BMW's Business Environment Analysis

This assignment tasks the student with analyzing the complex business environment facing BMW. It requires an understanding of Porter's Five Forces model, key industry trends (like Industry 4.0), and global market dynamics within the luxury car sector. The analysis should consider external factors influencing BMW's operations and strategic decision-making.

BUSINESS
ORGANISATIONS AND
ENVIRONMENTS REPORT

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Background information of BMW..............................................................................................1
Business environment of France.................................................................................................2
Analysis of Business Scenario....................................................................................................4
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Business organisation is a place where groups of people work together to achieve
organisational goals and objectives in an effective manner. Environment is a combination of
internal and external forces that have an impact on company. These both go together because
without the use available resources, an organisation cannot function. Environment gives threats
and opportunities to a company and various strategies and decisions are made in order to be
successful. This report will analyse the type and nature of BMW, it's current global operations,
legal structure and factors affecting its business environment as well as PESTLE analysis and
Porter's 5 forces. It will cover emergence of company in France and analyse various factors that
will affect the organisation.
TASK 1
Background information of BMW
BMW is a luxury German multinational auto mobile company, which was founded in
1916. Its headquarters is located in Munich, Germany and produces vehicles across different
countries. They employs over 100,000 workers and is a leading manufacturer that produces
premium vehicles and services across the world (Liebert, 2016). BMW is a huge organisation,
has a complex organisational structure and operations are done on a global scale. Their logistics
and production systems are advantageous to customers and efficiency in supplies has helped
them in speedy delivery of vehicles which has led to smooth operations across countries. They
have different committees that hold meetings regularly and discuss legal, corporate and
governmental affairs, corporate audit, organisational development, HR strategies and targets of
the company. They have various marketing strategies which have been successful for them.
Being in the auto mobile industry, company has stiff competition. They ensure that proper
analysis of threats and opportunities are done regularly so that strategies can be created to avoid
and resolve problems. Outsourcing is done by company in order to make operations strong.
They use their competencies optimally which has led to increase in production efficiency. Costs
on manufacturing remains low so that more emphasis can be given to marketing, product
innovation and research and development. They have earned a revenue of £79.2 million in 2017.
They have delivered over 2.5 million units around the world and attained a net profit of £3.2
million. They have a total assets of £41.4 million, equities and liabilities worth £15 million and
£15.1 million respectively.

Business environment of France
France is in one of the top 40 economies present across nations and have a good hold on
chain operations. Documentations and customs do not require much time and imports – exports
are quick and easy. There are certain regulations that are to be followed and approval is required
for their entry into the country. Their business market has huge international investors and they
are an important agriculture and industrial supplier across the world. France has one of the
highest rates of economic growth in Europe. Their organisations are highly structured and
organised. Flexibility is practised along with abiding to rules and certain practices. In order to
invest and be successful in this country, it is required to thoroughly understand their culture and
business environment (Birkinshaw, Zimmermann and Raisch, 2016). They are reluctant to take
risks and have a low temperament when it comes to uncertainty and confusion in an organisation.
France has a high purchasing power and is a major market area. It is closely connected with
Western European market and can import and export goods and services smoothly. Foreign
investments are always welcomed by the government and several multinational companies'
Illustration 1: Organizational Committee
(Source: BMW Leadership and BMW Organizational Structure, 2016)

headquarters are located there. Competition is promoted in order to improve business and the
environment. There is a lot of bribery and corruption in France, which causes inappropriate
business practices. Companies have to be careful while entering the country.
Political structure of France has not been a good one, since the beginning of time.
Government is heavily centralised and maintenance of administrative control is high. There is
always an increase in unemployment and debts of GDP.
It's economy on the other hand is performing well. They keep changing policies to
increase competitiveness and improve its finance. But citizens are imposed high rates of taxes
and those amounts are spent on various development projects. They have potential in fields of
heavy industry and manufacturing of auto mobiles and machines, luxury goods and services as
well as supermarkets.
Social structure of France has many ups and downs. Their culture is diverse and business
persons are always punctual. They have proper dress codes for meetings and give gifts to new
businessmen that want to set up their organisation in France (Camillus, 2016). They treat people
unequally and racially discriminate people from outside. In terms of businesses, they perform
well due to spending’s of individuals on their needs. France is a leader in technology exports,
they work on various projects with different countries to find sustainable and renewable sources
of energy, so that they can protect the environment. They use technology for various healthcare
facilities, to ensure that citizens get best services. Police is the legal body of France. They take
care of local crimes and fine people who break laws and follow specific regulations to deal with
them. Fraud in businesses are only dealt by police officials. Due to high amounts of production
and manufacturing, the country faces water pollution. They have created infrastructure
development programs that treat waste water and introduced various protection law for
endangered species. The above analysis of external factors is important because it gives business
persons an idea of how an organisation will react to different factors that are present in France
and determine solutions as well as track their performances and improves it while operating in
that country. It gives a perspective of the business environment from various angles, which is
beneficial for management.
BMW's entry into France can bring profits to the company as it is Europe's 2nd largest car
manufacturer. They are able to fulfil demands in different countries. They lead in research and
development which will be useful to company and lead to increase in tax credit. They have

