CompanyBMW Automobiles.
Parent Company‘Bayerische Motoren Werke Aktiengesellschaft’ (BMW AG).
IndustryAutomobiles Industry
HeadquartersMunich, Germany, Europe.
CEOHarald Kruger.
Net Revenue 2018€97.5 Billion.
Net Profit 2018€7.2 Billion.
CompetitorsMercedes, Audi, Volkswagen, Toyota, GeneralMotors, Fiat Chrysler, Jeep, Tesla, Jaguar Land Rover.

BMW is one of the leading names in the automobile industry. The maker of premium vehicles has gained recognition for its luxury products, innovation and focus upon customer experience. Apart from a large range of stylish cars, BMW is also known for its focus on driver safety. The company has brought a large range of motorcycles which have achieved high level popularity in the market for style and efficiency. BMW group also owns Mini and RollsRoyce brands. For the past four years, financial performance of BMW has remained stable except for a slight decline in net revenue in 2018.

Sales of BMW automobiles and motorcycles has increased during the recent years. The automobile industry is going through a phase of transformation driven by technological growth and changing customer trends. In the coming years, the demand for automobiles is expected to grow. China has emerged as the leading vehicle market of the world. The entire Asia Pacific region has experienced growth in demand for vehicles. Customers are looking for more environment-friendly vehicles. BMW has also brought a nice range of hybrid vehicles to the market to cater to growing demand for cars with lower emissions. It started its range of electric cars with the i3 range. The company is investing in research and innovation to bring safer vehicles for its customers.

In 2019, BMW is on the 53rd position in the Fortune 500 list. Its position declined two points in 2019 compared to the previous year. The company has created a new plan for future with core focus upon profitability, growth and futuristic innovation. Its focus is upon environment friendly vehicles and autonomous driving to offer its customers the most luxurious driving experience in the entire industry.

Read more about the strengths, weaknesses, opportunities and threats of BMW in this SWOT analysis.

Strengths :

Brand Recognition 

BMW is among one of the leading vehicle brands which enjoys very high level of brand recognition. Some of the major drivers of brand recognition for BMW are marketing, commitment to quality, innovation and rider safety. The brand can be recognized anywhere in the world by its stylish logo. It is a brand of luxury vehicles. Its focus on style has also helped it drive its brand recognition high. Stylish BMW cars have found heavy popularity among the higher end customers in all the leading Western markets. China is also seeing increased sales of BMW cars driven by growth in popularity of the German car brand. The company also invests in marketing and promotions to grow brand awareness and drive recognition higher. 

Research and Development 

The vehicle industry has undergone major changes in recent years driven by growth in technology and changing customer trends. The rise of digital technology brought major new opportunities for the auto businesses. However, the competition in the industry is also high and brands need to invest in research and innovation to maintain their competitive position. The need for higher safety as well as regulation by the government are also driving expenditure on research and development. 

The focus of BMW is on some exclusive areas including driver safety as well as autonomous driving and environment friendly vehicles. BMW has established a global research and development network. There are 15,000 people working in five countries at 16 locations in its R&D network. Year on year, the research and development expenses of BMW have grown significantly. From 2017 to 2018, the research and development expenses of BMW grew by 12.8%. R&D expenses were €6,108 million in 2017 and grew to €6,809 million in 2018. 

Large Product Range 

BMW has a large product range that includes cars as well as motorcycles. It has brought some of the most popular cars and motorcycles to the market in the premium segment. The business of BMW group is divided into three segments that include cars, motorcycles and financial services. The automobiles segment is the largest source of revenue for the brand. Apart from BMW, the other brands that the group owns include Mini and RollsRoyce. BMW is the core brand of the group and caters to a very large range of customers’ needs from fuel efficient vehicles to high performance car models. The company has also brought a  large range of plugin hybrids to the market and is continuously expanding this range. The BMWi models continue to push the line of luxury.

 BMWi models are built with higher focus on innovation and sustainability. These vehicles come loaded with features like “electric drivetrains, connectivity, intelligent lightweight construction, exceptional design and newly developed mobility services” (Annual Report, 2018). MINI brand is also known for the superior driving experience it offers and RollsRoyce, well acclaimed for its quality and service on the other hand, caters to the ultra luxury segment. BMW motorcycles are also made for the premium segment of customers. The motorcycle range of BMW currently includes Sport, Tour, Roadster, Heritage, Adventure and Urban Mobility (with scooter models) segments. Moreover, BMW Motorrad offers a large range of equipment for improved driving experience and higher safety.  

