Assess and comment on the Porter Five Forces model identified at BMW group, with regards to competition as well as the profitability.
30 Marks
Marking structure shall be:
(i) Introduction and highlights (15 % of the total marks allocated)
(ii) The application and development of the write up (60% of the total marks allocated)
(iii) Discuss, recommendations and the way forward (25 % of the total marks allocated)
Assignment Module Name: Strategic Management Tutor: Mr. T. Vivek Ujoodha E-mail:
[email protected] Program · MBA Specialisation INSTRUCTIONS TO STUDENTS The marks for this assignment would account for 30% of the total assessment marks for this course Submission date: 06 November 2021 Word limit: 2500/3000 words Format: Please follow the guidelines in the document “Guide to writing assignments” available on your Elearn platform. (Harvard referencing style to be used and bibliography to be included) POINTS TO REMEMBER WHEN SUBMITTING YOUR ASSIGNMENT (hard and soft copies of assignments) · You should pay special attention to the regulations on plagiarism which is heavily penalised. You should use the turnitin software to check the similarity index of your assignment and your tutor will not accept your assignment if the similarity index is beyond 20%. · In case the assignment is received after the due date, marks will be deducted as per OU policy. The onus is on the learner to ensure that the assignment reaches before/on the due date. The current penalty is 2% per day (weekends and public holidays included) for any assignment received after the due date which the tutor will deduct from the final mark. · The Open University of Mauritius will not hold itself responsible or liable for the non-award of marks if you fail to submit the assignment as per the required mode of submission. Mode of submission: · Please submit 1 soft copy directly to your respective tutor’s email address
[email protected] and always send a soft copy on:
[email protected] . Please ensure that you fill in the assignment cover sheet and attach it to your assignment. · All assignments submitted should include the assignment cover sheet (indicate your Student ID No and Your tutor’s name) (available at Moodle) Assignment ASSIGNMENT QUESTION: Read the case study and answer all questions below (30 Marks) BMW is one of the leading brands of luxury cars, headquartered in Munich, Germany. Apart from the BMW brand, the BMW group also owns Mini Cooper and RollsRoyce, both of which are premium car brands. The company is known for making stylish cars and its focus upon innovation. Worldwide, BMW, RollsRoyce and Mini cars enjoy high popularity as well as brand loyalty. In 2018 and 2019, the global automobile industry has entered a difficult phase and several leading brands have experienced a decline in vehicle sales in key markets including China and the United States. However, due to its focus upon innovation and its investment in research and development, the company has maintained its sales and revenue. It has also entered into a partnership with the Chinese car maker GWM for production of electric mini vehicles. Globally, changing consumer and technology trends have led to heavier focus on digitalization and customer experience. However, BMW has several sources of competitive advantage which include brand equity, research and development, global sales and distribution network as well as a strong production network. BMW works with around 12,000 suppliers located in 70 countries. Several of its supply chain partners are themselves auto firms and the main aim of these partnerships is to produce BMW cars locally in the markets where BMW operates. For example, the company has established BMW Brilliance in China which is a joint venture between BMW and Brilliance Automotives of China to produce and sell BMW cars locally. Additionally, it partnered with the Great Wall Motor of China to produce Electric Mini cars locally. The partnership between Great Wall Motors and BMW is a 50-50 joint venture. In India also, the company has several local supply chain partners that help it produce BMW cars locally for the Indian market. Its supply chain partners in India include Force Motors, ZF Hero Chassis, Draexlmaier India, Tenneco Automotive India as well as Valeo India, Mahle Behr and Lear India. While some of the BMW suppliers are big and influential names in their local markets, their bargaining power gets moderated by several factors including BMW’s size and financial strength. BMW is a leading brand with a global market presence and partnering it is highly profitable for any of the suppliers. BMW sets the rules of the game and the code of conduct for its suppliers. The suppliers are required to adhere to the code of conduct as well as follow ethical and sustainable business practices to remain BMW suppliers. The overall bargaining power of BMW supply chain partners in this way gets to become moderately low. BMW enjoys strong brand equity globally and moreover, working in partnership with BMW is an attractive proposition for its suppliers. All these factors offer BMW higher clout in the global automobile industry. However, BMW invests in the education and training of its suppliers and also works to manage its supplier relationships well. In the 21st century, the bargaining power of customers has grown a lot which is due to increased competition as well as higher regulation, changing consumer trends and low switching costs. Now, the customers are well informed and conduct research