Using the PESTEL Framework Carry Out an Analysis of the Target Country From the Organisation

8/18/2019 Using the PESTEL Framework Carry Out an Analysis of the Target Country From the Organisation

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1 Using the PESTEL Framework carry out an analysis of the

target country from the organisation’s particular perspective.

[! marks"

E#ecutive Summary

$ntro%uction to the &ompanyBMW (Bavarian motor works) is a German automobile, motor cycle andengine manufacturing company which was founded in 11!" #he ma$ority of the stake within the company is owned by strategic investors from all overthe world" BMW is mainly seen as a premium lu%ury cars manufacturertargeting the rich and upper class society"

Introduction:

BMW was founded in 1916 and has been publicly traded since 1969. The company produces and

markets a aried ran!e of hi!her end sports cars and motorcycles and with BMW" MI#I and

$olls%$oyce Motor &ars" the BMW 'roup is one of the most successful multi%brand premiumautomobile manufacturers in the world.

BMW is a leader in the premium lu%ury car market in the G&'G*+ thecompany has shown increasing sales in the last two years and has almost1- of the G&'G* car market share" #he reason for this success is thediverse range of cars that BMW has to o.er" /t consists of the BMW brand,

Mini and the 'olls 'oyce" 0owever all three of them are successful productsof BMW utomobiles and are discussed in this report+ more focus is given tothe BMW brand" #he reason so far for the success of the company is their accomplishment inthe companys core strategy, product development" BMW over the yearshave created cars and successfully launched them into markets, but timesare changing now as competitors like Mercedes are getting into new marketsand trying to win new consumers" BMW has to counter such moves bysticking to its core strategy yet entering new markets" #his is the way thecompany is going to achieve its mission of becoming the the world leadingprovider of premium products and premium services for individual mobilityby 22"

&orporate '()ectives*3orporate b$ectives are simply what the business wants to achieve, theyare those that relate to the (usiness as a whole" #hey are usually set by


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the top management of the business and they provide the focus for settingmore detailed ob$ectives for the main functional activities of the business"BMWs corporate ob$ectives are also simple and clear, they want to achieve aearning before interest and ta% margin of 4- in 212, which is similar to theone they achieved in 211" Moreover the company wants to achieve a return

on e5uity ratio of 14- in the 6nancial year 212 (source BMW blog)"

#he other long term aims of the company are to have e7cient dynamics inall cars by 22 and to be the world leading provider of premium productsand premium services for individual mobility by 22, the latter is also themission statement of the company" (BMW nnual 'eport)

+arketing ,u%it

+acro Environment -PESTEL

#he macro environmental factors of an organi8ation are the e%ternal and thenon controllable aspects of an organi8ation, which can be best, understoodby using the 9:;# analysis"

BMW is a vast organi8ation and thus a vast ma$ority of e%ternal factors a.ectthe running of the company which are discussed below

Political*

/n the recent past the G&'G* and :& laws have recogni8ed the fact thatthe car industry is a ma$or contributor to the emission of 3o2 in the

environment, recent studies have shown that 22- of the overall 3o2emissions have been caused by road transport of which 2- are from cars" #his has had an immediate impact on BMWs automobile industry" #hepressure of governments for greener technologies and environmentalfriendly cars has led BMW to invest in such technologies, although this hasraised the manufacturing costs for BMW, it has also created a positive imagein the minds of its customers by reducing the carbon foot prints which iscreated on the environment"

#his has led to BMW launching its 6rst car running on hydrogen in 2!,which produced very less 3o2 emissions" #his greener image is also being

made prominent by the new engine technology called the :7cient


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for forei!n e/uity inestment up to 100 per cent" with no minimum. (olitical climate in a

different countries producin! an buyin! automobiles re!ardin! policies on import" eport and

manufacture of automobiles and automobile components. This will also include policies onallowin! settin! up of manufacturin! plants by forei!n companies. 2tability of !oernments:

This may affect the future conditions in a country. Taation policies: Indian !oernment auto

policy aimed at promotin! an inte!rated" phased and conducie !rowth of the Indian automotieindustry. +llowin! automatic approal for forei!n e/uity inestment up to 100 per cent" with no

minimum.

