Swot analysis of BMW. BMW (Bayerische Motoren Werke AG) is German motorcycles and luxury vehicles manufacturing company. Karl Rapp, Franz Josef Popp, and Camillo Castiglioni laid the foundation of BMW on March 07, 1916. The company’s headquarter is in Munich, Germany.
BMW started its business as a manufacturer of engines for aircraft. The company manufactured it from 1917 to 1918 and 1933 to 1945. Rolls-Royce, Mini, BMW i, BMW M, BMW Motorrad, Automobiles, and motorcycles are some of the main brands working under the BMW. Approximately 133778 employees were working for the company by the end of 2019.
According to an estimate by MacroTrends, the annual revenue of BMW in 2020 was 111.014 billion US dollars. It has declined roundabout 1.48% since 2019. Out of which the annual net profit of the brand was 3.517 billion US dollars. It has decreased by approximately 34.63%.
Cars, Motorcycles, Design Works, Financial Services, and Automotive are some of the main products and services of BMW.
Tata Motors, Toyota, Daimler AG, General Motors, Koenigsegg, Volkswagen, Zorya, Chevrolet, Fiat Chrysler Automobiles, Ford, Renault Nissan, and Hyundai are some of the major competitors of BMW.
Today, we’ll study the swot analysis of BMW luxury cars. How internal factors like strengths/weaknesses and external factors opportunities/threats of the company impact the company. If you want to learn about the external factors of the company, check out the pestle analysis of BMW. Here’s the swot analysis of BMW as follows;
Strengths of BMW
Best Market Reputation
When it comes to the purchase of a luxury vehicle, the market reputation of the brand matters a lot. BMW is one of the top world’s most reputed brands. According to the ranking of Inter Brands, BMW was at the 11th position in 2019 of the world’s top 100 brands.
BMW became the world’s 12th largest vehicle manufacturer in 2015 by producing approximately 2279503 vehicles.
BMW has established a market reputation as the world’s most valuable brand by satisfying the needs of customers. According to the ranking of Forbes, BMW is at the 27th position in 2020 of the world’s most valuable brand. The market capital of the company is 38.9 billion US dollars.
Global Business Network
BMW is a global multinational brand and the company is operating its business in more than 140 countries across the world. The brand has got approximately more than 30 manufacturing facilities worldwide.
As we know that the world is moving towards sustainable eco-friendly products. BMW has been experimenting to manufacture electric and hybrid cars since the late 70s. It gives the brand a unique competitive edge over competitors. When the world is planning towards hybrid technology, BMW has got experience in it.
BMW has carefully maintained the balance among vehicles luxury, durability, performance, and quality. The company tests every vehicle in different phases before letting it out.
Diversified Earning Sources
The market share of BMW is distributed in Asia, Africa, Europe, and America. The company has sold thousands of vehicles in every region. It means that the company has diverse sources of revenue; it makes the company sustainable in the long term. Customers and investors can trust the brand.
BMW has got only 3 sub-brands working under its umbrella. A small portfolio of the big brand helps the company to focus on what is important and matters. The oiled German machine BMW follows advanced and effective marketing strategies.
Investment in R & D
Research and development (R & D) is the main reason behind the success of BMW, that’s why the company has survived over time. Approximately more than 15000 employees are working at 16 R & D facilities in 5 different countries across the world. According to an estimate, BMW has spent 6.8 billion US dollars in R & D in 2020.
BMW is aware of the fact that a skilled workforce is a great asset to any organization. The company spends a plethora of resources to boost the employees’ motivation and satisfaction level. According to the ranking of Forbes, BMW is at the 23rd position on the world’s best employers’ list.
The annual revenue and net income of BMW have fallen due to the pandemic of covid-19 in 2020. Other than that the company has been performing very well. According to an estimate by MacrTrends, the annual revenue of BMW has been increasing by approximately 1.38%, 3.22%, and 7.04% in 2018, 2017, and 2016 respectively. It shows the consistent growth of the brand.
BMW offers three basic products and services; financial services, vehicles, and motorcycles. The company offers a plethora of variety of products/services in each category. Cars and vehicles are the main sources of the company’s vehicle.
Weaknesses of BMW
Small Product Portfolio
Volkswagen is one of the major competitors of BMW and it owns many sub-brands. Comparatively, the product portfolio of BMW is very small and the company owns only three sub-brands; Rolls-Royce, BMW, and Mini.
BMW has faced many lawsuits over the years. Such lawsuits make it difficult for the public to trust the company. For instance, BMW has had a lawsuit of collusion over emission in Europe and an obstruction of justice lawsuit in South Korea.
