This is the in-depth BCG matrix analysis of BMW which is the renowned automobile company. It’s the brand which is famous for luxury cars and positioned in a same way in customer minds.
Introduction
BMW has been able to create market image as an automobile manufacturer that offers the customers with vehicles that bring them comfort, along with a sense of luxury. Moving beyond the production of automobiles, the company’s businesses have expanded into other domains such as motorcycles. In fiscal year 2016, BMW Group has recorded revenues of € 86,424 million, suggesting strong financial performance of the company (BMW Group, 2016). The BCG matrix is a useful tool when a business plans to analyze its products and identify the growth chances of its different business segments. The framework divides products or business segments into cash cows, stars, question marks and dogs. The application of BCG Matrix for BMW Groups would help to identify the profitable and risky ventures being managed by the firm. The BCG matrix is elaborated is as follows:
Cash Cows
Some products that are being manufactured by an organization take a leading position for the firm in terms of generating sales and revenues. Since these products are in high demand, the company is able to secure higher sales and return on investment (ROI) from these items as compared to its other product ranges. All these products or business units are considered as cash cows. They continue to offer financial support to the company, bringing in high profitability and providing sustenance to the company’s operations, without needing massive investments to maintain the profitability. These characteristics make the cash cows a suitable option for generating income to finance other business units. BMW has some products which are high cash creating business units, thus earning the status of cash cows for the company.
One of the main examples of cash cow products include Rolls Royce, which is a subsidiary of BMW. This segment has been a prime source of financial earnings, driving the company towards growth over the years. In 2015, the company has achieved more than 10% increase in net profits in the second quarter. This growth is attributed to the higher demand of its cash cow, the Rolls Royce (Geiger, 2016). DeMattia (2015) has stated that the financial performance of Rolls Royce division indicated the setup of record sales in the fiscal year 2015, with the highest consumption of the luxury car in the US.
Stars
The second quadrant that has to be considered in the BCG Matrix is Stars. These products are the emerging items that have good growth prospects in the future. The company needs to maintain steady investment in these categories in order to make sure that the stars can become cash cows. The main feature of stars is that their industry has the possibility of further growth, thus causing an increase in market share. These products already have a high market share and the additional progress can make them a profitable venture for the organization. As a result, these items are seen as adding long term value to the firm. The management needs to invest in these business units to help them in further growth.
There are many products being managed by BMW which can be identified as Stars. For instance, cars included in BMW series 5 such as Sedan and Touring are some of the cars that have been performing well. BMW Sedan is specifically a popular car among the consumers in different parts of the world. According to BMW Group (2016), there has been a significant increase in sales of its Sedan brand over the past few years, hinting at the high consumer demand. BMW mini is another vehicle that can be placed in this quadrant due to its financial performance and future growth prospects. The investment in BMW Mini is deemed as a profitable decision by the management, which has sold an average of 250,000. The company has expanded the product line, adding new designs of the BMW mini, strengthening the performance of its star product.
Question Marks
There are some products which do not show same level of promising future as indicated by cash cows and stars. Instead, these products have a high degree of uncertainty, making them a part of the question mark quadrant. In case of success, these items may provide the firm with the financial leverage, while the inability to gain a strong market share can make these products a financial burden for the firm. An organization needs to analyze the success and failure probability of these items to decide whether further investment is likely to fulfil the strategic and financial objectives of the firm. The question marks for BMW is its SUV series which has been a profitable venture, however it’s revenue generation potential has declined, resulting in loss of its market share in the luxury car segment. The SUV business unit may be able to improve its financial performance in the coming months. The demand for SUV may increase, helping the company to improve its market share. The industry has the potential to further grow, suggesting at the future promotion of SUV brand into a leading position in the global automotive industry.
Dogs
The fourth quadrant in the BCG Matrix is represented by the products termed as Dogs. This category includes all those business units or items that do not yield financial gain for the company. Instead, these items show poor performance in terms of sales, revenues and future prospects. Another element which makes these products a probable option for divestment is the low ROI as the company sees these items as cash traps. In some cases a company continues to invest in these businesses, while in other cases the management decides to dissolve the business unit or sale it. The BMW Z3 and Z4 cars have been identified as dogs as these vehicles have not been able to gain similar amount of sales as generated by the other brands being produced by the company. The performance of these vehicles was not up to the performance standard that other BMW cars have established, making the Z3 and Z4 gain negative feedback from the customers.
References
BMW Group (2016). Annual Report. Retrieved from https://www.bmwgroup.com/content/dam/bmw-group-websites/bmwgroup_com/ir/downloads/en/2017/GB/13044_BMW_GB16_en_Finanzbericht.pdf
BMW Group (2016). Two million vehicles sold: The BMW 5 Series is the world’s most successful business car. Retrieved from https://www.press.bmwgroup.com/global/article/detail/T0259054EN/two-million-vehicles-sold:-the-bmw-5-series-is-the-world%E2%80%99s-most-successful-business-car-bestseller-for-six-years-and-regular-winner-of-reader-and-expert-polls?language=en
DeMattia, N. (2015, January 7). All-Time Record Sales For Rolls-Royce. BMW Blog. Retrieved from http://www.bmwblog.com/2015/01/07/time-record-sales-rolls-royce/
Geiger, F. (2016, August 2). BMW profit up on Rolls-Royce boost, beating views. Market Watch. Retrieved from http://www.marketwatch.com/story/bmw-profit-up-on-rolls-royce-boost-beating-views-2016-08-02
Recent Comments