Changes BMW Undergone in The Process of Shifting from Engine Based Cars to Electric Cars: Analytical Essay

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Changes BMW Undergone in The Process of Shifting from Engine Based Cars to Electric Cars: Analytical Essay

1. Introduction

Bayerische Motoren Werke AG (BMW Group), the BMW tagline is “designed for driving pleasure” which is very popular among people. The company was founded on March 7th, 1916. Founded by FRANZ JOSEP POPP, KARL RAPP and CAMILLO CASTIGLIONE. The company headquarters are in Munich Germany. The slogans are “SHEER DRIVING PLEASURE” and “THE NEXT 100 YEARS”.

Name

Bayerische Motoren Werke AG (BMW Group)

Founded

March 7, 1916

Logo

[image: ]

Industries served

Automotive

Motorcycles

Financial Services

Geographic areas served

Worldwide (over 150 countries)

Headquarters

Munich, Bavaria, Germany

Current CEO

Harald Krüger ( from May 13 2015)

Revenue (Euros)

€97.48 billion(2018) , €98.678 billion (2017) 4.78% increase over €94.163 billion (2016)

Profit (Euros)

€9.88 billion (2017).

Employees

134 682 (2018)

Main Competitors

Chrysler Group LLC, Daimler AG, Ford Motor Company, General Motors Company, Honda Motor Company, Hyundai Motor Company, Nissan Motor Company, Tata Motors, Ltd., Toyota Motor Corporation, Volkswagen AG and many other automotive companies.

All the information above mentioned is taken from BMW official 2018 report and BMW site.

In this present generation competitive world, change or adapting to the current trend is a very crucial factor for the organization success. Now in automobile industries the electric vehicle are the latest trend and all the companies are trying to make automobiles powered by electricity, BMW has announced that they are going to make electric vehicles by 2025. Recently in Munich 21st March 2018 the CEO of BMW Harald Krüger has show cased the BMW i3 series electric powered vehicle as a glimpse that they are going to release the car in 2021. I want to discuss what change that the BMW has adapted in their whole organization to convert from fuel powered car manufactures to electric powered vehicle manufactures and autonomous driving, because the tesla is leading manufacture of electric vehicle so BMW also trying to be in the trend. The electric vehicle and autonomous driving is a disruptive technology where all the automobile companies are racing to achieve it with 100 percent efficiency. (Bloomberg.com, 2019) (Forbes.com, 2019)

Macro trends

The electric vehicle came in to light because of the hike oil prices and fuel resources will be consumed totally. Second factor is carbon monoxide or emission gas from the car which is very harmful and main cause for the greenhouse effect, and the third factor is innovation every company is trying to create a disruptive technology in order to gain a huge competitive advantage over their competitors.

2. Porter’s five forces for the internal analysis

The threat of substitute products

Threat of substitute product is high for BMW because BMW produces till now engine-based car models but recently all the competitors are transforming to produce electric or battery-powered cars. BMW has launched its i8 series hybrid car which has both fuel power and battery powered in the June 2014, BMW first hybrid vehicle. Automobiles can be easily replaced by motorcycles and bicycle’s, but BMW has its own motorrad(bikes). Public transport is also a huge substitute for BMW cars. (porter Analysis, 2019)

The threat of new entrants

Basically, the BMW is a high-end luxury car manufacturer, so it targets rich people, so for the new entrants is not that easy to give competition to BMW. Since tesla came in to the game it is giving competition to the whole automobile industry, but BMW has a very high brand power and customers are very loyal.

