Contemporary developments within an organisation can lead firm to improve its performance and raise benefits. On behalf of this, business environment plays a crucial role for every single business which consist with both internal and external factors that can impact upon operations and decision-making process as well (Baillie Smith and Laurie, 2011). It is essential for the organisation to analyse both macro and micro environment that may help in taking right decisions for the company. Modern environment, in which organisations produces quality based products and offering it with affordable prices cannot be considered as enough for this firm but it is also essential for firms to participate in various activities as well. Famous manufacturer of motor vehicles has been taken in this report i.e. BMW which was found in the year of 1916 by Karl Rapp. On the other hand, assignment is going to be enclosed with Influence of external factors on working of BMW and significance of each element on business activities of this organisation. Assessment have also kept its focus on influence of policies and decision-making within BMW, critical evaluation of the effectiveness of BMW' response and lastly, report will show areas for improvement in BMW.
Influence of external factors on working of company and significance of each element on business activities
World's famous multinational manufacturing brand BMW was found in the year of 1916 by Karl Rapp. Company's headquarter is in Munich, Bavaria and doing business worldwide. United Kingdom, US, South Africa, China, Brazil, India are some of main countries in which organisation is mostly doing business and selling its manufactured cars. Around 130,000 employees are performing their tasks on a regular basis which is helping BMW in offering right cars to correct consumers (BuÄiÅ«nienÄ— and KazlauskaitÄ—, 2012). Since, BMW is doing business at international level. Thus, it can be said that external environment can affect business of BMW in both positive and negative manner because every nation in which BMW has its presence consist with different governmental policies, tax rates, technology, economy and many more others. In order to get deep knowledge related to impact of external factors on business of BMW, PESTLE Analysis of BMW and importance for every single factor is being done beneath:
1. Political factors: BMW and its cars has its presence mostly in United Kingdom, US, South Africa, China, Brazil, India and all of these nations are having different conditions of economy and are following different tax policies that may affect operations of BMW. Therefore, it can be said that it is necessary for this company to keep its focus on these areas as they carry rapid changing nature and this may lead firm to face various issues. In present context, major elements which cover in this are political stability, legal framework, participation of government in rubber industry, intellectual property protection, pricing regulations, trading partners, industrial regulations, tax rate, policy and many more. BMW, if wants to do business in an appropriate way at international level then they have to deal with all the changes that a country makes in their policies and frameworks (Chen and Farh, 2010).
- Importance: This factor plays a crucial role for every single business organisation, that are doing business at international level. In present context, one of the main advantage of this factor is that it helps BMW organisation in getting knowledge related to policies of government of different countries that are against and favour of operations of the company. Main importance of this factor for BMW is that if manager or BOD of the company does proper analysis of business deeds within a country related to political then it may lead them to take right decisions for future context which can give great benefits to BMW.
2. Economical factor: It is another crucial factor of external environment which needs to be studied by business organisations considering as the important one. In context with BMW, who is doing business at international level where countries are having different and rapid changing economical conditions (Collis and Hussey, 2013). Here, some of economic factors that mainly involves are inflation rate, deflation rate, interest rate, saving rate, economic cycle and foreign exchange rate that can affect business doings of BMW.
- Importance: Major importance of this factor that can be seen in BMW related to the business is that it helps in identifying and formulating better strategies related to setting costs of cars. Here, if interest rates is high and income level of customers is low, BMW should keep its focus on expanding its business considering or using FDI (Foreign direct investment) in much effective manner.
3. Social factors: Culture and society are two main elements that mainly covers this factor. Here, BMW is performing its operations in different nations that are having their own culture and carrying different business ethics. Therefore, these two factors needs to be understood well by BMW in order to perform well at international level. Apart from this, behaviour and belief of people living in society largely affect the activities of BMW. Skills of labour and culture followed by them needs to be understood by BMW while performing its tasks.
