Globalization's Impact on BMW: A Comprehensive Analysis

Desklib provides solved assignments and past papers to help students succeed.

Contemporary Development
Globalization on BMW

Table of Contents
EXECUTIVE SUMMARY.................................................................................................................................2
INTRODUCTION...........................................................................................................................................3
DISCUSSION.................................................................................................................................................4
CRITICALLY APPRAISE THE DIFFERENT FRAMEWORKS WITHIN WHICH ORGANIZATIONAL DECISIONS ARE
MADE...........................................................................................................................................................4
EVALUATE HOW ORGANIZATIONS MIGHT RESPOND TO EXTERNAL GLOBAL FORCES..............................11
CONCLUSION.............................................................................................................................................15
REFERENCES..............................................................................................................................................16
1

EXECUTIVE SUMMARY
The globalization has shown the impact in many sectors in a wide range. The Globalization has
both positive and negative impact which has elaborated in this assignment by taking the
example of BMW Company. As this is a multinational company, the wide range of employees
and customers get impacted due to globalization and hence this is important for the company
to analyze the global factors which impact the organization. PESTLE analysis and Porter's five
forces have allowed the company to analyze the external forces briefly. In addition to this,
Knowledge management has become an essential part of all industries to bring new ideas and
to make effective strategies for the development of business. As per the study it has found that
BMW Company has very effective units namely E&E units by which the employees and
managers can collect the information and knowledge about different segments and people.
There E&E units are effective enough to analyze the market changes, the company's activity,
and other activities. The E&E units work to provide the effective responses of operators and
manufacturers to other departmental management about the happenings so that other
departments can plan the activities accordingly by keeping the company's growth in mind. In
the process of development, the communication among E&E units and their responses are
helping the company to make more improvements.
2

INTRODUCTION
The globalization is playing a vital role over the globe. This has brought many opportunities for
development as well as many challenges for various industries. The study of globalization and
its impact is important to analyze the global market so that the development of the company
could be done accordingly by making effective marketing plans and strategies (Beck, 2018). This
assignment has included brief information about the globalization and the impact of
globalization on BMW Company. BMW is one of the multinational automobile companies of
Germany which produces cars, engines, and motorcycles. Overall, the challenges of
globalization and how this can help the company to develop in international markets have been
analyzed. The different kinds of framework will be discussed to make effective decisions in the
business. There are external factors that affect the entire business performance will also be
discussed.
Figure 1: LOGO of BMW
Source: Huang et al., 2018
3

DISCUSSION
CRITICALLY APPRAISE THE DIFFERENT FRAMEWORKS WITHIN WHICH ORGANIZATIONAL
DECISIONS ARE MADE
INTRODUCTION OF BMW
According to Huang et al. (2018), BMW is one of Germany’s Multinational automotive
companies which are known for automobiles and motorcycles. This company was founded in
the year 1916 by Camillo Castiglioni, Franz Josef, and Popp Karl Rapp. In the year of 2018, this
company has provided the production output of 2,541,534 vehicles and generated the revenue
of €9.12 billion. Apart from this, there are 134,682 employees working within the organization
that have shown the great growth from a few past years to develop luxurious cars and having
great strategies to sell the cars in different segments including premium rates. There are some
BMW models such as BMW X3, Z4, X6, M3, E9, X5, 1 series, M5, Z8, 5 series, M1, M6, Z3, 7
series and so on. These all are luxurious cars manufactured by BMW and generated great
revenue by selling it worldwide (Munir et al., 2018).
Globalization
According to Beck (2018), Globalization refers to the process to interact and to integrate with
governments, peoples, and companies over the world. Globalization includes the products,
information, technology, jobs and so on and spread it to the world. The globalization has
brought many opportunities to develop the nations by exchanging the goods and services to
one nation to another. There are many countries which have benefitted due to globalization.
Globalization on BMW
According to Munir et al. (2018), the BMW is a multinational company and hence thee
globalization has a positive impact on the BMW Company. Globalization has shown a great
positive impact on exporting. There are two types of exporting i.e. Direct and indirect exporting.
Direct exporting is more popular in terms of developing the marketing strategies of big
4

companies. BMW directly exports its products and services to one nation to another and this
has also analyzed that the direct exporting is bringing more opportunities to earn maximum
profit and this exporting also control the marketing functions of BMW.
Factors affecting the decision-making process of BMW in globalization
Many external factors affect the decision-making process of the company and the analysis of
these factors is mandatory to control the business operations and to make effective strategies
for the development of the company. The PESTLE analysis is one of the most popular concepts
to analyze external factors. These factors are defined below in brief.
Figure 2: PESTLE analysis
Source: SHTAL et al., 2018
Kharroubi (2019) has stated that there are many political factors which are directly affecting
the BMW Company. The political factor is one of them. Enforcement legislation and the
recycling are the examples of political factors which are directly impacting the process of
manufacturing in BMW. The Political factor also involves political stability. If the political parties
are changing and there is any kind of movement in the political parties then it directly impacts
the policies of the nation and if the nation’s policies are changing then ultimately, this will
impact the entire operational activities of BMW Company. The company faces the burden of
higher taxes. Apart from this, there are 6 countries such as the UK, South Africa and more
5

