MGMT578 Wk 2 - Strategic Management Case BMW

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MGMT578 – Case 3: Future of the Autonomous Automobile: A Strategy for BMW 4 page) Strategic Profile: At the time of the case, BMW had a history of innovation and had a significant portion of funding that was specifically set aside for development. Because of the corporate legacy, learning that other companies were moving into more innovation, BMW had the potential of losing ground in the innovation spectrum With a critical meeting around the corner, BMW must create a strategy that meets the business goals for the upcoming decade. However, prior to creating any strategy, the business needs to identify what it aspires to create in the industry. Once that it is determined, they are able to choose the best strategy for the firm. Part II: Strategic Environment Analysis A. General Environment Analysis. While BMW had a presence in the innovation element of the automotive industry, competition has expanded globally. BMW had avoided obtaining permits for testing and suddenly begins learning that multiple car makers had received permits for testing in California, yet as BMW was testing in Shanghai and Beijing, they chose not pursue permits in the United States. Yet with competition expanding, the threats to the business success become more of an element of consideration. When it comes to technological innovation, BMW receives a positive score. Technology is a large factor regarding vehicles. As technology expands and the market has now moved to include autonomous vehicles, it becomes even more significant. Over the recent years there has been significant advancements in artificial intelligence, automation, connection technologies, and computer processing powers have all increased the capabilities of autonomous vehicles. Some of 1 | P a g e

the benefits of these technologies indicate the significant safety factors that are included as well as increased efficiency. Advancements in technology must be able to withstand the government regulations placed on them to ensure the vehicles are safe for use. Government regulations and policies impact business, especially those regarding the safety of humanity. These policies incorporated over the last decades impact the creation and marketing of autonomous vehicles. While the policies have benefits for consumers by adopting specified safety standards, requiring specific methods and guidelines for testing that must be met before the vehicle is placed on the market, and encouraging research and development, there are challenges as well. One can realize the negative aspect with the extreme regulations, regulations that are open to interpretations and can make innovation challenging without significant clarification. Ambiguous laws can make it difficult for a manufacturer to remain compliant and each struggle that a company faces affects the rapidness of completing the production process. While government regulations can bring challenges for a business, BMW has an entire legal compliance code that it adheres to. A statement by Oliver Zipse on behalf of the board of directors states, “The BMW Group is fully committed to lawful and responsible conduct” (BMW Group, 2020). The legal compliance is indicated not merely for the sake of the adhering to the law, but also for the corporate culture, customers, shareholders, and the public to feel comfortable in trusting the company. Because they are an international company which makes upholding the legal compliance aspect of all the nations they do business with, the compliance code is a foundational element of their business. B. Industry Analysis. The threat of new entrants into the industry of autonomous vehicles is relatively high. The market is under rapid growth and is facing much competition with rapid innovation occurring. 2 | P a g e

Because the positive movement in the industry is occurring, it has the ability to entice more entrants and increase competition. As an automotive company brings in a new feature, another company will be able to match it and exceed it within a short time frame, meaning they all must remain ready to adjust to new technologies. In addition to the typical vehicle manufacturers incorporating technology, there are new entrants into the market that are disrupting the previous positions an established vehicle company once held. When companies such as Apple and Google, with innovation and extreme financial backing, are a very credible threat to companies like BMW. When Google can bring a self- driving vehicle into the market, BMW has a hill to climb to stay competitive. When there is steady industry disruption by competitors, any company must make adjustments to minimize their corporate disruption. Comparing competitors of a firm includes understanding what drives the competitor which includes knowing their future objectives, and what the competitor is doing and can do which they show with the current strategy being applied. Knowing what the competitor believes about the industry in the assumptions made, and the strength weaknesses in the competition. Having this data for the competitor shows their capabilities and gives the firm the opportunity to prepare a response to the threat in advance and allows them to compete in a manner that leads to success. C. Competitor Analysis . Competition in the vehicle industry is extensive. When looking specifically at automated vehicles there are other companies such as Toyota/Lexus and Tesla that are installing navigation hardware on their vehicles. While some in the competition are jumping in rapidly to place new cars on the road that are ready for the competition. Others, such as Volvo which is known for 3 | P a g e

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their safety features, reiterated that in regards to automated vehicles. In fact, Volvo’s first consideration regarding possible vehicle automation, was more focused on how it could enhance safety and increase material strengths. D. Primary Competitors Tesla is a newer company, founded in 2003 by Elon Musk. In 2022, their market capitalization was nearly $885 billion (Investopedia, 2022). Tesla has been creating electric semi-trucks and started providing them for PepsiCo. Tesla also sells their battery technology to other vehicle manufacturers. While Tesla had some years where they merely had breakeven revenue its reported annual net income for 2021 was $5.524 billion, a 700.58% increase from 2020, and its reported annual net income for 2022 was $12.583 billion, a 127.79% increase from 2021. Only for Q3 2022, Tesla's net income was $3.714 billion, a 59.67% increase year-over- year (Investopedia, 2022). While Tesla has much competition they are considered the top in the luxury EV realm. Other competitors include Ford that has electrified the mustang, trucks and vans. General Motors is working to make some form of electric vehicle that is available for any price point a consumer has, created the ability for a Silverado to go 400 miles, and is working to build their competitive advantage in batteries, software, vehicle integration, and manufacturing with a large investment planned for 2025 regarding autonomous vehicles. A relatively unknown competitor is NIO, a Chinese holding company the designs, manufactures, and sells premium smart cars in the international space. NIO enhances their offerings with providing customer power options such as access to public charging, power mobile charging trucks, and battery swapping. With continual innovations, including the battery swapping and autonomous driving, they have grown 22% annually. 4 | P a g e

Volkswagen is one of the largest auto manufacturers which include Bentley, Lamborghini, Porsche, and more. After Tesla started in the industry, Volkswagen worked behind the scenes to incorporate more EV into its business model. They anticipate that 50% of their sales by 2030 will be in the EV style. They also are working to produce more EV’s to meet the EU’s emission target by 2025. Part V: Synthesis and Strategic Recommendations BMW has a solid amount of history and brand recognition. As they aim to enhance their place in the market with all the rapidly growing technology, they must thoroughly recognize the competitive nature of the industry. Understanding the strengths of the company and enhancing that such as brand recognition, luxury features provided, the geographic locations most likely to afford a BMW vehicle enhances their ability to market appropriately. While there are some benefits in their technology, the world has become more technologically advanced and they must increase their R&D to meet the growing demand of the current market. One strategic alternatives for BMW is to create an offshoot that is more affordable. In the current market and economy, having an affordable option that is linked to an iconic brand may enhance their market reach. BMW isn’t growing as some of the other companies and it must research other companies and what customers are more excited about and more likely to purchase. If the market is more likely to desire an electric vehicle or a hybrid vehicle, that is one enhancement (this is incredibly important considering the current fuel prices). A more affordable option with targeted marketing to specific geographic regions where wages tend to be less than places such as California and New York would provide more opportunities to increase their market share. 5 | P a g e

Hitt, Ireland, Hoskisson, (2020) Strategic Management: Competitiveness & Globalization: Concepts and Cases. Cengage Learning, Inc. https://www.investopedia.com/ask/answers/120314/who-are-teslas-tsla-main-competitors.asp 6 | P a g e

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