The BMW brand is defined by high marketing budgets and high quality inputs, and is therefore considered to be more luxurious and better quality than other brands. Since 1975, customers have maintained a distinctive brand image, and they want to make a statement by buying a BMW car, just as BMW marketing ensures that driving pleasure is the same as the ultimate driving machine. This has led new entrants to have to allocate high budgets to brand their products, so it is as good as BMW to attract customers.
High initial R&D investments
To be successful in the high-end automotive industry, focusing on the design, production, quality management and technical aspects of the continuous development. New entrants need to set up …show more content…
Over time, BMW has gained contact with a fixed professional supplier to ensure its quality requirements. New entrants must build this very expensive, time consuming and difficult network.
• Threat of substitutes: LOW
The automotive industry continues to produce more and more sustainable products, such as the production of hydrogen-powered vehicles and electric cars to reduce consumption and emissions while ensuring sustainable action. BMW invests heavily in developing new intelligence innovations to enhance performance and experience. And already launched its own electric cars which is already in ahead of other brands.
• Bargaining Power of Buyers: MODERATE
Moderate switching cost
BMW's customer base includes high-income buyers, they are relatively insensitive to the price, but want to get the highest quality goods. They perceived value to buy BMW cars, their aftersales service has high expectations. Although the BMW brand is in good standing, but if not satisfied, customers may be exposed to other competitors, because it does not need too much …show more content…
As a result, BMW is highly dependent on these few suppliers to maintain the supply of quality resources, so suppliers now have more BMW power, because they can decide whether to provide parts to BMW.
High alternative exchange costs for suppliers
After reaching a supply relationship with the supplier, BMW must thoroughly investigate the financial status, reliability and quality of its profile. Since BMW must re-conduct the supplier background investigation and rebuild the relationship, BMW's production process will change the different suppliers, which will be very damaging. A strong relationship with the supplier leads to a strong relationship that can reduce the bargaining power of the supplier because both the BMW and the suppliers are interdependent.
Just-in-Time (JIT) Production
BMW use JIT inventory management, which makes the BMW face due to lack of investment and lead to the risk of production disruption. In order to meet the needs and use of supply-related risks, BMW and industry suppliers to strategic alliances to improve supply chain efficiency. This shows BMW's greater reliance on its partner