Global manufacturing and distribution network 

BMW has a large manufacturing and distribution network that includes locations in key markets. A global and strong  manufacturing and distribution network has helped BMW maintain a strong global presence and cater to consumer demand and changing trends with efficiency.  

The BMW group production network includes 31 locations in 15 countries. 3 of the locations belong to the BMW joint venture in China known as BMW Brilliance Automotive (BBA). 20 of the locations are BMW group plants. Partners or contract manufacturers operate the eight remaining sites. The same quality, safety and responsibility standards apply to all the BMW production sites worldwide including company owned, joint venture and partner operated sites. Apart from these manufacturing and assembly sites located around the globe, the company also operates 16 research and development sites in various corners globally. There are also 43 sales subsidiaries and financial services locations of BMW worldwide. 

Consistent growth in vehicles sales –

BMW has been aggressively investing in research and development. The brand has retained heavy focus on customer safety as well as rider convenience. It has continued to bring new models with a strong focus on modern technology as well as rider safety and vehicle efficiency. These things have helped the brand grow its vehicle sales. Apart from these things, economic growth globally has also helped the brand grow its sales worldwide. The world economy has grown at a nice rate during the recent years. In 2018, the growth rate of the global economy was 3.7%. Growing economic activity in the U.S. has proved particularly profitable for the brand. 

Total deliveries of BMW in the automotive segment grew by 1.1%. In the automotive segment, BMW deliveries grew by 1.8% to 2,125,026 units in 2018 from 2,088,283 units previous year. Sales of Mini vehicles fell by 2.8% in 2018, Rolls Royce sales grew by 22.2% in 2018 rising to 4,107 from 3,362 last year.  Total sales of automobiles reached 2,490,664 in 2018 from 2,463,526 last year (Annual Report, 2018).

RegionIn April 2019Compared with previous year %YTD 04/2019Compared with previous year %
China (Mainland)59,16918.2227,60312.1
Latin America4,4610.316,6450.8

Skilled Human Resources –

One of the most critical strengths of the BMW company are its talented employees. BMW invests a lot in its human capital to keep its workers motivated and engaged. It also focuses on hiring the best who can help the company find faster growth. The company invests in its employees in several ways including training as well as special benefits like company shares. In 2018, the company was ranked at the tenth position in the Forbes list of world’s best employers. The number of people working for BMW grew to  134,682 in 2018; an increase of 3.7% versus the previous year. More than 15,000 people were working in research and development  function for the company at 16 locations in 15 countries. 

Weaknesses :

Premium prices :

The premium pricing strategy of the brand is related to its premium brand image. However, its premium pricing strategy also becomes an obstruction to faster growth and expansion. Not just BMW, but the Mini and RollsRoyce brands which the BMW group owns, also cater to the premium segment and have brought  a large range of luxury vehicles to the market. The BMW vehicles are priced in the $35,000 – $100,000 range. However, the RollRoyce brand that caters to the ultra luxury segment has brought even costly vehicles to the market. These cars are priced at $300,000 or higher. BMW invests in quality raw material as well as technology, marketing, human capital as well as research and innovation. These factors also drive the prices of its vehicles higher. Moreover, if the performance of BMW has been strong in recent years, it is also a result of the healthy economic activity worldwide.

High production costs and operating expenses 

BMW invests  a lot in creating some of the world’s best premium vehicles including cars and motorcycles. However, producing such cars also requires a large investment each year in research and development as well as latest technologies and marketing. All these things are driving production costs of BMW higher. Higher manufacturing costs and operating expenses can create pressure on the bottomline.  Cost of sales at BMW grew to €78.9 billion in 2018 from € 78.23 billion in 2017. Net revenues of the brand fell from €98.3 billion in 2017 to €97.5 billion in 2018. Gross Profit also reduced from €19,953 million in 2017 to €18.56 billion in 2018, a decline of 7% (Annual Report, 2018). In this way, the operating expenses of the brand have kept growing larger each year. Growing operating expenses lead to shrinking profit margins. In the future, BMW must try to control operating expenses. However, it is difficult to do so because of the premium brand image of the carmaker.

