Critical Evaluation of Causes of Reversal in BMW Company

This report discusses the critical evaluation of causes of reversal in BMW Company and the impact of COVID-19 on its business operations. It also explores the opportunities and challenges faced by the company due to the pandemic.

ASSESSMENT

Table of Contents
INTRODUCTION...........................................................................................................................3
Question 1........................................................................................................................................3
Critical evaluation of causes of reversal......................................................................................3
Ques.2..............................................................................................................................................8
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Business environment is a sum of different external and internal factors influence the
overall operations of company. This report is based on the case study of BMW Company in
respect to making decision in business. The organisation is a part of the automobile sector at a
global level. While also shows the financial investment of BMW investing in India or China is
selected through the NVP and payback period of both countries and comparing between two for
better investment. This report would talk about the investment decision making of the company.
Furthermore, report will emphasis over the COVID consequences which company needed to
face. Different factors such as political, economic, environment and technological factors impact
over the sales potential of company will also present in this project.
Question 1
Critical evaluation of causes of reversal
In the recent few years the world economy has seen a significant reversal in business
practices. Globalisation is about to expand the business at a global level. BMW Company has
already expanded its business at a global level. The recent few years has been very tough for the
multinational companies as they needed to face the global level pandemic of COVID 19. The
entire pandemic could completely demolish the overall growth and opportunities which the
multinational companies would had against channelizing business operations. Due to the

pandemic there are several restrictions which components needed to face that completely
demolish the overall growth of the multinational companies (Kumar and et.al., 2020). The entire
pandemic could address the following opportunities and challenges due to the current COVID 19
situation which can be addressed in the following points.
Opportunities due to COVID 19 situation
Opportunities are considered as the advantages against the pandemic company is facing in
current time. The global pandemic could provide several business growth opportunities which
BMW Company can face against channelizing business growth opportunities. These
opportunities will support the organisation in delivering all their different objectives behind the
business operations pushed by company.
E commerce trading
This is the major opportunity which BMW Company consider against delivering business
operations. The entire COVID 19 situation has allowed company to actively avails the e-
commerce mode of trading. The current situation sound best to deal with the trade over the digital
platforms. Company can allow its customers to book products over internet and also to address
the issues customers are facing over internet. This is the modern era practice which company can
adopt to deliver the overall business objectives of company. Under this channel company get to
use internet so that all trading activity can be conducted by organisation. All components
including majority of multinational company are switching towards the e-commerce mode of
trading as it allows companies to conveniently sale their products and also to deliver the best
level of customer services (Kuzmenko, Lieonov and Kashcha, 2020). This e-commerce approach
will open to many doors in favour of the organisation. As it will create an opportunity in favour
of the organisation as it can not only sustain the existing customers of company along with this

will also favour the organisation to attract new customers that potential can consume the services
and products offer by BMW Company.
Customer services over internet
The current COVID 19 situation has forced the BMW Company along with other
companies to deliver the customer services over internet. IT is essential that company must
allocate its services over internet so that customers can easily interact with the customers in
respect to product and services offer by company. This practice would drive the company
towards entertaining the issues and problems which customers of company are facing against
taking or buying the BMW Company products (Jain and Sharma, 2020). They also get an
opportunity where the customers can fetch the problem they are facing over internet so that
customer sale executive can deal and address the use of customer in a very limited time spam
which further improve the customer satisfaction through this mode of trading. Consumer services
is a critical element which in any case organisation needed to address as this support the company
in achieving the high brand value. IF the company can defectively cope up with the different
issues customers are facing than only it can cherish the brand value of company.
Electric care segment
This is another key opportunity associated with the BMW Company due to post pandemic
situation. The entire world is going towards the electric care segment and many c0ompanyes like
Tesla and other such companies could already been involved under this category of cars. Post
COVID situation people and customers in automobile sector are deeply influenced and became
more aware towards environment prot6ection practice. Customers becomes more keen to deal in
the electric car as compare to other fuel based car in order to protect the nature and environment.
BMW Company can boost up its growth if the organisation started addressing more electric car

as compare to other petrol diesel cars. This is the future of the automobile sector and will allow
the company to meet all its business objectives.
Improved brand value
Globalisation attract the improved brand value in favour of the organisation. This would
allow the company to improve the overall value of company's brand. IN case of automobile
sector as the product segment is luxury which favour the company to raise the brand value in
favour of the customer (García-Portilla and et.al., 2020). BMW Company contain heavy value of
brand which favour the company to attract the potential number of customers to sale its products
in market. Improved brand value is among the major opportunities which company get to
address.
The above mentioned opportunities are among the major business growth opportunities
that will support the organisation in enhancing the objective objectives of company. The
opportunities mentioned above are prominent and effective enough to deal with all different
requirements associated with the company.
Challenges of Covid 19
Covid 19 pandemic could cause to various challenges that can be demonstrated in the
following points.
Diverse effect over fuel consumed cars
Post COVID situation has not been favourable towards the sales of fuel based cars. People
become more concerned about the environment protection factor which lead them towards
buying the petrol or diesel based cars. Customers like to procure such cars more often as compare
to other category of cars (Vandebroek And et.al., 2020). Auto mobile sector has been addressing
the paradigm shift in the face of electric automobile segment which lead the customers to procure
such automobile products. The pandemic could damage the company's situation which lead to the