favourable policy incentives, marketing, overseas trade promotion offices and investor support
systems. Their innovative business leaders and culture will help BMW grow and prosper in the
country.
Analysis of Business Scenario
PESTLE Analysis of BMW
BMW has to assess its external environment due to high changes of risks in auto mobile
industry. There are various factors that can affect its management strategies and decision
making. It helps in giving a better idea of various scenarios and determine plans in order to
avoid any problems. Political: This highlights government laws and regulations, restrictions and measures
related to security. It has a big influence on company and their customer's spending
power. They generally revolve around environmental laws that have to be fulfilled by
BMW and have to take care of such issues. Policies created by different countries can
help them decide on success probability in international markets. A regulation was made
to produce high mileage cars, which led to increase in sales (Wagner and et.al, 2017).
Various taxation duties affect the profits of company as well as clear understanding and
cooperation can keep manufacturing quick and flexible. France does not have a good
political environment and can cause issues for BMW. They have to adapt to various
regulations in order to operate smoothly in the country. Economic: These factors generally consist of exchange rates and global economic
growth. High production of cars led to excess supply and lack of demand. This caused a
freeze of more than £1 billion in the economy. There was an increase in international
GDP due to revenue generated by BMW and decrease in euro exchange rates. They
expanded in China and India as well, due to surplus capital and buying power (Fogliasso,
2016). Economic crisis created a consumer credibility in company and changed their
purchase behaviour. They had to face losses due to currency fluctuations and increase in
prices of raw materials. Social: This includes changes in cultures, buying pattern and consumer's capacity. These
days everyone wants fuel efficient and low emission cars instead of a status symbol.
When recession occurs, customers change their buying behaviour and BMW has to focus
on environmental issues and awareness of harmful gases that cars produce. Tastes and

preferences of people and their attitude towards cars changes over time. They prefer
automated cars that can assist them whenever required and that can self-drive/ park.
BMW has to research, develop and formulate strategies accordingly in order to be
globally successful. Technology: This plays a very vital role at BMW. They need technology to increase their
productivity and gain advantage among competitors. The introduction and utilization of
new machinery to build sophisticated designs can help overcome decreased margins
(Ruff, 2015). Eco friendly technologies helps in lowering pollutants caused due to
manufacturing, cutting down of costs and create complex designs. It helps company in
meeting customer's demands on time. Environment: There is an increasing desire of protecting our surroundings from the
effects that auto mobiles create. BMW is aware about going green concepts, global
warming and how they affect sales of their cars. They aim at catering to desires of
consumers and create comfortable and fuel efficient cars as well as decrease pollution
emission so that the environment is protected. Their marketing strategies are based on
creating eco-friendly vehicles, to ensure that both customers and environment are happy
and safe.
 Legal: BMW is required to create company law, for their protection as well as customers.
Legal rules have to be abided regarding environment issues and corrective measures have
to be determined to make sure fuel efficient cars are produced. Laws of other countries
need to be kept in mind as well, because it impacts industry at a global level. The
restrictions and norms of pollution have been set up in Europe and US markets and they
are strictly followed by BMW management (Kodama, 2016). They give importance to
protecting customers and society from unfair business activities and advertisements. They
have a hand at helping developing and under developed countries by covering their
wealth issues.
PESTLE analysis of BMW gives an idea that political factors can influence sales and
revenue in France, depending on the regulations created by government. Their economy is
growing steadily, which will help company generate more profits. Development and plans for
eco-friendly and fuel efficient cars have been created, which will attract consumer's social needs.
New innovative technologies are introduced regularly to produce vehicles while decreasing

pollution, which is favourable for BMW. They live up to their environmental responsibilities and
legal regulations and protect their consumers and organisation as well.
Porter's 5 forces on BMW
Porter's 5 forces analysis helps in analysing competition of an organisation. It is an
important tool used by management to assess bargaining power of suppliers and buyers, threats
of new entries and substitution, as well as industry rivalry. It generally analyses micro
environment of a business.
 Product substitution: Threats of product substitution of BMW is high. Consumers are
not always satisfied with luxury cars and there are many available options. There are high
chances of having competitors with similar products is very high, due to a number of
companies present in the market. There is similarity in prices as well. It is hard to say
whether a consumer can change their mind and choose the alternative brand. It's image
and reputation can easily cause them threats (Lüttgens and Montemari, 2016).
Illustration 2: Global luxury car market
Source: (BMW Porter's Five Forces Analysis, 2016 )