Vehicle Recalls : 

BMW has maintained the image of a safe and responsible brand of cars and motorcycles in the industry. The automobile industry has grown highly competitive and apart from the fuel efficiency of vehicles, car companies are also focusing upon higher passenger safety as well as environmentally safe technology and car models. Their focus upon safety has grown due to increased legal pressure and apart from the overall safety of the vehicles, companies also focus upon individual parts. However, even a minor defect from time to time can become a reason for recall. Slight problems in individual parts can also make a vehicle unsafe to drive. While BMW vehicles go through a  lot of testing before their final release, some small or large issues may still crop up leading to vehicle recalls in large numbers. In October 2018, BMW was forced to recall at least 268,000 vehicles in the UK market because of a potential fire hazard. The brand recalled as many as 1.6 million vehicles globally. Prior to that, BMW had to issue a recall over a similar issue in May 2018, which also affected a large number of its vehicles globally. These vehicle recalls can affect brand image and in the longer term, customers’ perception of the brand.

Opportunities :

Autonomous driving technology

With advancing technology, the number of opportunities before the automobile brands have also grown. From AI to digital technology, all of these have brought several new opportunities for automobile businesses in terms of increased rider safety and convenience as well higher engagement in terms of marketing and promotions. However, autonomous technology is also a hot area that most leading vehicle brands of the world are investing in due to the higher safety and convenience it offers. On the one hand, while competition in this field is growing all the more intense between the leading players, the companies including BMW have grown their investment in this area to bring the safest cars to the roads which are equipped with autonomous driving technology and which offer their drivers a better driving experience. 

Customer interest in autonomous driving has grown with time and some brands including Tesla have already released models equipped with autonomous driving features. The brand plans to bring BMW iNext in 2021 which will be equipped with the most advanced technologies including highly automated driving technologies. The brand is also testing its autonomous driving capabilities with a fleet of 500 iNext cars. One of the core focuses of BMW is to bring the cars of the future to the roads which are automated, sustainable and connected. Automated driving is an area which can prove highly profitable for premium car brands. However, BMW will release a model only after it is  fully confident about its autonomous driving functionalities. That’s why it might take the brand 2 more years to bring a car equipped with highly automated driving.

Digital marketing and customer engagement :

Customer is at the centre of everything in the 21st century and brands are now more cautious than ever about customer experience and customer engagement since these factors affect customer demand. Digital technology has brought attractive opportunities for promotions and customer engagement. Apart from social media businesses are using their own websites including global and local websites to engage their customers and promote their products before the customers. Video marketing trends have grown stronger  based upon the level of engagement that videos can provide. BMW must use video marketing in combination with social media to run seasonal campaigns as well as for engaging customers on various issues like sustainability and driver safety.

Electric cars :

Electric cars have grown in popularity during the recent years. A larger number of customers around the world are interested in owning an emissions free vehicle. As the demand for electrified vehicles keeps growing around the world, BMW is continuously expanding its rage of electrified vehicles. Moreover, it’s planning faster electrification of its product range in the near future. 

In 2018, the company planned to have more than half a million electrified vehicles on the roads by 2019. BMW is also the largest seller of electrified vehicles in Europe. Moreover, its sales of electrified vehicles and hybrids grew more than fourfold between 2015 and 2018. According to its 2018 annual report, the company is the number one in sales of plugin hybrid vehicles worldwide. In 2019, the company is bringing plug-in hybrid variants of the new BMW 3 Series, X5 and 7 Series as well as a fully electric MINI.  In 2020, the company plans to release the first fully electric BMW ix3. The electrified vehicle segment holds immense potential and it is why the company has planned to grow its range of electric vehicles aggressively and meanwhile introduce plugin hybrid variants of its existing models. This will also help the company overcome the rising competitive pressure from the fast growing electric car brand Tesla.

Strategic partnerships

The company has struck several strategic partnerships around the globe with local companies to strengthen its international business network. One core aim of these partnerships and collaboration agreements is to share expertise and grow the pace at which new innovations are brought to the customers. In this regard, BMW has entered into partnerships and collaborative agreements with companies from inside the auto industry as well as technology leaders.  BMW group has entered a partnership with Daimler AG to merge the mobility services of both companies. In the longer term, the two companies expect to grow the level of interlocking and gain more from the partnership.

 BMW has also entered into a joint venture with Brilliance China Automotive Holdings Ltd. in China to form the BMW Brilliance Automotive (BBA). The company is looking forward to grow its stake in the BBA from 50% to 75%. BMW has entered into one more important joint venture in China with Great Wall Motors for the production of electrified MINI vehicles. These partnerships are helping the company strengthen its competitive position globally. Strategic partnerships with technology leaders like Apple, Google, Amazon and Microsoft will also help the brand equip its cars with the best features and grow the attractiveness of its product portfolio.

