Challenges Facing BMW: Internal & External Factors Analyzed

Discuss about the External Environment of BMW Organization.

A business organization comprises of a group of people or individuals who are targeted towards some common commercial goals. The business organizations operate in an external environment; therefore, the external environmental factors impact on the operations of the business organizations. However, these external factors cannot be controlled by the business organizations. They need to adapt themselves according to the external environment. In addition to it, when beginning a new business venture in a different location, the organization needs to identify the external factors and their impact on the business operations. If the external factors do not align with the goals or the vision of the organization, the business venture can remain unfruitful (Thompson & Martin, 2010). Therefore, the business organizations employ a large number of techniques to evaluate and analyse the external environment of a business organization. The most common tool for the external environment analysis is PESTEL analysis.

The PESTEL analysis is the acronym for political, economic, social, technological, environmental and the legal factors. All these factors together, impacts on the business operations and the profitability of the organization. The external environment analysis is important for the business organization as it helps them in analysing that the business venture will be successful or not. It also increases the knowledge regarding the current market structure and changes. Therefore, this tool can be used by the business organizations in adapting themselves according to the changes in the market (Cole, 2003). External environment analysis is a strategic tool which assists the organization in forming strategies to curb the market competition. In this regard, the current report will examine the external environment of a BMW in Europe. The company is the manufacturer of luxury cars and sell cars all across the globe. BMW is a German car manufacturing company which is also les popularly known as Bayerische Motoren WErke AG. It is a Germany-based company which sells luxury vehicles all across the globe. The company was founded in 1916 and has headquarters in Munich, Bavaria. The organization is considered as the best-selling luxury automakers in the world.  A PESTLE analysis of the company has been conducted to examine the market structure and the impact of the external factors on the environment.

Originally named as Bayerische Motoren WErke AG, the company is popularly known as BMW all across the globe. It is one of the most popular luxury vehicle, motorcycle and engine manufacturing company. It is one of the most popular automakers in the world. The headquarters of the company are located in Munich, Bavaria. It also manufactures Rolls-Royce Motor Cars and plug-in electric cars. The company is conducts responsible business and is the member of US Environmental Protection Agency and National Environmental Achievement Track which states that the companies should be recognised according to their environmental performance and stewardship. It is considered as one of the sustainable automotive company and it the part of several environmental programs (Frynas, & Mellahi, 2015). It has production units all across the globe and makes efforts to product the most sustainable and environmentally friendly cars. In order to attract the customers in different locations, the company has developed exhaustive marketing plan. The audio and the roundel logo of the company are quite popular among the car enthusiasts. The company advertise its vehicles as the ultimate driving machine. It also promotes the car as approachable, attractive and having better appeal to women.

PESTEL Analysis

The company is pioneer in environmental sustainability initiatives. The electric plug in car is an innovative model of the organization. The cars can be charges prior to their use and has the potential to give competition to the pubic vehicle. It has also developed electric batteries with double capacity and has also started deploying electric trucks in the European countries. It has become the first company to enthusiastically encourage electric vehicles on the roads.

PESTEL analysis is the macro analysis framework which examines the external factors of a business organization. It is an environmental scanning component of the strategic management. PESTEL analysis gives a strategic analysis or conducts market research regarding different macro-environmental factors related which may impact on the organization. There are four basic components of PEST analysis. The political factors refer to the impact of government on the economy. The political factors refer to tax policy, labour law, environmental law and the trade restrictions. The political stability also impacts on the business of the organization. If there are frequent changes in the political structure of a country, then the operations of the organization may halt due to changes in the legislations. Other than that, there are several economic factors which may impact on the business of the organization. The economic factors include economic growth, interest rates, exchange rates and the inflation rates. The economic factors of a country may impact on how business organizations operate in the organization. The interest rates affects a firm’s capital requirements and on the growth and the business of the organization (Henry, 2011).

The exchange rate of the currency also impacts on the growth and the business of the organization. In addition to it, there are several social factors which may impact on the business operations. The cultural factors include the health awareness, population growth, age distribution and the attitudes towards the professional life. The technological factors involves the technical aspects such as the integration of technology in the infrastructure of the firms. It encompasses aspects such as population growth rate, age distribution and safety awareness of the people. Recently, two other factors are also added in the PEST analysis, namely, legal factors and the environmental factors. The legal factors refer to different laws such as the employment laws, health and safety laws and the antitrust laws. These laws impact on the operations, productivity and the eventual profitability of the organization. In the recent years, there is increased concern for the environmental impact of the business organizations. The environmental impacts include the changes in weather or climate which is influenced by the operations of the organization. The environment has a strong impact on the tourism, farming and the insurance industry. The climatic change impacts on the operations of the company and the product offering (Jeffs, 2008).

