because of various factors. Firstly, technology has enabled car manufacturers to design new automobiles with great interactive features at affordable prices. Buyers, thus, have strong reasons to acquire and own cars, instead of seeking for alternative transport means, such as public buses and train transit.
Secondly, continued research and development operations have made it possible for individuals to order for customized cars that are made to suit the specific demands of a single individual. However, tough economic conditions have equally made it slightly difficult for buyers to afford owning cars, thus lowering the easiness of individuals owning cars.
In addition, the car manufacturing industry is encompassing significant technological integration, which is costly to the firms and it influences the increase in prices. BMW has worked towards dissuading the substitution threat by designing modern, high quality vehicles with superior efficiency results to convince buyers to purchase their models.
The BMW electric car, for instance, attracts greater demand from the market owing to its superior features and high functionality (Papasolomou and Kitchen 63). BMW also manufactures a range of other car models that do not necessarily target the premium market, thus making them affordable to a majority of consumers.
Supplier Bargaining Power
Suppliers’ bargaining power is equally moderate within the car manufacturing industry, especially because of established manufacturers’ ability to backward integrate. However, suppliers also wield significant powers, especially where specialized product supplies are involved. Accessories like tires are often supplied by third party firms and are critical to any car manufacturing firm.
In the case of BMW, for instance, the firm has taken an initiative, in collaboration with SGL Group, to manufacture its own viable ultra-lightweight plastics. The carbon fiber manufacturing plant co-owned by BMW and SGL has a significant effect on the power of suppliers of these materials because the firm does not rely on third party supplier firms for its ultra-lightweight plastics needs, but it supplies itself.
Additionally, the anticipated collaboration with Toyota Motors could create a significant technological skill and capacity for the two firms to manufacture and supply their factories with crucial components like batteries, thus eliminating the need for third party supply services.
Buyer Bargaining Power
Buyers in the industry enjoy high bargaining power, partly because of the high number of manufacturers in the industry and the readily available information in the market about cars. The presence of the Internet resource makes it easier for existing and potential buyers to search for all the information that they are interested about. Consequently, they make highly informed decisions concerning the choice of car they intend to own.
With the recent recessionary pressures across the globe, a majority of the buyers can only acquire cars that they consider to be affordable, as opposed to models that are priced at premium rates. However, BMW relies on its powerful brand name that has been built over the years to win over buyers from other competitors.
The high quality and superior performance efficiency of the BMW car models assures buyers of value for their hard-earned money, which curtails the buyers’ high bargaining power. The eco-friendly model of the BMW, which is a new entrant into the market, further attracts relatively higher demands from the market. In essence, it provides the manufacturer with the ability to lower the high bargaining power in the market.
Industry Rivalry
The car industry is characterized by very high rivalry levels among the very many brand manufacturers in the industry. There are many highly established industry players, such as Toyota, GM, Ford, and Volkswagen, all of which have greater capacities to produce high quality vehicles.
These firms have established their own supply and distribution networks across the globe, which provide them greater access to the market and allow them to acquire raw materials at huge discounts. Most of the well-established brand makers equally boast of highly efficient concepts, such as the lean manufacturing production from Toyota.
These concepts further enhance their competitive advantage against other firms. However, innovation has been BMW’s greater asset, as it seeks to tackle the high levels of rivalry amongst the industry players. Extensive R&D budgets by the firm and high skill development have ensured that the company enhances its capacity to design highly functional models, such as the BMW i3 electric car.
It has patented some of its key innovations in the industry, such as the electric turbo engine and the car battery technology to protect the ideas from being copied and used by others to compete against BMW. The move to own a carbon fiber manufacturing plant also underscores BMW’s efforts to achieve greater innovation performance, as the initiative seeks to supply the company with efficient raw materials for its wide range of car models.
Organizational Behavior
The BMW Group has successfully incorporated a design philosophy as part of its corporate culture. The firm associates the strong design philosophy to its strong expression of dynamism, as well as an entrepreneurial spirit. The design culture describes the firm’s strong commitment and that of its employees to ensure they produce the best that the industry requires (BMW par. 1).
Part of this design culture can be witnessed in the series of investments that the firm has pursued over the years. The modern carbon fiber manufacturing plant initiated by the firm provides viable ultra-lightweight plastics (CFRP) to the designers, who in turn transform them to highly efficient car models and designs.
The BMW human resources function (HR), on the other hand, creates a strong bond between the employees hired by the firm and the products that are finally released to the market. This is achieved by the continuous evolution of the firm’s dynamic operations. Consequently, it has created an immense experience within the workforce.
Past operations and activities of the firm are shared with the current serving workers as a means of empowering their design skills further. Furthermore, the core operations of the BMW Group are guided primarily by the notion of creating products that are emotionally charged to achieve a lasting appeal among the buyers.
The designers at BMW Group specifically focus their attention on achieving a momentum in every vehicle that is released to the market, such that people in the market can remain engaged emotionally for a longer period. This strong behavior developed in the firm’s workforce has achieved a permanent affiliation between high quality products and the BMW brand.
Right from the initial stages of idea conception to the physical production process, both the designers and the engineers at the firm strive to ensure that whatever they are working for achieves meaningful and functional perfection. This strong heritage built over the years is further guided by the past performance of the traditional car models that were designed by the firm.
Employees are also rewarded for their great performances in terms of their engineering and design contributions, which have gone ahead to help the firm achieve its strong brand position and quality performance results. These strong behavioral concepts are likely to sustain BMW’s efficient and unique performance in numerous fronts (BMW par. 1). The firm has succeeded to retain a minimal turnover rate of its workforce, which implies that little of its skills built over time are lost to the rival firms as a result workers moving out to be employed by the rival firms.
Conclusion
The BMW Corporation has succeeded to maintain its top position as one of the best car manufacturers in the world. This strong performance has been sustained by significant strategy activities that have ensured that the BMW model continuously enjoys a competitive advantage over its rivals.
In terms of the resource base view, BMW has initiated a carbon fiber manufacturing plant as it strategically positions itself to manufacture its own viable ultra-lightweight plastics (CFRP), as well as sell the surplus in the industry. This special resource has boosted the firm’s capability in terms of producing highly efficient cars, while also increasing its revenue base capability.
BMW has also explored on the possibility of working closely with Toyota Motor Corporation to enhance its dynamic capability, especially in terms of acquiring skills on hydrogen cell fuel and ecological car models. BMW has built a strong brand name over the many years of its operations, which are closely associated with top quality performance and high efficiency results.
More importantly, the firm has succeeded in creating a strong design culture among its employees. This has made it possible for the BMW models to be associated with good performance and high quality.
Works Cited
“Economic Indicators.” Chemical Engineering 117.5 (2010): 71-72. Print.
BMW Group. BMW Group and SGL Group to Triple Production Capacities at Moses Lake Carbon Fiber Plant. 2014. Web.
BMW. BMW Insights. 2014. Web.
Papasolomou, Ioanna, and Philip J. Kitchen. “Cause Related Marketing: Developing a Tripartite Approach with BMW.” Corporate Reputation Review 14.1 (2011): 63-75. Print.
Roberts, Graeme. Germany: BMW and Toyota Talking Roadster Cooperation. 2014. Web.