Economical*

#he recent 6nancial crisis has had a huge impact on all businessesthroughout the G&'G*, consumer purchasing power has fallensigni6cantly this is the reason why in 24 BMW had a pro6t before ta% of >?1 million :uros whereas in 211 the pro6ts have increased to !"> Billion:uros"( nnual 'eport 212) 0owever /n the G&'G* the recession is stillgrowing stronger, as the country is facing is facing its 6rst double diprecession since 1!? so it is likely that these rising pro6ts will come to a fall"(


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economy like chan!e in 'ot. policies" political situation" buyin! capacity of the people. With

the !rowin! population of well heeled citiens in India emer!es to be the primary cause. With the

oerall population bein! 1 billion" the 13 people who constitute the affluent society or the new4'lobal Indians4 are estimated to be oer 10 million" mainly because of the !rowin! disposable

income of India. It is a reflection of the chan!in! lifestyle of the affluent class in the country. In

India" the luury car se!ment 5+era!e (rice 7%80 *akh has been !rowin! at an aera!e rate of 03 or aboe durin! recent years In effect to this" almost all the oerseas manufacturers

includin! Mercedes" BMW" +udi" 2uuki" and most recently -olkswa!en hae entered the fray.

;errari4s announcement to roar into the India market from 010 and +ston Martin4s aspirations toenter the Indian market soon net year also si!nals that the market has M+$=,T ?$I-,$2 Increase disposable income "$isin! aspiration leel "*ower

interest rates.

Social

0ofstede (14) de6nes culture as the collective programming of the mindwhich distinguishes the members of one human group from another"

#he G&'G* population is e%pected to be increase by 4 million by the year22 when in comparison to 212" #he breakdown of this increase showsthat the population is shifting towards more life e%pectancy and thus to anolder generation" #his shift will cause BMW to ponder upon its greentechnologies as the consumer will likely prefer a greener environment"(Market racle)

2ocio &ultural ;actors: *ifestyle and preferences of people" that impact their choice of types of

automobiles. 2ocial norms that impact the decision to own and use automobiles ersus other

means of transport This market !rowth also presents ample opportunity for relatiely newentrants such as @a!uar" *and $oer" $olls $oyce" (orsche" *ambor!hini" Toyota and -olo to

increase their market share" and further intensify the competition


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Technological

#echnology has driven many aspects of societal development, business andmarketing over the centuries, however the technological revolutions of the

last 1 years have also led to the demise of various industries" Aor e"g" thetypewriter has ceased to e%ist"

BMW has to constantly look after these changing environments, the BMWe7cient dynamics is doing well in the markets but the organi8ation shouldalways be ready for change and one step ahead of its competitors" 'ecentlyMercedes Ben8 launched an advert of its invisible car, which emits 8eroemission and Mercedes e5uipped one side of the car with sheets of =:


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aailable" 'erman manufacturer BMW has come out on top by sellin! 0"09 units this

#oember. @apanese manufacturer Toyota Motors4 brand *eus" came second with 1C"D0 units

while compatriot manufacturer" Mercedes Ben came a close third with 1C"0C sales. *eus stillleads the oerall sales fi!ures till date for 010 but are closely followed by BMW and Mercedes

Ben. *eus sold 01"69 units from @an%#o 10 while BMW and Mercedes Ben sold 196"C88

and 196"CC units

httpCDDwww"ir$c$ournals"orgDi$mssrD$an21>D?"pdf

Legal

It is compulsory for BMW activities and business processes to confirm with a wide range of rules and regulations in local, regional, governmental and

international levels, therefore any changes in relevant rules and regulations are

likely to impact BMW performance.

Moreover, patents and copyrights in relation to innovation on auto devices and

functionalities can be specified as significant legal issues to be approached by

BMW in an appropriate manner.

