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Bmw Swot Analysis

Essay by review  •  November 2, 2010  •  Case Study  •  1,221 Words (5 Pages)  •  1,103 Views

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Case 2 focuses on the Bayerische Motoren Werke (BMW) Company. My analysis will define each of the company's strengths, weaknesses, opportunities, and threats as brought about within the case as well as through additional research.

The history of the Bavarian Motor Works is a history of innovation, dedication and determination. These achievements are reflected in the BMW emblem, symbolizing a rotating airplane propeller from BMW's early years as an aircraft engine manufacturer. Today, the emblem signifies a global company that annually produces hundreds of thousands of engines, motorcycles, and cars.

May 19, 2003 BMW was about to launch a new version of their already extremely popular 5 series of luxury sedans. The automobile being introduced was BMW's fifth generation 5 series and was expected to initiate BMW's aggressive and extremely ambitious plan of rolling out a new or updated model nearly every three years through the year 2005. CEO Helmut Panke defined his goal as "expanding annual sales by 40 percent over the next five years, to 1.4 million cars, and beat out Mercedes-Benz (DCX) as the number one maker of premium cars in the world. We won't accept the position of number two." Certainly a very aggressive plan, could it be done?

The auto market during the 1990's had begun to shrink as a percentage of total sales. This was particularly evident in the United States where the auto market was hot for some new niches and BMW was finding it costly to make three differently sized cars, namely the 3, 5, and 7 series.

Strengths

Reputation. Having a reputation for luxury, BMW's are smooth and refined. BMW have developed a marquee prized highly by many company executives. The BMW brand also relates well to the domestic owner reinforced by BMW's reputation for quality, reliability and their dealer's attention to service. Hailed as the ultimate driving machines and leading the field in a whole host of classes, BMW are constantly innovating in their quest to stay ahead of the pack.

Engineering History. BMW is not only a car maker; they are one of the world leaders in motorcycle production, aircraft engines, in addition to marine engines. BMW has a long history of providing the best engineering possible in the market.

Facilities. BMW's factories are considered the most flexible and most productive in Germany; its suppliers are the industry's best; and the workforce among the industry's most talented.

Strong Financial Position. Despite a 53 percent increase in research and development and a 75 percent increase in capital expenditures over the past two years, BMW's net profit for 2003 rose 8.3 percent to $2.36 billion, while revenues climbed 9.9 percent, to $49.5 billion. Operating margins, at 8 percent in 2002 and 8.7 percent in 2001 were among the highest in the industry.

Success of the Mini. Profits for this car line are greatly exceeding BMW's forecast with unexpectedly strong sales of loaded models. Buyers are snapping up options from navigation systems to sunroofs, paying as much as $35,000 per car.

Shared components. BMW is able to keep overall costs down by using shared components across its similar-sized cars. For example, the 5 Series shares components with the X5 and the 6 Series, and the 3 Series shares with the X3, and the 1 Series.

Continuous Improvement. BMW identified the need for improved quality and customer care. BMW now offers a four-year warranty, including maintenance and service, in the price of the car, cutting out complaints that occasional technological glitches made the brand extremely expensive to maintain.

Weaknesses

Looking too far ahead too fast? Rolling out a new or updated model nearly every three months through 2005 may shift emphasis on getting a new model to market rather than focusing on issues that may develop with existing models, issues such as software, and mechanical problems.

Manufacturing costs. Compared with other volume producers, BMW's manufacturing costs are much higher, its product development process more costly, and its purchasing costs are higher. Reflecting these risks, BMW shares have slid 41% to $32 from a year ago (2002).

Relying on 1 Series. BMW is relying to heavily on one model, the 1 Series to maintain its high margin. They are also realizing profits due to the strong sales of the loaded models of the Mini, but need to diversify, or in other words not keep all their eggs in one basket.

Shared components. Although this can also be identified as a strength it can also be a true weakness. If cars are using shared components or if they are too similar, it could lead to

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