For new entrants huge capital, skilled professional workers are required and face many legal issues to launch. So the threat of new entrants is low for BMW. (porter Analysis, 2019)

Power of competitors

The power of competitors is very high because there are many companies like VW, TESLA, TOYOTA etc, are competing. So BMW invests a lot of money in research and development department (R&D) to create new innovations and technology. Actually, the electric cars are the new age of innovation where the fuel-based cars are completely replaced and now all the competitors are trying to achieve the competitive advantage. (porter Analysis, 2019)

Bargaining power of customer

The bargaining power of customer is very high because customers can easily shift and have lot of options in the market. The BMW should always pay attention to the customer needs and what they are expecting. BMW should always treat their customer loyalty in order to get the competitive edge. (porter Analysis, 2019)

Bargaining power of supplier

The bargaining power of supplier is low because BMW can easily replace their supplier as there a lot of options available. Now the BMW has signed a 1 billion worth contract with Samsung SDI for car batteries to keep up with the competitors (according to electrek.co). In this particular case the bargaining power of supplier can be high. (Lambert and Lambert, 2019)

3. PESTLE analysis

Political factor

Brexit can be a dis advantage to BMW because U K government may impose tax on BMW cars as it is a German manufacturer.
If the government in another country changes where the BMW operates it can cause risk to the investment.
The import and export tax rates will effect BMW directly in their revenue.

Economic factor

BMW should make cheaper cars in order to capture the whole market as BMW makes only luxury cars and targets the rich people, but it should reach to the middle segment also.

The global economy fluctuation will effect the BMW in performance, valuation and profits. The tariffs will affect BMW directly because BMW has operations in more than 150 countries. (Frue, 2019)

Social factor

BMW operates in more than 150 countries, each country has its own culture the culture difference between countries is high. Bmw must try to adapt to the customers around the globe. Bmw have a lot of facebook pages (over 13 million pages), Instagram and twitter. Although social media integration is a key role to attract customers and know their preferences, BMW officials releases news or updates or responds to the followers in twitter but responds to the main issues it is a positive point for BMW. (Frue, 2019)

Technology factor

In the present competitive world for a company to survive it should be innovative and must be ready to adapt to the change. The adapting to the new technology or disruptive technology is very important for companies to survive. In this case tesla came up with a disruptive technology like manufacturing the electric cars and BMW earlier released a hybrid model now the company has announced that by 2021 all the BMW cars are electric powered, it is good for BMW to adapt to change and release announcement about the future. (Frue, 2019)

Legal factor

BMW till now has not faced any legal issues because all the law was fully accepted and followed by BMW very strictly. BMW asks the sub companies and suppliers to follow the rules very strictly. (Frue, 2019)

4. Critical success factor

BMW has a very high brand loyalty because of the quality of the product and precision of the work, where the customers have a very good impression on BMW. The readiness to adapt to the change is a very difficult task to global companies like BMW but they have adapted to every change and giving competition to their competitors. BMW invests lot of money in R&D for creating new technology, innovations and strategies to be ahead in the market. The BMW uses STRATEGY NO 1

Access to technology and customers
Profitability
Shaping the future
Growth

The BMW has increased its sales network by entering in Asian market (INDIA, CHINA). The size of the work force increased globally and expanding. The BMW always thrives to make new innovations which is a very good competitive edge to the company as the bmw has releases new conceptual cars and models every year ex BMW I3 which is a hybrid and latest the BMW new I series car displayed in Munich by the CEO which is going to be released in year 2021.

The external pressures is a very plus point for BMW because the bmw is always ready to adapt to the change and now the BMW has signed a billion dollar contract with Samsung SDI to buy batteries for the electric vehicle and BMW tied up with Volkswagen to launch twenty five lakhs plus battery power station in the whole Europe. These external pressures creating more work force and innovation which helps in the company’s growth. The disruptive technology like tesla has introduced electric vehicle which is a very high competition for BMW and all the other automobile industries, BMW has announced that from 2025 all the cars from bmw will electric powered which will bring a huge competition with tesla and BMW also planning to bring a disruptive technology like fully autonomous diving where it will be huge success to the company and the whole automobile industries. The BMW have some strategic issues like there is a very big organizational structure in the company like the board of the management consist of six highly professional managers and chairman of the board so the pinpoint of a problem in a company is low and it cannot be reached to the top management easily, so the BMW should give power and decision making to the middle management like each individual manager can be able to rectify their own team problem among them and later should be informed to the board. The feedback should be improved as the employers should give feed back to their higher authorities about the operation and performance. The communication among the departments must be improved as now the BMW entering into the electric vehicle field and every department participation is required by keeping them connected. BMW has introduced a new model of connection with other departments by keeping a meeting of all the departments head and the CEO directly interacts with them for every two months. The risk management of BMW is super because BMW takes an open sustainability audit every year where all the employers can see that and the employers can share their thoughts and ideas to the risk management department where each and every feedback is considered and they are presenting prizes or compensation to make the employers to involve much.

