Pestle analysis of BMW luxury vehicles. Bayerische Motoren Werke (BMW) AG is a German multinational vehicle and motorcycle manufacturing company. Franz Josef Popp, Camillo Castiglioni, and Karl Rapp were the founders of BMW and they established the company on March 07, 1916. The headquarter of the company is situated in Munich, Germany.
Initially, BMW began manufacturing the engines of aircraft from 1917 to 1918 and 1933 to 1945. Some of the major brands of BMW are Rolls Royce, Mini, motorcycles, Automobiles, BMW Motorrad, BMW M, and BMW i. The brand has employed roundabout 133778 employees to manage different operations of the company.
Some of the major products and services of BMW are Automotive, Cars, Financial services, Design works, and Motorcycles.
According to a report by MacroTrends, the estimated revenue of BMW was 111.014 billion dollars by the end of 2020. Out of which the net income of the company after excluding all the expenses was 3.517 billion dollars. The annual revenue and net profit of the company have decreased by 1.48% and 34.63% respectively.
Some of the major competitors of BMW are Hyundai, Renault Nissan, Ford, Fiat Chrysler Automobiles, Chevrolet, Zorya, Volkswagen, Koenigsegg, General Motors, Daimler AG, Toyota, and Tata Motors.
Today, we’ll discuss the pestle analysis of BMW luxury vehicles. We’ll focus on the macro-environmental factors that how they impact the company. If you want to learn about the internal factors of the company, check out the swot analysis of BMW. Here’s the pestle analysis of BMW;
Political factors affecting BMW
The conflict between the US & China
BMW is a German brand and it doesn’t have any stake in the conflict between the former Trump administration and the Chinese government. But it has made the stock market fragile. Consequently, the stock price of the automobile kept declining. It became difficult for the company to attract investors.
Most importantly, the European Union and the US government increased the taxes on import of Aluminum and Steel.
Political factors like government policies, political regulations, and political corruption can result in the form of strict laws. Such laws would impact BMW. They can disastrous to small companies. BMW, on the other hand, has a strong brand and it got a plethora of resources. Even the company can influence government policies.
Recycling of Vehicles
Approximately 15 manufacturing units are working under BMW. They all are working very well and they manufacture 100s of vehicles everywhere. They become useless at the end of their life-cycle. As we know that the world is moving towards recycling waste. If the government introduces any laws, it would stop the company’s production facilities.
Politically Unstable Countries
The unstable political environment would impact BMW in two ways. First, it would reduce the purchasing power of consumers. It has happened in countries like Russia, Brazil, and China. Secondly, when the sale drops at a certain level, then the asset and the investment of the company becomes risky.
BMW allocates a certain amount of funds for lobbying so that the company could influence politics and government policies. For instance, there was an incident in Europe when the company, BMW, hired a lobbyist to slow down the fuel-efficient plans. The fuel efficiency plans would suppose to decrease the carbon emission rate.
It doesn’t mean that BMW is against environmental technology. In fact, the brand has launched the first passenger vehicle by using hydrogen. The plan was to reduce the pollution in Europe produced by taxi vehicles.
As we know that the EU allows free trade among all the member countries. The Brexit deal means the exit of Britain from Europe and it has caused increasing costs, a decrease in the volume of sales, and more trade restrictions. That’s why the growth and profitability of BMW have been decreasing every year. If other countries started leaving the European Union, it would be very bad for the company.
Economical factors impacting BMW
Competition with Toyota
BMW used to be the most reputed brand in the automotive industry many years ago. Toyota came and it flooded the market with a lot of vehicles across the world. Now both of these brands are in fierce competition with one another and they both want to win the market. The last win BMW had over Toyota, was back in 2012 with a 10% increase in margin.
Global Economic Recession
The global economy plays a significant role in impacting the performance, growth, valuation, and profitability of the company in different regions. BMW has been growing for the past few years in Europe. It’s very difficult to predict the profit and loss ratio of the company when economic conditions are fluctuating.
For instance, no one had expected the pandemic of covid-19 in 2020. It happened and caused a global economic recession. The shutdown and lockdown of businesses decreased the annual revenue and net income of the company by approximately 1.48% and 34.64% respectively in 2020.