Governments too, can create issues regarding fuel emissions and environmental issues.
BMW has to ensure that they produce vehicles accordingly. Barriers to entry: It is difficult for new firms to enter into auto mobile industry,
especially luxury cars. There are already several companies that exist around the world,
with high image and reputation. They have an advantage as compared to new ones. The
entry barrier is extremely high for newcomers. They have to create a name for themselves
as well as search for reputable manufacturers. For BMW, there is no threat present,
except if consumers would want to shift to cheaper alternatives. Capital requirements are
high for setting up, assembling a company and advertising it. Competition is already
intense among existing companies as well. Buyers' power: BMW has 2 types of buyers; direct consumers and third parties or
dealerships. The chances of direct buyers are low due to profitability of dealerships, but
the small percentage of them cause a low threat to company. Dealerships cause high
threats because the bargaining power lies in hands of large amount of consumers. They
can analyse each products and choose according to their needs (Neelankavil, 2015). TV
shows and magazines provides reviews of numerous cars, which gives individuals full
knowledge about them and marketing influences them a lot while making decisions. Suppliers' power: BMW's supply chain has been present for many years. They have a
good understanding with suppliers. They have a high to medium bargaining power
because it is up to them to decide rates and prices of raw materials that are required for
manufacturing. Company is extremely concerned about their quality and very particular
about it. Unique inputs created by suppliers makes them dependant on BMW and vice
versa. Neither of them would want to lose each other and increase in revenue and profits
will ultimately lead to supplier's income increase as well.
 Competitive rivalry: Auto mobile industry steadily grows. Luxury cars are wanted by
many individuals which creates competition in the market. Steady growth means
strengthening and intensifying competition. Fixed costs of manufacturers are
comparatively low in proportion to total costs, which means that selling prices will be
same among different brands (Wilden and Gudergan, 2015). Rivalry is high due to
consumers and the global economy. BMW has produced hybrid vehicles due to the

demand of eco-friendly and fuel efficient cars, which has given them an upper hand in
competition and help maintain its share in the market.
Porter's 5 forces analysis helps understand that BMW keeps producing vehicles with
innovative techniques, which has helped retain their customers as well as attract new ones. It has
maintained its reputation and standards even in cut throat competition (Ruff, 2015). The
development of hybrid cars has helped them significantly, as consumers have changed their
preferences and opt for environment friendly cars and will overall help BMW's business
operations in France.
CONCLUSION
From this report, it can be concluded that France’s good economy will help BMW start
future business operations and prosper in the country. Their good reputation across the world,
will lead to high revenue and profit generation. They have good logistics and production systems
that has helped them in delivering of vehicles globally. They continuously conduct proper
analysis of threats and opportunities, and create strategies for various conflicts that may arise.
Business leaders of France and its culture will help BMW grow in the country.
PESTLE analysis of BMW has shown that political factors can influence sales and
revenue in France. Their growing economy will help them earn more profits. The development
of fuel efficient cars will attract consumer's social needs as well as environmental
responsibilities. Porter's 5 forces analysis has given an understanding that BMW will keep
producing vehicles using innovative techniques, which has helped them gain new customers as
well as retain old ones. They have maintained their brand image and reputation while operating
in heavy competition and can continue to do so by aiming at manufacturing more eco-friendly
cars, so that they get an advantage among other luxury companies and promote them across the
world.

REFERENCES
Books and Journals
Alexa, L., Alexa, M. and Avasilcăi, S., 2016, August. Gaining a Competitive Edge through
Action Design Research. In IOP Conference Series: Materials Science and Engineering
(Vol. 145, No. 6, p. 062008). IOP Publishing.
Birkinshaw, J., Zimmermann, A. and Raisch, S., 2016. How do firms adapt to discontinuous
change? Bridging the dynamic capabilities and ambidexterity perspectives. California
Management Review. 58(4). pp.36-58.
Camillus, J. C., 2016. The wicked challenge of the business environment. International Journal
of Business Environment. 8(1). pp.19-31.
Fogliasso, C. E., 2016. Events and Trends in The Last Decade (2005-2015) That Changed the
Business Environment. Insights to a Changing World Journal. 2016(1).
Kodama, M., 2016. Interactive business communities: Accelerating corporate innovation
through boundary networks. Routledge.
Liebert, A., 2016. Industry 4.0–the intended impact of Cyber Physical Systems in a Smart
Factory on the daily business processes: A Study on BMW (UK) Manufacturing Limited.
Lüttgens, D. and Montemari, M., 2016. New Ways of Developing and Analyzing Business
Model Innovation. Journal of Business Models. 4(3).
Neelankavil, J. P., 2015. International business research. Routledge.
Ruff, F., 2015. The advanced role of corporate foresight in innovation and strategic management
—Reflections on practical experiences from the automotive industry. Technological
Forecasting and Social Change. 101. pp.37-48.
Wagner, D. and et.al., 2017. Sense, seize, reconfigure: online communities as strategic assets.
Journal of Business Strategy. 38(5). pp.27-34.
Wilden, R. and Gudergan, S. P., 2015. The impact of dynamic capabilities on operational
marketing and technological capabilities: investigating the role of environmental
turbulence. Journal of the Academy of Marketing Science. 43(2). pp.181-199.
Online:
BMW Leadership and BMW Organizational Structure. 2016. [Online]. Available through
<https://research-methodology.net/bmw-leadership-and-bmw-organizational-structure/>
BMW Porter's Five Forces Analysis. 2016. [Online]. Available through <https://research-
methodology.net/bmw-porters-five-forces-analysis/>

<https://research-methodology.net/bmw-porters-five-forces-analysis/>