where the 17 production forces of BMW group exist and hence, they face multiple political
challenges in different countries.
According to Tzemi and Breen (2019), economic factors also impact the decision-making
process of the company. The economic factors involve the GDP rates, Exchange rates, inflations
rates and so on. The economic factors directly or indirectly impact the performance of the
company as well as the purchasing power of the consumer. Overall, it impacts the prices of the
products and services of the company. The fluctuation in GDP rates impact the customer's
decision making. The GDP rates are higher than the company is capable to pay the high wages
and salaries to employees that are impacting in a positive sense for employees where it is quite
showing the negative result in terms of Customer's buying behavior towards the products. The
Customer is required to pay a higher amount to purchase a product if the GDP is high.
Exchange rates impact the revenues of the company and fluctuations in global inflation rates
impact the strong distinction of manufacturers of BMW Company. Ultimately, the fluctuation in
economic rates impacts the organization.
Gerkensmeier and Ratter (2018) stated that social factors represent the demographical
characteristics, value, norms, and customs of the general public and these factors are directly
connected with the society and impact the behavior of the society. The demand of the
customers is flexible, and it keeps on changing. In the era of globalization, people ask for more
advancement. The manufacturing of products within the company depends upon the
demographical and cultural behavior of the customers. The company is required to
manufacture the goods after analyzing the needs and wants of the customers. The company is
also required to be aware of the harmful emissions to provide a safe and secure product and
service to customers. This will build a strong image of the company.
Horberry et al. (2017) described that the technological factors refer to the innovative
technologies which make the operational activities more smoothen. The technological factors
are showing a positive result from every aspect of BMW. As technology is developing day-by-
day, things are becoming easy and faster. BMW is gaining a great competitive advantage in the
global market due to technological factors. They are bringing more innovative and sophisticated
6

models and designs of their products (e.g. cars) which are attracting the customers in a wide
range. Karabag (2019) stated that BMW is also very focused on the quality and functions of the
products and overall, the features of every car model are satisfying the customers. The BMW is
enough capable to set high margins for the cars due to its effective features which are helping
the company to earn maximum profit.
According to Salamai et al. (2019), the legal factors involve the various types of norms and
regulations of government. These legal factors are quite important also to control the
operational activities and to provide a safe and secure product to the customers. The
government rules and regulations are related to the profit margins, transportation of products,
and viability of markets and so on that impact the company. The BMW is focused on strictly
following the same to maintain the image of the company. The company faces many challenges
at the time of expansion of their company in other countries due to having different laws and
regulations. To provide the products and services to customers, the company is required to
follow the rules and regulations made by the country to maintain the existence of the company
in different nations. BMW can enhance its services and products worldwide with the help of
following the laws and regulations of different countries.
Salamai et al. (2019) stated that the changes in climate and weather are the environmental
factors that directly affect the company. If the weather or climate is getting change majorly
then it becomes a challenge for the company. The major change in climate can impact
transportation, manufacturing and other process of the company. The impact on transportation
includes the non-recycled body and harmful gases. The BMW is required to take care of the
changes in the weather and should also take care of fuel-efficiency and should provide the
environment- friendly vehicles. The company must focus on manufacturing energy-efficient,
technology embedded and hybrid cars.
SHTAL et al. (2018) said, PESTLE analysis is quite helpful to analyze the external factors that
impact the decision-making process of the entire company. The analysis of external factors
helps the company to make effective strategies for the development of the company and help
to control the operational activities of the company to produce a better quality of product to
7

their customers. The PESTLE analysis is helpful to analyze the business globally that shows both
positive and negative impact of globalization on the company but there are some specific
challenges that every big and multinational company face. If there is a positive impact of
globalization then the negative impact will also be there in the company that creates threats
and challenges for the company. With the help of Porter's five forces model, the challenges and
threats could be analyzed properly.
Porter’s Five Forces Model
Figure 3: porter's five forces model
Source: Ariffin and Sahid (2018)
Ferras Hernandez and Nylund (2019) have argued that the BMW Company is one of the‐
reputed and multinational Companies. The biggest challenge for the company is to compete
with other automobile companies such as Mercedes-Benz, Jaguar, Audi, and so on. The
competition is rising day-bay-day in the automobile sector. In the era of globalization and
technology, the customers are more demanding for hybrid cars. Therefore, most of the
companies are focused on manufacturing hybrid cars. So this can be analyzed that the
competition is very high among automobile companies.
8