Ecological

The impact of ecological factors on private sectors organisations such as BMW

has increased significantly during the past several decades. Specifically,

ecological factors effecting BMW include increasing levels of consumer concern

towards green! products, effects of non"government environmental

organisations, changes in waste management practices and others.

httpCDDresearchEmethodology"netDbmwEpestelEanalysisD

http://www.irjcjournals.org/ijmssr/jan2013/5.pdfhttp://research-methodology.net/bmw-pestel-analysis/http://research-methodology.net/bmw-pestel-analysis/http://www.irjcjournals.org/ijmssr/jan2013/5.pdf


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httpCDDwww"businesstoday"inDsectorsDautoDglobalEleaderEbmwEranksEthirdEinEindianElu%uryEcarEmarketDstoryD2241>"html

httpCDDlimeonline"inDdownloadablesD=/M:-2>-23asestudyD3ampusE'oundDBMW"pdf

http://www.businesstoday.in/sectors/auto/global-leader-bmw-ranks-third-in-indian-luxury-car-market/story/228413.htmlhttp://www.businesstoday.in/sectors/auto/global-leader-bmw-ranks-third-in-indian-luxury-car-market/story/228413.htmlhttp://limeonline.in/downloadables/LIME%203%20Casestudy/Campus-Round/BMW.pdfhttp://limeonline.in/downloadables/LIME%203%20Casestudy/Campus-Round/BMW.pdfhttp://www.businesstoday.in/sectors/auto/global-leader-bmw-ranks-third-in-indian-luxury-car-market/story/228413.htmlhttp://www.businesstoday.in/sectors/auto/global-leader-bmw-ranks-third-in-indian-luxury-car-market/story/228413.htmlhttp://limeonline.in/downloadables/LIME%203%20Casestudy/Campus-Round/BMW.pdfhttp://limeonline.in/downloadables/LIME%203%20Casestudy/Campus-Round/BMW.pdf


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/. ,nalyse the entry mo%e the organisation use% for the country

an% the %egree of success to %ate. [0! marks1

2easons for entry into $n%ian +arket

#he lu%ury segment is puny in /ndia, accounting for no more than

">- of the market" *evertheless, highEend carmakers see it as

crucial to build a presence here due to the marketFs anticipated

growth"

/n 2, only 6ve in every 1, /ndians owned a car+ by 21, the

number is e%pected to have risen to 11 per 1," By 21 there could

be 1> million cars on /ndiaFs already crowded roads, up from $ust ?

million in 2"

We want to bene6t from this growth potential, but we also want to

make an active contribution to this growth, said *orbert 'eithofer,

chairman of BMWFs board of management"

3hennai has a developed infrastructure and it bene6ts from having

parts suppliers nearby, added ArankE9eter rndt, BMW board member

in charge of production"

1> potential production locations were analy8ed for setting up the production

plant in /ndia" 3hennai was chosen as the most feasible option because of

the following reasonsC


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utomobile manufacturers utomotive suppliers Huali6ed labor 3ost balance for production location /nfrastructure I /nternational irport, ;ea 9ort, 'oad *etwork

Strategic o()ective

J#he BMW Group is the leading provider of premium products and premium

services for individual mobility"K

3ision

J&ni5ueness through diversity, =eadership, taking 'isk, courteousK

http://www.blurtit.com/q270773.htmlhttp://www.blurtit.com/q270773.html


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+ission

#o become most successful premium manufacturer in the car industry

+arketing Strategy

BMW /ndia studied the /ndian markets and found it to portray immense

dynamism and this is how BMW formulated its marketing strategy"

BMW /ndia decided to stand their ground in a 6ercely competitive

environment with new ideas and the strength to promote our new products"

/n absolute terms, /ndia cannot compete with other highEvolume single

markets yet" But, the future belongs to /ndia" /f you want to bene6t from the

dynamics of the /ndian market later, you need to act today" #his is what they

did" #hey were prepared to meet the challenges headEon to ensure their

companyFs success" #hese 5ualities enabled them to weather stormy

conditions and continue to invest in our future" #hey were able to anticipate

trends and that gave them an edge"

#heir strategy has been to embark on an aggressive product o.ensive with

rapid market e%pansion through greater customer intimacy" #hey have

addressed these through competencyEenhancement across all levels seeking

new business opportunities" s pioneers in bringing lu%urious dealerships to

/ndia, they set a decisive course by setting up BMW dealerships of

international standards across all metros" #hey have set very high standards

in service 5uality and customer care in /ndia, which meet the e%pectations of

their customers" nd this is e%actly how they position themselves to rede6ne

http://www.blurtit.com/q270773.htmlhttp://www.blurtit.com/q270773.html


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lu%ury, focusing on individuals, recogni8ing future challenges, promoting

creativity, and being the leading supplier of lu%ury products and services for

individual mobility" #hey always concentrate on their strengths and thus on

the

/mplementation of the lu%ury claim which they convey with each of their

vehicles" #hey do not make compromises" #his has been their strategy in

/ndia, where they currently have 1L BMW dealer facilities" s we embark on

the ne%t phase of our dealer network strategy, BMW /ndia will further e%pand

operations by establishing its presence in 1 more cities"