BMW is a global multinational brand and high tariff impacts the company’s profitability. For instance, the EU and the US government have imposed heavy taxes on the trade between them. If BMW manufactures its vehicles from the US and sells it in Europe, the company has to pay an extra 10% tariff. If the company manufactures its cars from Mexico and sell it to Europe, there’ll be no taxes. That’s how regional conflict and tariff decreases the company’s profitability.
Social factors affecting BMW
As we’re aware of the fact that there are different cultures across the world, and people speak different languages and follow different lifestyles. It means that BMW has to launch different types of marketing strategies for different markets across the works. The needs and wishes of every market are different.
Understanding local Cultures
If you offer the same product to all the customers, such a marketing strategy won’t work. BMW is a multinational corporation and operating its business in countries like Austria, South Africa, China, the US, and many other countries. The band performs heavy research and development before launching any product. It keeps in mind the needs and wishes of customers along with the political and economical environment of the country.
Active on Social Media
BMW is very much active on social media and the brand has its pages on all the major social media platforms. When we talk about finding out the needs and wants of customers, integrating your platform with social is a major part of it.
According to an estimate, BMW has got roundabout more than 20 million fans on Facebook. The company updates its platform regularly with catchy posts to keep the interest level of customers up.
BMW is also active on Twitter by replying to the comments and answering the questions of people. Many people have experienced that the customer service of the company isn’t consistent. The brand should answer the queries of its customers.
According to an estimate, BMW has got more than 29 million followers on Instagram. Instagram is the right platform to show off the luxury lifestyle and advertises its vehicles.
BMW has recently launched a customer service by the name of CarData, the goal of this service is to increase the customer satisfaction level. The CarData analyzes the customer’s information and provides a customized solution tailoring to the needs of every customer.
Technological factors Impacting BMW
Adapting the latest Technology
The automotive market has become very competitive in recent years. The only way to stand out from the crowd is to adapt to the latest technology. BMW has a reputation for being a luxury brand. Therefore, innovative technology is very important to the company.
For instance, adding the latest tech tools and features like Wi-Fi, Bluetooth, and the internet in its vehicles. These entire tech features fall under the category of luxury items and they increase the company’s growth.
Autonomous self-driving, automatic car parking, and hybrid vehicles are some of the examples of innovative technology that BMW has added to its vehicles. Autonomous and self-driving vehicles are the latest technology. Tesla (electric car manufacturer, the biggest competitor of BMW in the automotive industry) has already added an Autopilot feature in its vehicles.
Legal factors affecting BMW
Following Copyrights Laws
BMW has a history of following the patent and copyright laws. Especially the regulations related to Bluetooth and Wi-Fi technology, because they can be very tricky. It’s very important to know that the patent and copyright laws of every country are different. Any new law or amendments in the current laws can limit a company’s performance.
Approximately 100 customers of BMW complained about engine failure. Out of the 30 customers filed a lawsuit against the company regarding the same issue in 2017. The brand recalled approximately more than 300,000 vehicles in 2018 to fix the engine failure issues. Such incidents of recalling vehicles back increase the cost.
Many customers of the BMW have complained that the mysterious fire ignited in the vehicle while being parked. On the same fire issue, the South Korean government put a fine of 9.9 million dollars on the company for product failure and intentionally knowing the problem.
Environmental factors Impacting BMW
Clean energy and fewer carbon emissions are the two major concerns of many customers nowadays. BMW has addressed these issues by launching hybrid cars in the market. It’s an environmentally sustainable mode of transportation. BMW has also launched electric vehicles, and the company plans to become more efficient in the future.
Reducing Carbon Emission Rate
According to an estimate, BMW has decreased the carbon footprint by approximately 42% in Europe. Electric models like BMW i3 and others would further reduce carbon emissions. The company would have the advantage of being a sustainable brand.
After an in-depth study of the pestle analysis of BMW, we have realized that the company is indeed a market leader in the automotive industry. Faulty engines, recalling vehicles, lobbying costs, and other issues are serious threats to the company. They can jeopardize the company’s profitability by increasing the extraneous costs and fines.
Ahsan Ali Shaw is an accomplished Business Writer, Analyst, and Public Speaker. Other than that, he’s a fun loving person.