- Importance: As, BMW identifies social factors and keep its focus on firm than it will assist firm in operating its business accordingly. Here, importance can be seen with the help of an example of BMW. If BMW tries to execute CSR activities in an appropriate way, then this may lead firm to gain competitive advancements and raise in reputation as well. Thus, with the help of this organisation will be able to maintain a positive image in front of customers. This help company in get support of public and also helps in get competitive advantage (Frey and George, 2010).
4. Technological elements: Technology in past decades has been one of the crucial factor which played an important role for BMW. Being a manufacturer of cars and motorcycles, BMW have kept its focus on using updated technology which is already helping them in performing well and aiding them in gaining competitive advantages. Furthermore, if BMW fails to adapt the new technology then it decrease its international market share.
- Importance: Adopting new technology in right time can help BMW in developing highly tuned engines. This can help company in offering right technology based cars and motorcycles to its customers. This will directly aid in giving excessive rivalry to BMW's competitors like Mercedes-Benz, Jaguar, Audi, and many more. Away with this, main importance that has been found i.e. technology helps in manufacturing cars and bikes with high speed where the consumption of limited resources like fuel can be reduced to minimal (George and Jones, 2015).
6. Environmental factors: BMW is an automotive manufacturer, building cars, bikes, trailers and semi-trailers requires testing as well before launching it in the market. This leads to create heavy water, air and environmental pollution which can be a cause of increasing global warming. All this harm to environment can give rise to criticism by members of society and negatively affect the business operations of BMW.
- Importance: Major importance that has been found in past few years is that, heavy wastage and pollutions created by BMW can impact on firm's reputation which will directly impact upon its customer base. Therefore, using less polluting tools, following lays and creating a waste disposal system can help organisation in improving benefits for BMW.
7. Legal elements: This is being considered as an effective element of external environment that mainly plays a crucial role for BMW as it involves business laws which needs to be followed by company in order to perform well at international level. Discrimination law, health and safety law, copy right, intellectual property rights and many more are some of laws which needs to be followed by BMW at the time of performing tasks in much effective and appropriate sense.
- Importance: This factor consist with high importance when it is talked about BMW as it is doing business at international level. Implementation of various laws of different countries such as health and safety, discrimination help BMW in getting trust and confidence of its employees (Hodgkinson and Healey, 2011). All this can help BMW in maintaining long term relations with workers and at the same time ensure achievement of business objective on timely basis.
In this context, technological disruption and disruptive innovation that are major factors that has played crucial role for BMW while doing its business at both domestic and international level. Disruption being considered as a process whereby both small and large companies with few or heavy resources successfully challenges a larger established incumbent business or invents entirely new markets.
Often times, larger necessary businesses are focused on their largest and most demanding customers, which opens the door for disruptive companies to target overlooked customer segments and gain a foothold(Jeston and Nelis, 2014).
Influence of policies and decision-making within BMW
BMW has kept its focus on using the newest or latest technological systems like they have used AI which is benefiting them in manufacturing cars and bikes with the help of robots. This helped them in reducing errors in whole process of building motor cars and bikes. Therefore, this created a whole new market from existing market, this led them in creating higher values for themselves. The Disruptive technology is being considered as important alterations which mainly impacts upon entire industries operations. Most of the times, technologies mainly force companies to alter the way they approach their business, or risk losing market share or becoming irrelevant. In present context, BMW have kept its focus on technology which has helped them in bringing innovation among their existing products like cars, bikes, trailers and semi-trailers as well. Away with this, disruptive innovation is being considered as an innovation which mainly develops a whole new market along with value network as well which majorly changes existing market and values at the same time. It has been analysed that BMW have kept its considerations on technological aspects which has helped them in bringing favourable innovations in their cars. At the time when BMW was found, innovation was being one of the major factor that has helped BMW in raising their reputation among both domestic and international level of market. In the field of technologies and mobility, in particular, they are able to realise their full potential and show how they can contribute to mobility and progress in all different areas.