Political Factors

BMW has production and the distribution units all across the globe. The sales and the marketing activities of the organization are impacted by the external environmental factors. In this regard, the external environment of BMW in Europe has been evaluated in the present section.

There is a possible range of the political factors which impact on the business operations of BMW in several ways. The government of different countries have regulated the car manufacturing business as they are the major source of pollution. The government enforces new laws related to CO₂ emission and the recycling of the vehicles. The political stability and the outlook of the government also impacts on the business of the organization. The taxation structure and the export-import duties in the organization impact on the business. In the recent years, the government has produced new legislations to encourage the production high mileage cars which may also impact on the business of the automobile industry.

There are a wide range of the economic factors which may impact on the car manufacturing organizations.  The performance and the profitability of the car manufacturing company are influenced by the GDP fluctuations and the economic growth rate of the country. The inflation rate is another important factor which influence of sales and the business of the organization (Cadle, Paul & Turner, 2010). The company has to increase the price of its products according to the inflation rate. The inflation rate of the countries also impacts on sales rate of the products. However, the reduction in the Euro exchange rate will impact on the business of the organization. However, with the increased demands in the developing countries, the business of the company is growing drastically (Thompson & Martin, 2010). Moreover, GDP fluctuations in the European Union countries can impact on the performance on the consumer spending in these countries. Therefore, it will drastically impact on the profit in these countries.

The culture in which the countries operate can impact on the business operations of the company. There are several differences between the cultures of different countries as each individual country has different values, attitudes and beliefs. The culture of the geographical location affects the preference and the choice of the consumers. The culture of the country also impacts on the attitude towards working, education, training and ethics of the people (Thompson & Martin, 2010). Therefore, while setting up operation in a foreign country, the company has to examine the attitude of the foreign workers for forecasting the productivity of the employees.

Economic Factors

There are a number of social factors such as culture, lifestyle and the changes in the demographics which may impact on the business of the organization. The social factors and the environment impact on the buying choice and the preference of the customers. The changes in the social pattern impact on the customer choice. The brand image of the organization associates develops the status symbol of the car. Moreover, currently a large number of customers are aware regarding the environmental impact of their business activities and try to control their activities so that there is minimal impact on the environment. They are attracted towards the sustainable organizations and environmentally-friendly products (Freeman, 2010).

Technology is a significant factor which may impact on the business of operations. The companies use technology to gain a competitive advantage over other companies. In addition, the companies use new and sophisticated technology to increase the profit margins. There are also certain technological modifications or changes which can be implemented to prevent environmental pollution (Analoui & Karami, 2003). In the recent years, there is increased customer awareness regarding the global warming, greenhouse effect and create burnout among the employees. As a result, the preference of the customers is shifting towards eco-friendly cars, hybrid cars and fuel cell cars (Varbanova, 2013). Most of the countries all across the globe are also forming legislations curb pollution level. The customers are also inclining towards the use of more eco-friendly cars, hybrid cars and fuel cars.

With the increased awareness regarding the environmental impact of the automobile industry and the phenomenon of global warming, the government has made several legislations to control the negative impact on the environment. These laws control the production level, emissions from the manufacturing plants and health and safety of the employees.

The automobile industry is regulated by several laws. Firstly, the government has imposed several legislations related to the environmental pollution. The companies are also encouraged to engage in innovative techniques which can address the issue of environmental impact. In addition to it, the company also faces the laws related to the taxation structure and excise duties (Mannix & Wheeler, 2017). The government has also imposed several laws related to the engine manufacturing so that there is minimal level of environmental pollution.

Conclusion

It can be concluded that PESTEL analysis is a strategic framework for the analysis of the macro environment of an organization. A business organization operates in external environment and needs to acclimatize to the changes in the external factors. The macro environment has a significant impact on the operations and the profitability of the organization. The PESTEL analysis is the most common tool for the analysis of the external environment. BMW is a part of the automobile industry and; therefore, it will be influenced by several external factors. These factors may impact on the business of the organizations.

BMW is the leading luxury car manufacturer headquartered in Germany. The company is one of the leading in the automobile industry. There are several political factors such as political stability, government legislations and environmental laws which may impact on the business of the organizations. In addition, the economy of country, growth rate and the GDP of a country also influences on the purchasing power of the people. The social factors refer to the cultural factors which may impact on the preference of the customers. It refers to the demographic characteristics, lifestyle and the health preference of the consumers.

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