5. Organizational resilience

The BMW follows the MTBF mean time before failure to be more resilient. BMW have IT services also in order to face and withstand if any disruptive technology comes in to the market and BMW is trying to build up their customer loyalty which gives BMW to be more resilient. I suggest that BMW should follow some methods to be more resilient like early identification of risk, forecasting the change in the environment, do some risk compressive analysis and use some sustainable management tools. Which help BMW to be more resilient to the change or disruptive technology. As BMW should be more proactive to the change and can be easily adapt to the change

Not only does adaption plays crucial role in resilience but the climate and weather extremes also play an important role (Linnenluecke and Griffiths, 2010). Now a days all the companies are focusing on the economic factors such as competition and technology innovation, well bot one company need to be resilient it should focus and forecast on all factors. This is also called as disaster recovery which offers per disaster strategies to reduce or avoid costly downtime, stop vulnerabilities and to maintain a smooth operation even in the time of unexpected or additional breaches.

The BMW should be resilient in such a way that has to be adaptive to disruptive change and maintain the business operation continually, protect people, assets and overall brand image. (Harvard Business Review, 2019) (Linnenluecke and Griffiths, 2010)

6. Diagnostic model

The suggested diagnostic model for BMW is 7 S frame work. Which was developed by Robert Waterman, Tom Peters, and Julien Phillips in 1980. The 7s framework consist of 7 factors

Structure
System
Style
Staff
Skill
Strategy
Superordinate Goals

The 7s frame work is more importance on the interconnectedness of all the departments, in this frame work if one department needs to be changed then all the departments are effected by that change which is good for organization. The frame work can be used to increase the performance of the company, forecast the likely effect of future changes in and out of the company, all the departments are aligned and we can also check how good is the proposed strategy with this frame work. (Palmer, Dunford and Buchanan, n.d.)

Structure refers to the Organisational structure. The way the organizations is designed and who should report whom. The structure gives the information about how the departments are divided, how the work flows through the departments. Why I suggested this model to BMW is that it has gone through a lot of change from fuel car to electric car, now the 7s frame (especially strtuture) works help the BMW to know how all the departments coordinate and how does the team player align and organize to the change happened in the company. It also allows to know about the communication gaps between the department, which is very helpful for a global company like BMW. (Mindtools.com, 2019)

System is used to know the daily activities done by the employees and to check weather the job is done in time. In BMW using this frame work they can detect the main system that’s running the company, where are the controls of the company and they can monitor it (the Verizon has made a dash board where all the managers use it know the how work done and any issues inside the company). This system framework is useful to the top-level management of BMW where they can know how the employees are working and did they reach the target and how the employees are reacting to the change. (Mindtools.com, 2019)

Style is the leadership style in the company, In BMW this frame works helps in knowing how effective the leadership is and how their subordinates are reacting like willing to cooperate or compete with the managers. (Mindtools.com, 2019)

Staff this frame work helps BMW to know what position or category is required in the team and are there any gaps in required competencies.