On the other hand, Technological disruption and disruptive innovation have also influenced policies of BMW because firm have kept its focus on bringing in innovation in its existing cars. Policy related to technology and innovation which has been made by BMW are : light and art melt into one, new testing of cars, bikes where technology have been one of the ho point for this company as it promotes innovation, LED head lamps, auto parking capability in cars and others are some major innovation which brought change in existing cars of BMW and this has also helped company in stepping into the whole new market to give good rivalry to its rivals like Mercedes-Benz, Jaguar, Audi and many more. Away with this, it has also been analysed that company have kept its focus on delivering right product to consumers and here they made a policy named as Worldwide Harmonized Light Vehicles Test Procedure where new, realistic measuring process for determining a car’s fuel consumption, range and emissions. It is mandatory for BMW and will be binding in all participating countries in which this company is offering its cars. Here, proper testing of cars is showing that BMW have been influenced with disruptive innovation because it brought changes among existing market and pushed company towards new market where consumers were expecting much more innovative and hybrid car models (Mosse, 2011).
On the other hand, it has also been analysed that disruptive innovation have impacted upon decision making process as well of BMW, as technology has carried a rapid changing nature, it has impacted severely on decisions of engineers that are performing tasks related to building new car design and many more other perspectives. It has also been analysed that at the time of developing or building automatic car park system in cars of BMW like i3. Organisation faced number of issues because rivals were already using the technology already when BMW to decided to adopt it, here, it became much important for company's engineers to build the most safe, independent and dynamic remote valet parking assistant which will directly help consumers in parking cars at congested areas. It was highly essential for engineers to develop right system so that car can itself without any sort of damage while parking i3. Thus, it was much required to take right decisions which will BMW in making its reputation in new market where its rivals were already at a good place (Myers, 2013).
Therefore, it can be said that disruptive innovation have been one of the crucial aspect which has helped BMW in bringing in innovation among life of its consumers. Here, it is pretty much required for company to focus on making innovative moves and develop distinctive strategies that may aid BMW in reaching to an all new level where they can deliver best experience to its customers. Decision making process has brought up many questions against BMW because of its strategic alliances. This impacted on performance level of the company and on reputation as well at the same time.
Critically evaluate the effectiveness of BMW's response
According to Bughin, (2018), companies that adopt bold offensive strategies in the face of industry digitization will come out as winners. Reason behind author's point can easily be considered as a correct statement because in past few years, innovation/technology have played a crucial role for firms and took them to the highest peak whoever business organisations were in favour of bringing in changes (McDonnell and et. Al, 2010). Here, it has been analysed that, BMW's effectiveness can be seen with the help of alterations they have made in there cars and innovation that they brought among manufacturing process. Here, it is one of the successful car of BMW which raised their performance and profit margins at the same time, innovative action which was taken in this car which has been offered to customers is auto car parking system. Away with this, it has been critically analysed that BMW have used aggressive digital entrants techniques that overturned a long-held non-aggression pact between traditional. Here, from past decade it has been analysed that i3 which is one of famous car of BMW has been a great response of the company which showed it used disruptive innovation because coming out of traditional approaches and using new technology with keeping an aim of bringing innovation was the strategy that has been followed by the organisation. Few authors have also argued on digitisations disruptive influence is growing rapidly. But surprisingly little empirical evidence has captured either the magnitude of digital disruption here broad scale approach was used by BMW which was a good response related to disruptive innovation.
Apart from this, BMW also knows that there is a problem is going to stay in there working operations and it will also impact on there performance level as well. It is required for them to keep on monitoring their own performance and the technological aspects as well related to all the modifications that are going to be faced by the company at international market (Rosemann and vom Brocke, 2015). Here, company needs right guidance (strategic alliance) so that it can actual compare from existing performance and actions that are needed to be taken for improvement.