negative impact over the sales of company. People become more aware towards buying the
electric car segment which could boost the overall growth and development of entire sector.
Mental barriers
Post COVID situation related a mental barrier in the mid of customers. This entire
situation could harm the company's responsibility to entertain growth in market. People stooped
coming to the stores of company which created a negative environment in respect to the
organisation. This is a key challenge which company is facing at this point in time when it
becomes really challenging for organisation to motivate customers to come at the stores of
company.
The above mentioned points are the key challenge associated with the post Covid
situation. Company needed to face these challenges in order to achieve the all different objectives
behind the business operations channelizes by company.
Global economic system headed towards
Global economic system is headed in a certain direction. The different factors like
environment,political,economical and technological factors are influencing the sector.
Political factor: With the effect of pandemic in the whole world. All country has been degrading
their economic affected with Covid. While the political factor faces some challenges in to
maintain the globalization around the world with no issues. But Government are restricting some
of the countries to doing of business which are not in the bond of peace in world. BMW may be
impacted due to political factors which can increase their cost and find interruption of doing the
business. While the BMW production is also affect the environment, government may have
incurred some rules and regulation on BMW for the less harmful activities, they also affect with
the change in political government and relation to the neighbourhood market in world. While all
government have different point of view and motive to rule in country, globalization can be

affected due to conflict with government and relation to governments. This may also influence by
nongovernment parties, good relation creates the opportunities for BMW to work in the country
while the challenges are international legitimacy and ignoring the international law of union
nation. Government policy, tax rates, Labour laws, trade restriction are some factor that are
affected by political and affect the working of company in the market which changes after the
pandemic hit the economy. Trade restriction is the very important factor for BMW in the country
as most of the parts are manufacture in other countries and this polices are changes accordingly
due to Covid 19.
Economic factor: This factor is one of the important factor for every company before starting the
industry in country. This factors are uncertainty of market, inflation and recession occurring in
the market and the due to pandemic almost every country have been affected and in the period of
recession. Economic factor in globalization while be affected either positive or negative. The
company need to know the relation between the countries they are working with and the ethics
which are followed by both of them. As the whole world is affected with the Covid-19
government find hard to bring back the economy to target inflation point. For this, government
have been collaborating with each other and help the companies financially and increase4s the
investment in conytries.to bring back to normal life government started may scheme for
companies which will bring investment and the opportunities towards the country and their
people. This can increase the employment and generate the cash flow in country and world
market will back to root one. While there are some challenges which are faced by companies and
countries. As almost every companies are in losses due to shut down for few months this brings
less investment and liquidity in the companies. While some countries are developing and some
are developed, under developing countries have affected hard with this situation as it increases
the unemployment in every country

Environmental factor: Post Covid situation created a paradigm shift over the business
operations of BMW Company. Customer becomes more aware towards buying the electric car or
electric automobile products (Yang and et.al., 2020). This has created a negative impact in
market over the sale of petrol or diesel based automobile products. BMW Company is also being
involved in different social responsibility as a part of the corporate social responsibility which
further allow company to establishes a loyal and favourable image in market.
Technological factor: BMW Company has also been involved in advancing and developing its
technology. Company is constantly being involve in development of technology which could
support the overall growth and development possibility of company. Technological development
could provide an ease in delivering both sales of company and also to serve the customer service
in favour of the organisation.
Ques.2
BMW is considering to invest in Asia market as the demand is increased from past few
years and existing from European market for uncertainty. BMW aims to consolidate the strength
of their brand in Asia market with full potential. BMW have considered 2 countries to invest in
which are India and China and their investment cash flows are given as:
India net cash flow China net cash flow
21 Million 15 Million
3 Million 1 Million
6 Million 2 Million
6 Million 4 Million
6 Million 8 Million
6 Million 8 Million

Payback period: It refers to the amount of time we can recover the cost of investment. It is the
length of time to recover the investment cost. Shorter the payback period results in good profits
and should be selected that project only. Higher Payback refer to longer time to recover the
investment cost of project for the company and cannot give much of the profits.
Net present value: Net present value is the discounting technique which evaluate the investment
appraisal by considering the time value of money as both cash flow of inflow and outflow are
determine by discounting with cost of capital rate. The higher NPV projects are selected by the
company over the lower one which shows only difference between inflow and outflow of cash.
Sometimes NPV can also shows positive and negative number but positive NPV is selected only.
Computation of NPV
India
year
Cash inflow (in
millions) PV factor @8%
Discounted cash
flow
0 15 1 15
1 1 0.925925926 1
2 2 0.85733882 2
3 4 0.735029853 3
4 8 0.540268885 4
5 8 0.540268885 4
total discounted cash 25

flow
less: initial investment 15
Net present value 10
The NPV of India is 10 million after 5th year which is low when it compares to china invest where
the NPV of china is shown as 23 million which is higher. BMW should consider the China
investment project which gives higher profitability.
China
Year
Cash inflow(in
millions).
PV factor
@8% Discounted cash flow
0 21 1 21
1 3 0.925925926 3
2 6 0.85733882 5
3 6 0.85733882 5
4 6 0.85733882 5
5 6 0.85733882 5
total discounted cash
flow 44
less: initial investment 21
Net present value 23

