Cross Border Strategy OF BMW PDF

Preview

Summary

How BMW as a company focuses its business internationally...

Description

Cross-Border Strategy of BMW 1

CROSS-BORDER STRATEGY OF BMW

Student`s Name:

Course Name: Professor’s Name: Institution: City: Date:

Cross-Border Strategy of BMW 2

CROSS-BORDER STRATEGY OF BMW In the current age and era, competition has become one of the most rampant concerning issues, especially in the business world. The subject becomes sensitive when considering established companies that have operations in different parts of the world. These companies or firms tend to deal with various issues related directly to the aspect of competition globally. In the quest to be at pace with competitors, firms employ cross-border strategies that help greatly in coping with the continuous competition and still remain in the market. Such strategies involved the incorporation if various business theories like the resource-based view and the market-based view theories. One such company that has exhibited the application of cross-border strategy in such a manner is the BMW Automobile company. The company has established major branches that deal with the production of automobiles and motorcycles. Due to the radical competition in the automobile business, the company employs cross-border strategies that have proved to be effective. COMPETITION CHALLENGES IN THE INTERNATIONAL MARKET Cost One of the most notable concepts and fact about BMW products is that they are more expensive when compared to other brands. Due to the fact that the company produces quality vehicles that are durable and luxurious, they tend to set higher prices which in the higher end is a competitive challenge since other companies manufacture quality cars still at relatively lower prices (Borchert 2008). This concept becomes one if concern especially when trying to hit higher sales and also ensure that the brand remains in the market with a positive image holistically. When compared to other firms like Toyota, it is undeniable that BMW quotes high prices for

Cross-Border Strategy of BMW 3

both the cars and the motorcycles as well as their accessories (Avery and Bergsteiner 2011). Due to this factor, most average earning individuals find it difficult affording BMW products. Other competitors like General Motors and Volkswagen still pose a competition challenge bearing in mind that their products are globally recognized. Innovation In every area of business, innovation remains to be a paramount concept because it enables a firm to always be ahead of competitors. In the automobile industry, producing more models of cars overtimes helps to even change the typical view of a company by the customers. Although developing and manufacturing new car models is costly and also risky. Coming up with new luxurious models of cars heavily affects the taxation of a company. In addition, since BMW faces stiff competition in this area, it incurs high costs of production especially with the multiple models that it makes each year. Furthermore, there are various risks that are closely related to the concept of innovation (Press.bmwgroup.com. 2018). Product development and advancement in production are crucial for every company and therefore BMW is left with no option but to venture in the same. In the execution of the innovation schemes adopted by the company, BMW faces steep procedures that are linked with innovation prototypes. Product Substitution and Differentiation BMW is mostly identified in the market to the diverse product descriptions that it possesses. Product differentiation is the concept where a company offers distinctive products than those offered by competition rivals. For a company to remain a step higher than the competitors and to also maintain a wider market share a company has to apply the aspect of product differentiation. It is one of the core elements of competition because buyers or else

Cross-Border Strategy of BMW 4

customers have a wide range of option dot choose from bearing in mind that there are very many companies that manufacture good and quality vehicles. Most cars have almost the same functionality traits and this factor makes BMW employ mechanisms and tactics in their production to ensure that their products are uniquely different from those of competitors (Avery and Bergsteiner 2011). The company is also forced to use ways and means possible to ensure maximum satisfaction of car lovers in the market. While on the positive side, differentiation seems to bring many benefits but it also contributes to the increase in operational costs that are incurred by the company. The demand for a product especially in international levels is affected by substitute products ranging from resources, products and the materials that are required in the automobile market. Therefore, having a product substitute may in one way or the other take away the market share of a company and also decrease the sales of certain products. Substitute products are meant to reach customers who are unable to buy the original products. BMW mostly focuses on meeting the needs of premium buyers who are more concerned about the quality more than the prices (Avery and Bergsteiner 2011). The thought of having substitute products would adversely affect business and increase the chances of being overtaken by potential competitors. However, BMW highly considers these challenges that are directly related to its performance and also growth in the international market. Some of the strategies that BMW has employed are theories applicable in business to cope and deal with competition issues. RESOURCE BASED VIEW As a company, BMW is operational in over 13 countries and owns approximately twentyfour production facilities all over the world. Unlike other companies, BMW owns most of those

Cross-Border Strategy of BMW 5

manufacturing facilities. On the concept of gaining the same economies of scale with other companies, BMW is exempted because it has categorized its premium brands into three sections. The company also invests heavily in research and development and therefore it faces the challenge of facing stiff competition from its business’ rivals. In a general view and analyzation of these factors, the Resource-Based View theory becomes useful and effective in examining how the company copes and acts upon the subject of competition internationally (Srivastava et al., 2001). The man key factor that enables BMW to remain in the market is the possession of unique and exceptional technical design knowledge which is then portrayed in its products in a manner that meets the demands in the automobile market. Heterogenous For a company to be termed as heterogeneous, it has to have distinctive skills, resources, and abilities which are not the same as those of other companies. These concepts enable a company to gain a competitive advantage since it is able to employ strategies that are also different. In connection to that BMW continuously uses resources and researches on diverse skills which it applies, making it outdo its competitors widely (Peng 2001). This facet is true because when compared to other automobile companies like Audi and Toyota, BMW still continues to take the lead in term of market share and profits yielded. In 2014, BMW was able to sell over 1.8 million brand cars, which made it the highest earning company in terms of sales. This was a significant difference, especially when compared with their direct rival Volkswagen who managed to sell 1.7 million brand cars. Because of being heterogeneous, BMW`s cars are always in high demand in European markets and also in China. In addition, due to the vast development and integration of technology, BMW incorporates communication technology in its production.

