MNGT 220 Week 8 Tutorial Questions

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MNGT 220Week 8 Tutorial Questions
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Overview

• What do we want you to demonstrate
• Practising the competitive analysis of an
  industry.
• Assessing the strategic capability of a company.
• Practising the segmentation of a market.
• Relating the factors that are key to the success
  in a market to the resources and competences that
  a player must possess.
• Identifying positioning options.
• Evaluating the importance of brand management to
  successful differentiation.
• Choosing directions and methods for the strategic
  development.

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Question 1

• 1. What main trends are identifiable in the
  business environment in general and in the
  automobile market in particular in 2004 that
  might affect BMW strategy? (20)

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Question 1

• Industry was in the mature phase.
• Fiercely competitive, mostly on price, except for
  companies that managed to differentiate their
  products.
• Consolidation was driven by the need to generate
  economies of scale.
• Quality was no longer a differentiator. Branding
  was a major competitive tool.

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Question 2

• 2. Using Porters five-forces framework, attempt
  an analysis of the competition in the automobile
  industry in 2004 adopt the BMW perspective.
  Consider the time horizon of strategic planning,
  and attempt to identify what future changes are
  likely for that period in the light of the
  factors at play in the macro-environment. (30)

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Question 2

• Start by identifying some of the segments in
  which BMW competes (e.g. sports cars and high
  performance saloon cars).

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Question 2

• Potential entrants.
• Significant threat.
• Segments were already crowded.
• Premium price of products attracted many players
  (e.g. Audi, Volvo, Jaguar).
• Ford (Volvo Jaguar) entered the market with a
  low cost strategy.

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Question 2

• Substitute Products.
• Also a significant threat.
• Other vehicles (e.g. motorbikes, boats).
• Leisure products (e.g. cruises).
• Properties (e.g. holiday homes).

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Question 2

• Power of Buyers.
• Power of individual buyers was very limited.
• Little bargaining power not a threat.
• However, fleet managers and car rental companies
  were powerful in some segments.

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Question 2

• Power of suppliers.
• Suppliers had little power.
• Their products were custom-made, thus unsuitable
  for most other buyers.
• Carmakers were capable of backwards integration.

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Question 2

• Competitive rivalry.
• Fierce competition.
• Mature industry, no growth, little room for
  differentiation.
• Quality and more recently design becoming a
  requirement not an option.
• Difficult to exit. Asset intensive and political.
• Competition increasingly on price.

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Question 2

• Future changes.
• Intensification of the identified trends.
• Further consolidation of the industry. More
  mergers and acquisitions.
• Intense search for unexplored niches.
• Cooperative links.
• Increase importance of IT.

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Question 3

• 3. What were the critical success factors in the
  market segments in which BMW competed? How do
  BMWs competences compare to these? Was BMW able
  to acquire and maintain a sustainable competitive
  advantage? (20)

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Question 3

• Supply chain management.
• Vertical integration.
• Cooperation links.
• BMW controls most of the activities in the supply
  chain to ensure quality.
• Effective distribution network.
• BMW high quality control on distribution
  increased the brand value.

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Question 3

• Size Economies of Scale.
• BMW was large enough.
• Economies of scale were achieved and cost was
  reduced.
• However, the group was still family controlled.
  What does that tell the market?
• Strong Brand.
• Associated with status, prestige and quality.

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Question 4

• 4. Discuss BMWs sources of competitive
  advantage. What route(s) does it appear to pursue
  on the strategy clock? (10)

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Question 4

• Differentiation.
• Through design expertise, RD, solid engineering
  and craftsmanship.
• Through Marketing. Effective communication of the
  brands and differences of each brand.
• Through effective exploitation of core
  competences such as RD, engineering and
  especially brand management.

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Question 4

• BMW was successful in its pursue of a
  differentiation strategy.
• Core competences and benefits that the product
  would bring to buyers were effectively
  communicated to customers.

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Question 5

• 5. What directions and methods of strategic
  development does BMW appear to follow? Evaluate
  their effectiveness in light of your
  understanding of the market segments in which the
  group competes. (20)

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Question 5

• BMW was following simultaneously a strategy of
  product development and market development.
• Continuous development of new models in new
  segments and entry into new markets (e.g. China,
  Eastern Europe and India).

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Question 5

• Strategies appeared to be very effective.
• However, a question mark on the wisdom of the
  strategy in relation to its long term effects on
  the power of the brand is appropriate.