For effective sales and business management in general, it is necessary to analyze the market and the company’s capabilities from the perspective of certain factors. It includes the five forces or five main aspects that must be analyzed for effective management. The analysis will help to view sales from the perspective of an outside observer and consider those points that may be hidden from a superficial analysis. Moreover, it may become the basis for further development of business evolution strategies, as it will help to find problem areas and solve these issues. The purpose of the work is to analyze the industry of choice from the perspective of the five forces, consider the framework, and propose improvements.
These five forces are fundamental as they shape the environment of any business and how this environment affects it. Such points as new entrants, substitutes, customers’ and suppliers’ bargaining power, and competitiveness are essential since they determine the capability of business perofromance (Johnson et al., 2020). Primarily, it is explained by the fact that these factors determine the financial, economic, and business guidelines for the company. With an incorrect balance of these points, the company cannot continue to exist because the financial foundation will be destroyed.
In this case, BMW’s five forces performance is an example of a positive balance. As one may notice in Figure 1, the threat of new entrants is low and formulates around 20 percent. It demonstrates that for BMW, the threat of new companies entering the market in the specific niche is insignificant. It is explained by the fact that BMW products have firmly established their position as a luxury, high-quality, and recognizable object. Moreover, it is worth noting that the level of competitiveness is high. It can be pointed out that a high level of competitive ability affects the indicator of the threat of new companies in the market. Namely, it makes market entry difficult for new organizations to implement. In addition, it is worth considering the policy of BMW, namely the pursuit of high quality and customer satisfaction.
Substitutes formulate the possibility of a product that will replace BMW products and force them out of the market. At the moment, such a threat is not high since BMW products occupy a specific niche in the market. Namely, high-quality, beautiful, and recognizable sports or family cars. However, today there is an increasing trend toward the transition to electric cars, scooters, and other eco-friendly means of transportation. In addition, the increase in the number of vehicles and traffic jams also encourage customers to switch to other means of transportation. At the moment, the threat is not significant, but it may increase in the future.
The high customers’ bargaining power may be explained by modern informational flow and customers’ awareness. That is, customers learn quickly about new products, changes, or the pricing policy of the company. The suppliers’ bargaining power is not high since BMW cooperated with thousands of supplier companies. Thereby, switching cost is low, and due to its reputation, BMW may perform under its own conditions. Finally, as it was mentioned, the competitiveness is high, however, it positively influences the indicator of new entrants’ threat. Although, it is necessary for BMW to control the situation not to lose its position among its competitors. Among the improvements that may be proposed are the strategies aimed to switch to electric vehicles, as there is a tendency for it. Besides, it will decrease the level of substitutes possibility and competitiveness level.
Reference
Johnson, G., Whittington, R., Regner, P., Angwin, D., & Scholes, K. (2020). Exploring strategy. Pearson UK.