According to an estimate, BMW has recalled approximately 1.4 million vehicles worldwide, so that the company could replace their outdated Takata airbags. The brand has recalled roundabout 357000 older vehicles only from the US market. Recalling of its vehicles back to the production facilities at such a huge rate is decreasing the reputation of the company.
The pandemic of covid-19 has impacted businesses very badly across the world. BMW has asked the German government for a subsidy so that the company could pay 1.7 billion dollars of dividend to the executive. This type of greed is doing negative marketing of the company and pushing people away.
High Cost & Expenses
BMW provides premium quality vehicles to its customers across the world. It means that the company spends a plethora of resources on technology, research and development, and innovation and creativity. New ideas and engineering require resources to experiment with.
When you add all of these things, it increases the production cost and expense level in the balance sheet. That’s why the annual revenue and profitability of the company has been decreasing annually.
BMW offers premium products at premium prices. The company applies the premium price strategy to its entire product category of the sub-brands. The price range of BMW’s vehicle starts from 35000 US dollars to 300000 dollars. Such a huge price range is out of the reach of the majority of customers.
Opportunities available to BMW
Environmental friendly Vehicles
The environmentally conscious market trend and go-green movements are getting stronger. They demand clean energy and a non-polluted source of transportation. On the bright side, BMW has the advantage of being a market leader in the electric car market. Now the company should capitalize on this opportunity and use it to its advantage.
The internet and research & development are pushing the world towards an autonomous and self-driving vehicle. BMW should also work on it to exploit the opportunity by offering what customers want.
The Chinese, Indian, Malaysian, and Saharan Africa’s markets have great growth potential. The emerging used to have a potential of 420000 vehicles in 2017. Thomas Schaefer, head of Volkswagen in Africa, said in his interview that the African market has the potential of approximately 3 to 4 million vehicles. It’s a huge growth rate and BMW should keep those statistics in mind.
Flexible Mode of Transportation
The young generations of Millennials are in majority of the demographic and they want a flexible mode of transportation. BMW offers luxury vehicles and the world is moving is towards a shared economy. Therefore, the company should rental car venture and share a vehicle mobile application to attract more customers towards the company.
Alliances & Partnership
BMW is operating its business globally. The company has made partnerships and alliances with Daimler AG, Brilliance China Automotive, Great Wall Motors, Google, Apple, Microsoft, and Amazon. It’s to increase the customer market share and add new features into its vehicle.
Threats BMW has to face
Pandemic of Covid-19
One of the severe impacts of the pandemic is that it shut down the production process in all of its facilities across the world. It’s because of the lack of raw materials to work with. That’s why the annual revenue and the net profit of the company have dropped to a great extent.
The former Trump administration was strict about the import policies. That’s why they imposed heavy taxes to discourage imports. The Europeans and Germans automakers visited the white house in 2018 to discuss the trade deal. It finished without coming to any conclusion on the question tariff. Hopefully, things would be better under the Biden administration.
Policies & Regulations
The governments of different countries are introducing new laws against pollution and carbon emission. Such regulations could impact any tech and automotive company. That’s why BMW has to pay heavy fines for blocking the rollout of clean technology when the company partnered up with Daimler and Volkswagen.
Increase in Production Cost
The cost of production and the raw material is increasing every year and it has raised many concerns. The annual revenue of BMW in 2016 was 7.04% and it was 1.38% in 2019. The decline in revenue is mostly because of the increasing manufacturing cost.
One of the other drawbacks of the pandemic is the global economic recession. It would result in the form of reducing unnecessary expenses. BMW falls under the category of a luxury product, and people would have no other choice but to cut out their luxury expenses. Major world economies are facing an economic recession due to the pandemic.
As I’ve mentioned that the new generations of millennials are dominating the customers’ market. But they want to spend their resources on luxury products like BMW. They are moving towards the shared economy. It would be a great threat to the company.
Lexus and Mercedes are the major competitors of BMW and their market share is increasing. It means that the company would have fewer customers. Loss of customers would reduce sales and it would decrease the profitability of the company.
After a careful study of the swot analysis of BMW, we have realized that the company is the world’s top luxury vehicle manufacturing company. The growth and profitability of the brand are good. But the threat of shared economy, pandemic, economic recession, and increasing competition are serious issues. The company should exploit opportunities to minimize threats.
Ahsan Ali Shaw is an accomplished Business Writer, Analyst, and Public Speaker. Other than that, he’s a fun loving person.