,ssess the principal managerial challenges associate% with

managing the operation an% its employees in the country4 which isgeographically an% culturally remove% from 5home6. [0! marks1

CHENNAI: The city has come to be known as the Detroit of India for its large concentration of

automakers, but a series of labour disutes ha!e rocked it, utting a "uestion mark o!er industrial eace#

Car markers such as Hyundai $otor India, %erman lu&ury car maker '$( and )ord $otor India besides

)innish handset manufacturer Nokia India ha!e set u their lants on the city outskirts emloying more

than *+, eole# As the city and other arts of Tamil Nadu woo more foreign and domestic comanies,

emloyees of se!eral factories had resorted to strikes demanding recognition of Trade -nion, good ay

ackage#

httpCDDarticles"economictimes"indiatimes"comD21E1E14DnewsD2!?!211nokiaEindiaEtEmEanbarasanENashEstrike

http://articles.economictimes.indiatimes.com/2010-10-18/news/27572144_1_nokia-india-t-m-anbarasan-flash-strikehttp://articles.economictimes.indiatimes.com/2010-10-18/news/27572144_1_nokia-india-t-m-anbarasan-flash-strikehttp://articles.economictimes.indiatimes.com/2010-10-18/news/27572144_1_nokia-india-t-m-anbarasan-flash-strikehttp://articles.economictimes.indiatimes.com/2010-10-18/news/27572144_1_nokia-india-t-m-anbarasan-flash-strike


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Chea labour and generous ta& concessions for internationalin!estors ha!e made India a ma.or hub for global carmakers#

According to India/s Deartment of Industrial 0olicy and0romotion, the industry attracted 1-234#+* billion foreigndirect in!estment 5)DI6 between Aril * and December*37# 2u8uki, Toyota, Honda, %eneral $otors, )ord, '$(and $ercedes 'en8 and Hyundai all ha!e manufacturingfacilities in India#

The auto industry currently accounts for 9#3 ercent of India/s%ross Domestic 0roduct with ambitious go!ernment lans toencourage more foreign in!estment# The current international

economic downturn, howe!er, has imacted on local automanufacturing and seen roduction targets decline in the ast3* months#

A recent study by the 2ociety of Indian Automobile$anufacturers 52IA$6 re!ealed that !ehicle roduction hadfallen 3#+4 ercent in the ast year, down to 3#7 million!ehicles# 2IA$ told the media that the auto industry might not

be able to meet the Indian go!ernment/s e&ected target of a1-2347 billion turno!er by *3;, and that it may now re"uirea decade to accomlish that figure#

Indian auto workers ha!e consistently demonstrated theirdetermination to fight low wages, and harsh and highlye&loitati!e conditions, including the widesread use ofcontract labour and seed us# (hen workers ha!e taken

action to fight these conditions, India/s state go!ernments,who are in cometition with each other to attract foreignin!estment, ha!e deeened their collaboration with the autocomany managements and mobilised olice to reress thestruggling workers#


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The chief olitical roblem confronting auto workers and theIndian working class as a whole are the main unionfederations, the 2talinist C0$


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company to grow" /n order to grow remarkably, a company has to ac5uiremore brands and enter into more strategic partnerships" " Weak brand portfolio (only three brands)C BMW manufactures and sells only >brandsC BMW, M/*/ and 'ollsE'oyce" #he lack of di.erentiation in brand

portfolio may have negative impact on longEterm growth of the company" /tmay put the company in $eopardy to e%ternal shocks and economic crisis inthe future

2ince then there has been no looking back and the automobile industry hascontinued to grow at a consistent rate of *7=# These ositi!e stes led toglobally renowned auto brands to in!est in the Indian market# 2ome of theleading automobile manufacturers from Euroe and the -nited 2tates

collaborated with Indian brands to create customi8ed !ehicles for each section ofthe oulation# Comanies like $aruti -dyog were formed as a result ofcollaboration between 2u8uki of >aan and the Indian go!ernment#