Bocken (2018) has stated that the new entries of automobile companies are also a threat to
BMW. As in the global world, the competition is already very high and if the potential and
efficient companies will take place then it will be a big challenge again for any automotive
company. Apart from this, the entry in the automobile company is not that easy as it seems.
Companies are required to have huge capital or fund to invest in the business. Therefore, no
company can easily enter the market. But if the company is entering big high capability and
efficiency to manufacture the best quality of products then it could be a big threat for existing
companies.
According to Sovacool et al. (2019), BMW has around 13000 suppliers in different sizes. To have
a business with BMW is paramount for all suppliers due to having a big brand image over the
globe. The BMW and suppliers both are having good terms with each other that help the
company to buy the raw materials from suppliers at a reasonable cost. Apart from this, almost
all the suppliers provide the same kind of products and services which is not significantly
unique. Therefore, it decreases the bargaining power of suppliers. This is how BMW enjoys the
services of suppliers by getting a good quality of goods and services at a reasonable cost.
The BMW Company faces another challenge that is the bargaining power of customers. The
buyers of luxurious cars are enough capable to identify the features and utility of the facilities
which are being provided by the company in the car. The customers can compare the features
of the car with other luxurious cars and compare the prices that increase the bargaining power
of the customers. The reviews of the customers from the internet, newspapers, and magazines
attract the customers towards different company's luxurious cars (Dai et al., 2019). Audi and
Mercedes-Benz are the examples that attract the customers towards their car models and
increase the bargaining power of the customer for car models of BMW. The BMW Company is
required to provide the advanced features in the car to attract the customers towards their car
models and need to make effective pricing strategy as well because the price is one of the
factors which easily attract the customer towards the product.
Musonera and Cagle (2019) stated that in the automobile sector, the substitution of products is
easy. The products in the automobile sector are Cars, motorcycles, bicycles buses and other
9

means of transpiration. The BMW is mainly known for luxurious cars. There are many
companies which manufacture luxurious cars such as Mercedes-Benz, Porches and so on. These
companies are the competitors and create the threat of substitute product for BMW Company
in the global market. According to Phillips and Moutinho (2018), the threat of substitution of
luxurious cars is pointless because these cars could be owned by only wealthy peoples who are
capable enough to pay the bill by analyzing the features of the model for every aspect.
The Porters five forces model is enough to analyze the threats, barriers and other challenges
like competitors, bargaining powers and so on. The impact of globalization could be analyzed
easily with these five forces that will help the company to make effective strategies to deal with
the threats and challenges of the company. This will also help to develop the company.
EVALUATE HOW ORGANIZATIONS MIGHT RESPOND TO EXTERNAL GLOBAL FORCES
KNOWLEDGE MANAGEMENT
Hislop et al. (2018) argued that knowledge management is playing a vital role in the company.
Knowledge management is the process to share ideas, perspectives, information, and
experiences. The knowledge management also ensures that these things can be identified in
the right place at the right time to make an effective decision. A well-established company is
always having effective information system which provides the proper knowledge about
happenings related to company. The Knowledge management also helps the company to
control the activities, improve the efficiency and to reduce the need of every individual working
within the organization that ultimately contributes in the development of the organization.
Also, knowledge management is important to implement marketing strategies effectively for
the development of the company. According to Maina (2019), The E&E units are playing a
significant role to implement the strategies of marketing in BMW Company. The E&E units are
required to balance the marketing strategy's adaptation versus standardization and to link the
organization to customers. The knowledge management also helps to generate external
knowledge by analyzing the internal existing knowledge. E&E units in BMW effectively manage
the knowledge. E&E units are helpful for BMW to collect the information and to manage the
10

knowledge from every aspect. It also involves the communication channel by which the
gathering of information becomes easy.
The knowledge information influences the policies and decision-making process of the
company. As the external forces can’t be controlled but the proper knowledge about these
forces can help the company to make new policies and to implement the existing strategies by
with the effectiveness could be maintained of the company (Petzold et al., 2018). The political
and legal factors are those factors which are directly related to the rules and regulations of the
government and the policies of the company must be made by keeping the political and legal
factors in mind to run the business for a long time. The development of the company is not
possible until the company has less knowledge. The appropriate information must be there to
make effective strategies for the development of the company. The proper knowledge
management can help the company to gather information about all external forces. Biswas
(2018) stated that BMW has E&E units by which they can communicate through various
communication channels about the changes and movements of things in a particular company.
After collecting the information, the company can make policies and strategies for the company
so the company can develop.
Many competitors in the market are creating the threats and many challenges which are being
faced by the company like bargaining power of customers and suppliers, threats related to
substitute products and competitors. These threats and challenges could be reduced by
analyzing these forces and these forces also could be eliminated by implementing new
strategies and making new policies within the company. Ultimately, Knowledge management is
very important for all the organization to run the business smoothly and effectively.
Evaluation of the effectiveness of the organization's response
Bohras (2019) stated that Globalization has a positive impact on the BMW Company. BMW is
very focused on selling cars in different segments by analyzing the needs and wants of the
customers. They also provide the premium rates of cars to wealthy people that help the
company to maintain the maximum profit. The sale of cars in different segments is helpful for
the company to increase the sales volume. BMW is a well-recognized company. Therefore, the
11