GROUP 7: BMW

Competitive Analysis: Porter’s Five-Forces

Rivalry among Competing Firms

 Number of Competitors
Number of competitors has a high significance as there are lot of competitors in automobiles category
which exceeds growth of other automobile companies. The company faces strong competition towards its bigger
rivalries like Toyota’s Lexus, Volkswagen Audi, Daimler’s Mercedes-Benz, Honda’s Acura GM’s Cadillac
Corporation, Volvo Car Corporation, and Nissan’s Infiniti. It indicates that customers can easily switch brands as
there are many options and variety of product offerings for consumers that they can compare trend, quality, and
prices of its products.

 Undifferentiated Product
No differentiation products with competitors contribute high significance because if products are generic,
the customers may be treated it as commodity that can lead to price-based competition. Furthermore, Toyota’s
Lexus competes directly with our BMW and Lexus, and Volkswagen Audi offers a computerized control system
similar to the Idrive control of the company. These indicate that if the organization offers products similar to its
competitors, buyer’s choice will be based on price and value for money.

 Capacity Increases
Increasing capacity moderately contributes significance because the company already established its
global dealer networks in more than 140 countries with about 3,000 dealers worldwide. Also, the company
exceed its record with more than 100,000 deliveries of BMW vehicles around the world which means that the
organization still sold its products despite the disruption in the demand and supply of the market. But when
Daimler sells its vehicles in 40 countries and Mercedes-Benz’s U.S sales rose, it overtakes BMW in luxury-auto
deliveries which indicate that this factor still has a negative effect towards the company.

Potential Entry of New Competitor

 Barriers to Entry
Threat of new entrants is significantly low due to barriers to entry. As automobile industry usually offers
luxury products, it is expensive to manufacture these products and requires a huge amount of money because of
cost of productions. The competition in this industry is already intense as big companies are competitive globally
which they consistently provide huge amount of money for development and advancement of their organization.
Our company despite being the smallest firm offering luxury automobiles, we established customers’ loyalty
which prevents threat against new competitors as we can confidently compete with existing bigger companies.

Potential Development of Substitute Products

 Product Price, Quality , and Performance

Threats for substitute products is high, our company's product portfolio is primarily comprised on
automobiles, including small to medium luxury vehicles and a crossover series. To differentiate its offers, BMW
does not own any automobile brands aimed at lower- and middle-income consumers who cannot buy luxury
automobiles. But other automobile company provides a much lower price compare to what we sell into the
market like how Mercedez’s global sales rose due to demand of their class A and B compacts with its SUV line up
that causes declined revenues of our company. It implies that if substitute products are inexpensive but with
high-quality and provide the same performance like we offer, customers may shift their choice of brand.
Bargaining Power of Suppliers

 Number and Size of Suppliers

In terms of number and size of suppliers, threat towards BMW is significantly low due to large number of
suppliers in automobile industry. Also, the company itself operates business having 29 production and assembly
facilities in 14 countries that indicates we supply our own company for spare parts products. Therefore, we only
needed a certain supplier if the supplies are not enough to provide for our global dealers in more than 140
countries.

 Uniqueness of each supplier’s products

Bargaining power of suppliers in terms of uniqueness of the products show a moderate significance
because in case of insufficient supplies, it is difficult for the company to find a certain supplier as we produce our
own products and the parts are not similar with other brand. It will leads to increase power of suppliers as they
will need to customize the products we need as it is not common to demand due to uniqueness. Therefore, it will
moderately affect the business if our own production team failed to provide enough supplies.

Purchasing Power of Consumers

 Dependence of Buyer’s Purchase

Threat of purchasing power of consumers is significantly high because buyers can get similar products
from other companies which cause less dependence of customers to BMW. Our company was listed in Forbes
magazine as the number-one most reputable company in the world and this ranking is based on aspects such as
"people's willingness to buy, recommend, work for and invest in a company” which contributed highest annual
sales of the company. Also, stocks of BMW declined due to delayed shipments, implies that buyers have the
ability to squeeze the company’s margins by pressuring the organization for its products and services quality
control.

MEMBERS:

Goli, Francel L.
Delgado, Trisha Ann B.
Tolentino, John Carlo C.
Ramirez, Eugene Ej C.