before making the final purchase. Moreover, the government has grown the level of regulation favouring the customers and this has led to higher focus upon product quality as well as passenger safety. Higher competition has also added to the bargaining power of customers. Every brand is competing to grow its market share and customer base. Most of the leading brands including the closest rivals of BMW are investing heavily in research and development as well as marketing. The focus is now on entire customer experience and not just quality products. Marketing as well as after sales service have also become a core focus for luxury automobile brands. In the case of BMW, some of the leading factors that moderate the bargaining power of customers are brand equity, product quality, technological innovation and customer experience. Overall, the bargaining power of BMW customers is moderately high. Main substitutes of BMW include the rival brands in the industry as well as the alternative sources of transportation. There are several rival brands in the market including Volkswagen, Audi, Land Rover, Toyota, Ford, Mercedes, Aston Martin and Lexus. Alternative sources of transportation like cars, buses, taxis and flights also pose a threat before BMW. BMW makes stylish cars and owning one is a matter of class, luxury and prestige for most BMW car owners. Moreover, having your own luxury car means higher convenience in personal life. BMW offers a comparatively better customer experience than most substitutes. The passenger safety and convenience as well as luxury which BMW car offers is matched by very few rival brands in the market. The overall threat of substitutes for BMW is moderate. Higher popularity and customer loyalty also act to moderate the threat from substitute products. Several of the leading brands have formed partnerships to survive the growing number of challenges in the international automobile market. Some of the main barriers that prevent new players from entering the market include fierce competition, large capital investment, need for skilled human resources, technological barriers and brand equity. Any new brand would have to make a considerable capital investment to build a strong source of competitive advantage. Competition in the automobile industry is already quite fierce and the incumbent players make huge investments into research and development as well as marketing to retain their market shares. Apart from that, any new player entering the market will need time and money to build brand recognition and gain market share. None of these things is possible overnight. Except Tesla, there is hardly any new brand that has been able to build a remarkable presence globally in the automobile industry during the recent years. Growing legal regulation of the automobile industry has also made it difficult for new players to enter the market. Not just product quality but passenger safety and sustainability have also become major concerns for auto firms. All these factors discourage new players from entering the automobile industry. The overall industry environment has also become highly challenging. New businesses would also need to invest a lot in building production, supply and distribution networks which works as a barrier to entry. There are several rivals of BMW in the market like Audi, Mercedez, Skoda, FCA, Ford, Toyota, Tesla and Land Rover. Even if new players cannot enter the market or become a threat overnight, the existing players are quite aggressively investing in marketing as well as research and development to produce innovative vehicle models and grow their market share. Luxury car brands like Audi, Mercedes or Tesla are highly cautious regarding customer experience and passenger safety. These brands focus upon customer experience and technological innovation. They are investing in digitalization and production of environmentally safe car models. Moreover, with growing competition, companies are forming partnerships to strengthen their competitive advantage and produce cars locally for sales in local markets. BMW has also entered into partnerships with other car businesses like Daimler Chrysler and Great Wall Motors of China. While these strategic partnerships are helping the existing brands strengthen their competitive position and customer loyalty, they are also helping them penetrate new markets. Due to growing intensity of rivalry, BMW has grown its focus upon sustainability, vehicle design, customer experience as well as research and development. There are more factors that help BMW moderate the competitive pressure and include brand equity, supply chain, international manufacturing network as well as marketing. All these factors have helped the BMW group retain its leading position and market share in the automobile industry. However, reducing its focus upon innovation or product quality will lead to loss of market share. So, continuous focus upon R&D as well as customer satisfaction is essential to beat the competitive pressure. The overall intensity of rivalry in the industry is very high Question Assess and comment on the Porter Five Forces model identified at BMW group, with regards to competition as well as the profitability. 30 Marks Marking structure shall be: (i) Introduction and highlights (15 % of the total marks allocated) (ii) The application and development of the write up (60% of the total marks allocated) (iii) Discuss, recommendations and the way forward (25 % of the total marks allocated)