Cross-Border Strategy of BMW 6

Assets In 2017, BMW has a balance sheet that noted denoted the company having over 193 billion euros worth of assets (Boston 2018). Physical resources such as operational equipment, buildings, land, and capital are some of the basics that enable a company remains stable even when competition is high. BMW acquires the best, most durable and reliable equipment and facilities that cannot be easily accessed in the market by other companies without investing heavily. Having resources that are costly enables the company to maintains a competitive advantage since it does not seek to change the equipment of strategy of production every now and then. In addition, to have physical assets, intangible ones are also necessary. The most common intangible assets include brand reputation, intellectual property, and trademarks. These concepts are very distinctive when comparing BMW to other firms. The technical design used by the company both in production and in development of world-class vehicles adds itself as a competitive advantage (Hwee 2015). In this case, intangible assets become vital in ensuring that a company delivers the demand of customers and uses them still as resources to enhance the brand reputation in the market. Value and Rarity BMW is able to provide value to its customers because it uses resources that are of high value. The fact that the company is able to give valuable products, and sell them proofs that one uniqueness of coping with competition, is maintaining constant and enhanced value to the customers. A big number of individuals who buy BMW`s products are fully satisfied because of the comfort that they get (Hwee 2015). The use of rare resources and knowledge is also essential

Cross-Border Strategy of BMW 7

when it comes to competition. The knowledge and the skills that are possessed by BMW`s workers are rare and cannot be easily accessible by competitors (Avery and Bergsteiner 2011). The technical expertise in the company in terms of manufacturing and designing is exceptional and that is why the company remains to dominate the market. MARKET-BASED VIEW This theory mainly entails the idea of having a strategy that focuses on the subject of the environment, both locally and internationally. Having the idea of such facets enables the company to choose the right market combination to introduce its products and continue thriving businesswise. On a conceptual finding, BMW inherits such understanding in certain ways. Differentiation Firms and companies employ different strategies that can be used to ensure that a product reaches the market, uniquely, with diverse descriptions. Once the customers spot a product that is unique from the others and of value, the demand also increases. Differentiation is one of the reasons that makes individuals but products without really focusing on whether such has been on the market for long or not (Srivastava et al., 2001). Therefore, BMW attracts buyers even on international levels by producing products that are different in terms of description, quality, durability and also price. Also, BMW diversely focuses on ensuring that customer satisfaction is met and that the idea of luxury connected with its products remains. In the wake to ensure that it is different in all ways, instead of solely focusing on mass production, BMW invests heavily in incorporating technology and other forms of innovation in its operational. Therefore, it is able to withstand any competition that may be caused by such factors.

Cross-Border Strategy of BMW 8

Leadership in Prices One of the biggest secrets that turn out to be a strategy employed by most established companies, is ensuring that products and services are offered at the lowest prices than others especially if competition is a major issue. However, one great concern is that in most cases, when the price is lower, the quality tends to drop too (Srivastava et al., 2001). Although BMW does not really focus on regulating prices because of competition, it ensures that it delivers the best premium and luxury cars at the most relative prices. It is undeniable that the prices are high but BMW ensures that customers pay for products that are worth their money. The most expensive cars by BMW like the Rolls Royce model, still remain to be prestigious vehicles that have created a positive image of the BMW brand. It is highly recognized because of its quality and class and therefore most people who buy it do not necessarily consider the price over the quality. This idea and facet have enabled BMW to be recognized globally as a leading producer of worldclass, quality and luxurious cars. In a nutshell, it undeniable to state that BMW has employed the cross-border strategy that has enabled and empowered the company to remain in the automobile industry for long and withstand any form of competition. The company applies all methodologies to come up with the best tactics, plans, and strategies that it employs to ensure it stays ahead of it active competitors. Although the company seems to focus on delivering premium cars to its customers, it is able to maintain a balance of existence in the production and selling of motor vehicles. BMW stands to be different in various ways that can only be defined and explained using the market-based view and resource-based view business theories. It exhibits practices make it diverse in terms of its

Cross-Border Strategy of BMW 9

operations, techniques, investment, and branding, among other factors that are relevant to the automobile business.

Cross-Border Strategy of BMW 10

References Borchert, O., 2008. Resource-based theory: Creating and sustaining competitive advantage. Peng, M.W., 2001. The resource-based view and international business. Journal of management, 27(6), pp.803-829. Ismail, A.I., Rose, R.C., Uli, J. and Abdullah, H., 2012. THE RELATIONSHIP BETWEEN ORGANISATIONAL RESOURCES, CAPABILITIES, SYSTEMS AND COMPETITIVE ADVANTAGE. Asian academy of management Journal, 17(1). Avery, G.C. and Bergsteiner, H., 2011. How BMW successfully practices sustainable leadership principles. Strategy & Leadership, 39(6), pp.11-18. Hwee, E.Q.C., 2015. Building & Sustaining Strategy: Bayerische Motoren Werke (BMW)– Automotive Industry Boston, W. (2018). As BMW, Audi and Mercedes-Benz Race for Luxury-Car Sales Crown, Profits Get Dented. [online] WSJ. Available at: https://www.wsj.com/articles/in-luxuryrace-profits-get-dented-1426208841 [Accessed 23 Aug. 2018]. Srivastava, R.K., Fahey, L. and Christensen, H.K., 2001. The resource-based view and marketing: The role of market-based assets in gaining competitive advantage. Journal of management, 27(6), pp.777-802. Press.bmwgroup.com. (2018). BMW Group remains world’s Number One premium automotive company. [online] Available at: https://www.press.bmwgroup.com/global/article/detail/T0277889EN/bmw-group-

Cross-Border Strategy of BMW 11

remains-world%E2%80%99s-number-one-premium-automotive-company?language=en [Accessed 23 Aug. 2018].

....