Asian markets:

The Asian markets have experienced growth at a sound rate. China is the largest car market in the world. However, the entire Asia Pacific region including India and Malaysia also holds immense potential for car brands. BMW has already entered into two strategic partnerships with leading automobile brands of China. This will help the brand grow its market share in the Asia Pacific market and find faster growth there.

Threats : 

Competitive threats :

Competitive pressure in the car industry has grown. There are several car brands in the world which investing aggressively in technology, marketing and driver safety to grow their market share. The growth of Tesla and rising popularity of electric cars is also adding to the growing competitive pressure. However, the size of the car market has also grown. BMW is also experiencing higher competitive pressure which can lead to decline in market share. To combat the competitive threat, leading brands like BMW, Daimler AG, Toyota and Volkswagen among others are entering into strategic partnerships with other car brands to share expertise and find growth together.

 In the first half of 2019, BMW experienced growth in its market share in its leading four markets – China, USA, UK and Germany. It leads the premium segment in USA. In Germany and UK, as well, the company grew its market share. The automotive industry is experiencing higher competition and despite that BMW has maintained its growth momentum. The company is going to retain its focus on profitability rather than sales volume.

Regulatory pressures :

Regulatory pressures in the automotive industry have kept growing every year. With growing regulation of the industry, the compliance costs have also grown bigger. Even minor violations can result in severe fines and the fine can be a large percentage of the brand’s revenue. Volkswagen, one of the leading players had to cough up billions because of trying to evade the emissions laws. BMW remains careful about compliance in all the regions of the world where it operates and has not faced any major legal trouble in recent years. To combat any legal problems and prevent their occurrence, BMW has established a compliance management system and a compliance code. Its associates are equipped with the tools that help them handle legal risks.

Economic fluctuations and market uncertainty:

The world economy has grown at a nice rate in the recent years which has led to growth in demand for cars worldwide. Due to higher stability in the global economy, sales performance of BMW cars in various regions of the world was also stable. Apart from a small decline in revenue in 2018, the company’s financial performance over the last five years has remained stable. However, there are some leading economies in the world which account for the largest part of BMW’s revenue. Countries including the U.S., China, UK and Germany account for the larger part of its revenue. As such, the economic performance of these economies matters the most for the company and fluctuation in these economies can have a negative impact on its bottom line. Moreover, uncertainty in the European market has grown caused by Brexit and other political changes like the elections in Italy which dampened investor sentiment during the year. Trade conflicts between the U.S. and China are also affecting vehicle businesses including BMW and driving their operational costs higher. BMW is focusing on market expansion and growing its product line to retain car and motorcycle sales and attract new customers.

Growing costs of raw materials and labor :

The costs of raw material and labor are growing each year leading to higher operating costs for the automobile brands. The operating expenses of BMW have also increased a lot over the past several years. Moreover, there is a lot of competition in the industry for skilled human resources. Growing operating expenses create pressure on the bottom line and can reduce the net income of a brand. Net profit of BMW in 2018 declined to €7.2 billion in 2018 from €8.7 billion in 2017.

Conclusion : 

BMW is a premium car brand with a leading position in the luxury car segment in several important markets including the U.S. and China. China and North America are the leading car markets of the world accounting for the largest percentage of car sales. The brand has got a large product portfolio which includes BMW, Mini and Rolls Royce cars as well as motorcycles. Sales of the car brand have continued to increase year on year. However, now the main focus of BMW is on profitability rather than on sales volume. To acquire faster growth in the car market, the brand is focusing upon growing its range of electrified vehicles. It has already introduced the plugin hybrid variants of several of its leading car models. 

The automobile industry has grown highly competitive. Leading brands including BMW are entering into strategic partnerships with other global and local vehicle brands to fast grow sales and market share. BMW has managed two major partnerships in China to grow its share in the local market. The brand is also investing in the autonomous driving technology and is working on its fully electric car model which it will release in 2021. The car industry is full of challenges but there are opportunities too since the car market globally has grown at a healthy rate in the last several years. However, 2019 onwards demand could dampen a bit according to sources. Focus on electrified vehicles could be the next driver of demand for auto brands. BMW is in a strong position overall and poised for faster growth in future. 

Sources :
BMW Annual Report 2018.