Disruptive innovation have also helped BMW in continuously making appropriate decisions where they left the existing market in which they were already performing and switched to new and innovative market which has helped them in raising profit margins of BMW and it also helped them in giving good rivalry to its competitors like Mercedes, Audi, Jaguar and so on. Across countries, digitization has a significant negative impact on the profits of incumbents through two loop effects: digital entrants competing with incumbents through disruptive models, and incumbents responding to disruption and creating more intense competition with each other.
Henceforth, the performance level of BMW have been successfully influenced with the help of innovative disruption and it has also impacted positively on profit margins of the company. BMW is already working on a number of projects for future with new and updated technology like Artificial intelligence (AI) which will help human (consumers) in dealing with number of risks like accidents in the best ways. On the other hand, response have been great of BMW when it is compared with its rivals which raised its reputation and helped company in building effective relations with its customers (Stokes, Wilson and Wilson, 2010).
Areas for improvement in the response of BMW
As past experience, BMW suffering from various technical issues because of limited strategic alliances which was leading more complication in their segment. So company need to concern on this area for technical improvement and high competition. It can be perform through creating joint ventures and adding to technical experts. They provide better assistance in existing and new technologies in auto mobile industries. BMW must know about future goals and risky circumstances about the potential products. Today's era, there are number of mechanism which provides strategic alliance such as shared management or a particular assignment and delegate to experts. Most common errors in cars for instance: gasket leaks, looseness in the front suspension, strut bushings problem, proper light reflection and air bag related issues can be resolve by them.
Through few initiators managers can reduce recurring errors in their products. Intelligent engineers in management can design a new technologies by observing all existing functions of products and solve minor issue such GPS vehicle tracking. Company have basically two options, disruptive innovation and techniques when managers seek for market growth for their business. Here, high risks take places throughout sustaining innovation for product. It will create either new market or high competition to rivals in existing market which fascinate to potential consumers. BMW have best performance in research and development department, although managers should consider on strategic planning for innovation. BMW people should prepare for suitable price by considering on future economic crises. Operational management need to increase cost efficiencies throughout reducing raw wastages in production department. Those improvement will provide quality products that assists in creating better image in customer eye. Moreover, last technical issues can be reduce by hiring new skilled experts who will supervise properly in test drive and other related observations (Sturdy, 2011).
On the other hand, there have been significant number of cases as well where BMW has engaged in recalling of cars. Recalling means requesting the customers to return an already delivered product due to defects in the product. BMW has executed the recalling of cars due to fluids leakages in cars posing a threat of occurrence of fire, air bags not opening at the times of emergency, system defects in engines etc. Some of the other issues that are highlighted by the customers are electrical faults, safety issues posing threat to the lives of people. These faults have largely occurred because the company hired people with low technical knowledge or semi-skilled people. These people when engaged in the manufacturing process resulted in the making of cars that were not safe as some of the renowned features of BMW cars did not function properly. Lack of knowledge of system engineers and their prime focus on use of labour intensive technologies have largely resulted in these defects.
There is a vital need for the company to provide induction training to the workforce as they influence the lives of many people. It is important for management of company to design a working structure where the major processes are automated. The company also has a scope of improvement in hiring of employees. The manpower hired needs to be skilled and possess all the technical knowledge required for the manufacturing of cars. The management also needs to upgrade the processes as per the technological advancements taking place in economy. It is also required for the company that before a car is finally delivered to customer, it is properly checked. Checking must be done by the management of BMW with respect to variables like car running system, seat belts, engine, tyres, air bags and other safety issues that can pose threat to lives of people (Van Der Aalst, 2013).
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From above mentioned report, it has been concluded that external environment consists with ample number of factors which may impact upon performance and working of a business organisation. Away with this, it has been also been summarised that policies and decisions should be made in favour of company related to technology and innovations. This may lead firm to raise profit margins and deliver products and services to customers. Along with this, change is an important factor of improvement which can help organisations in bringing modifications among existing products of a company. This may help enterprise in raising profit margins and gaining many competitive advantages as well in modern business environment.