Computation of Payback
Period
Initial Investment - 15
(in million)
India
Year Cash inflow Cumulative c/f
1 1 1
2 2 3
3 4 7
4 8 15
5 8 23
Initial investment 21(in million)
China

Year Cash inflow Cumulative c/f
1 3 3
2 6 9
3 6 15
4 6 21
5 6 27
The payback period of India is covered in 4th year and after that they earn the profit of 8
million in next year while the china investment recovers their initial investment in 4th year
as well and shows 7 million profit in 5th year.
Interpretation:
From the above calculation, BMW should consider the china project as it is higher than India
project. The initial investment of India is 15 Million while the china initial investment is 21
Million while the discount rate of both the project is 8%. While the NPV of India is 10 after 5
years and NPV of China is 23 after the 5 years which shows the higher rate of China. This
interpreted that the China is more profitable for the BMW when it compares to India. The project
of China will provide more profits than India project which can be affect from various factor like
Labour and cost of production, government rules and regulation for the foreign companies.
Payback period of the India is shown in the 4th year which BMW can recover fully and after that
they earn the profit of while same as china will give BMW to recover its investment cost in 4Th
year as well which shows both country will give the same payback period for BMW. After the 4th
year the company will recover full investment cost and earn the good profit after the payback
period. But Payback period of India shows the more percentage of profit after the investment

recover. BMW should invest in china project as there is uncertainty in their market and shown the
higher profitability of investment return. While India market is uncertain at some point where the
market can give them some less profitability in Asia market. Hence, for the higher profitability of
BMW China market is best for them.
B. Current world economic climate is effected with Covid-19 pandemic which fluctuate the
world’s economic and the exchange rate are almost weaker with all the country. The effect of
pandemic is to currency market and economic growth of the courtiers. While the healthy
countries like USA capital flows which is an important aspect of exchange rate. Cpvid-19 impact
on every part of the country and which can be analysis by seeing the following factors affect the
exchange rate:
 Demand shock: while the world shuts for few months and remain quarantine, all
businesses and industry like travel, consumer’s goods and services, hospitalities are
remain shut down which impact the courtiers market and their exchange rate have been
fallen for some time.
 Supply shock: global supply chain has been broken and make the world underground for
several months without any known to reopen. This create the business to shut down and
which effect the exchange rate to fallen in every country.
 Financial shock: as there is lack of cash flow in every country while the liquidity is
threatening to sink in the economic environment where the global financial safety is strain
while the international corporations declining in the market.
This factors shows the countries exchange rate has been affected and global market in uncertain
in almost every country while the economies are decreases due to pandemic and this can me the
reason for uncertainty and decline exchange rate.
The above mentioned points are the key challenges which company needed to face.

CONCLUSION
Covid 19 pandemic has created a negative impact over the business operations of
organisation. The entire pandemic has motivated the customers towards protecting the
environment in the favourable way. People started buying more electric cars. The pandemic could
diversely affect the buying capacity of customers which could decrease the overall growth rate of
the automobile sector at a global level. It can be concluded that to make the investment decision
methods like NPV, payback period and such methods can be used that guide towards the right
direction to make the investment decision.

REFERENCES
Books and Journals
Kumar, A. and et.al., 2020. COVID-19 impact on sustainable production and operations
management. Sustainable Operations and Computers. 1. pp.1-7.
Kuzmenko, O., Lieonov, S. and Kashcha, M., 2020. Financial, economic, environmental and
social determinants for Ukrainian regions differentiation by the vulnerability level to
COVID-19. Financial and credit activity: problems of theory and practice. 3(34).
pp.270-282.
Jain, S. and Sharma, T., 2020. Social and travel lockdown impact considering coronavirus
disease (COVID-19) on air quality in megacities of India: Present benefits, future
challenges and way forward. Aerosol and Air Quality Research. 20(6). pp.1222-1236.
García-Portilla, P. and et.al., 2020. Are older adults also at higher psychological risk from
COVID-19?. Aging & Mental Health. pp.1-8.
Yang, C. and et.al., 2020. Taking the pulse of COVID-19: A spatiotemporal
perspective. International journal of digital earth. 13(10). pp.1186-1211.
Vandebroek, I. And et.al., 2020. Reshaping the future of ethnobiology research after the COVID-
19 pandemic. Nature Plants. 6(7). pp.723-730.