(ith each assing year, the number of automobile manufacturers willing to take

the lunge into the Indian market has risen considerably while most of the

international brands ha!e entered into .oint !entures? there are e&cetions like

Hyundai which is keen on setting u its own manufacturing units# Howe!er, thereare numerous challenges before Indian automobile industry# @ne of the ma.or

roblems faced by this sector is the oor condition of the roads# The road

infrastructure is not roerly de!eloed# The condition of the highways is not u

to the mark# A large number of the roads are single lane roads built almost 7

years ago# They hardly match the raid ace at which the automobile industry is

de!eloing# $oreo!er, they are mostly used by bullock carts and two wheelers# It

is belie!ed that the condition of the roads would worsen with the introduction of

bigger and increasing number of !ehicles# eair work is e&ected to incure&enses u to1+ billion# The ri!ati8ation of the road infrastructure is not

enough to sol!e the roblem which has attained large roortions# The oad

De!eloment 0rogram and its rogress is e&ected to be a key factor in the

growth of the auto industry in India#


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Though numerous foreign comanies ha!e entered the Indian automobile

market, the tariffs on imorted comonents and roducts and the fre"uent

alterations in the currency e&change rates ha!e made locali8ation an absolute

necessity for these comanies# Daewoo


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Economic En!ironment

$ost of the economic factors that affect the comany are the economic downturn in the market#

(hen the urchasing ower of the consumer becomes low and the currency rate start declining in

the de!eloing countries like in India#

(eaknesses

The rices of '$( roducts are usually high# 2trategic artnershis and ac"uisitions are small in

number# The brand ortfolio can be further di!ersified# The high cost structure can weaken the

comany/s brand name in !arious market segments#

he '$( grou is the world/s leading automaker industry# The comany faces an intense cometitionin the market and in order to remain cometiti!e should consider reducing costs and e&and intonew markets# The comany has also maintained its brand management which attracts and target theright market and otential buyers#

httpCDDmarketingmi%%"comDmarketingEplanE2D2LEmarketingEplanEofEbmw"html

Benefits and Challenges

Analysts said that the main reason for '$(s global success, desite being much smaller than auto

giants like %$, Toyota $otor Cor 5Toyota6, )ord, olkswagen A% and DaimlerChrysler A% in terms of

annual sales !olume was that the comany offered ersonali8ed cars# '$( offered customers a wide

!ariety of otions while allowing them to get their car manufactured e&actly the way they wanted it#'ecause of this, customer satisfaction with a '$( urchase was higher than what they obtained by

buying a mass roduced car# This enhanced the comanys image in the auto industry###

The Future of Mass Customization


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Analysts said the dri!er of mass customi8ation

was the ga between what the customer

wanted and what a comany could suly#

$ass customi8ation was used with great

efficacy by Dell Inc in manufacturing comuters#(hile it was simler to mass customi8e

comuters than cars analysts were of the

oinion that the auto industry could benefit from

building roducts to order#

It was said that more than 7 ercent of the

cars built did not ha!e a otential consumer

when they rolled off the final assembly line###

httpCDDwww"icmrindia"orgDcasestudiesDcatalogueDperationsDMass-23ustomi8ationEBMW-2WayEperations-2Management-23ase-2;tudies"htm

The automoti!e industry is a growth industry# It has broken record after record in recent years, with no end insight# 2ales and roduction in China are booming# @n the other side of the globe, a strong reco!ery in the -2continues to surass e&ectations#

'ut along with record growth, the industry is also facing unrecedented challenges:

• Demograhic changes and rofound shifts in global economic ower are causing massi!e uhea!als

in demand#

• Consumer e&ectations are changing radically#

• New technologies are dramatically changing !ehicles, from the ad!ent of the Fconnected car/ and

enhanced dri!er suort to better fuel efficiency and new or imro!ed owertrains#

Automoti!e manufacturers and suliers are confronted with increasing comle&ity as aresult of increasing numbers of roducts and otions, shorter technology cycles, increasingressure to inno!ate and global suly networks#

And at the same time they need to balance the needs and demands of customers,

in!estors, regulators, non


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Using the PESTEL Framework Carry Out an Analysis of the Target Country From the Organisation