Skills are the abilities of the employees who’s working in the company. This helps BMW in giving training to the employees who are the part of a change and help the employees to be adaptive and professional. (Mindtools.com, 2019)

Strategy is the plan of action used in the company to improve their competitive advantage and goals. BMW should use this frame work to develop a new strategy before adapting the strategy and after the change is adapted also. It helps to know how to achieve the intended goals, the strategy should be built in such a way that it should deal with competitive pressure and how the customer needs or demands are met. The BMW should adjust their strategy with respect to environmental issues. (Mindtools.com, 2019)

Superordinate goals it is the vision of the company and BMW have announced their vision such that by 2025 they will launch all the electric and green cars. (Mindtools.com, 2019)

So for the BMW I suggested this model because it has advantage mentioned in the above and also this 7s frame work is used to self-check with in the companies for the gaps.

7. Conclusion

According to the study I totally recommend BMW to use 7s frame work, BMW should be also ready for the environmental changes also to be more resilient. Adaption is most challenging task for the global company like BMW because it operates more than 150 countries so change cannot be easy until if the middle management is given power to take decisions so that it saves a lot of time to top management. Finally what I believe the most important aspects for the BMW success is their brand power, their relationship with customer and technology & innovation.

8. Bibliography

Bloomberg.com. (2019). Bloomberg – Are you a robot? [online] Available at: https://www.bloomberg.com/features/2019-bmw-electric-car-german-engines/ [Accessed 7 May 2019].
Frue, K. (2019). PESTLE Analysis of BMW: Shaping the automotive industry. [online] PESTLE Analysis. Available at: https://pestleanalysis.com/pestle-analysis-of-bmw/ [Accessed 7 May 2019].
Lambert, F. and Lambert, F. (2019). BMW signs $1 billion battery supply contract to support future EV production. [online] Electrek. Available at: https://electrek.co/2018/06/29/bmw-signs-billion-battery-supply-contract-future-ev-production/ [Accessed 7 May 2019].
Porter Analysis. (2019). Porter Five Forces Analysis of BMW|Porter Analysis. [online] Available at: https://www.porteranalysis.com/porter-five-forces-analysis-of-bmw/ [Accessed 7 May 2019].
Harvard Business Review. (2019). What Resilience Means, and Why It Matters. [online] Available at: https://hbr.org/2015/01/what-resilience-means-and-why-it-matters [Accessed 7 May 2019].
Mindtools.com. (2019). The McKinsey 7-S FrameworkEnsuring That All Parts of Your Organization Work in Harmony. [online] Available at: https://www.mindtools.com/pages/article/newSTR_91.htm [Accessed 7 May 2019].
ComputerWeekly.com. (2019). BMW gears up IT resilience with private cloud infrastructure. [online] Available at: https://www.computerweekly.com/news/2240205641/BMW-gears-up-IT-resilience-with-private-cloud-infrastructure [Accessed 7 May 2019].
Press.bmwgroup.com. (2019). BMW Group Annual Report 2018. [online] Available at: https://www.press.bmwgroup.com/global/article/detail/T0293372EN/bmw-group-annual-report-2018?language=en [Accessed 7 May 2019].
Equitystory.com. (2019). [online] Available at: http://www.equitystory.com/Download/Companies/BMW/Quarterly%20Reports/DE0005190003-Q2-2018-EQ-E-00.pdf [Accessed 7 May 2019].
Evarts, E., Contributor, E., Contributor, E., Contributor, J., Editor, B., Contributor, E., Contributor, E. and Editor, B. (2019). BMW plans 12 all-electric models by 2025. [online] Green Car Reports. Available at: https://www2.greencarreports.com/news/1122188_bmw-plans-12-all-electric-models-by-2025 [Accessed 7 May 2019].
Bmw.de. (2019). BMW i Modelle: Übersicht Elektroautos | BMW. [online] Available at: https://www.bmw.de/de/neufahrzeuge/bmw-i.html?bmw=sea:59052874027_kwd-299858606523&gclid=CjwKCAjw2cTmBRAVEiwA8YMgzTYNoY9oKiQBZt0Ce29cUoCd6BPb27AJWZd1_ADzYwax6KEqLjexoRoCtjoQAvD_BwE [Accessed 7 May 2019].