SWOT Analysis of BMW: Is brand loyalty enough to sell cars?

Since 1916, Bayerische Motoren Werke (BMW) has been one of the leading luxury brands of vehicles on the market. It’s available in more than 150 countries and relies heavily on brand loyalty to sell units.

But their wealth might have an end. Especially as BMW’s soars into debt and as consumers shift from luxury driving to more practical, inexpensive options. And thanks to increased saturation of the market, there are a lot of options.

This SWOT analysis of BMW goes further into the strengths, weaknesses, opportunities, and threats this luxurious brand faces.

Strengths of BMW: A luxury not everyone can afford

A brand with a strong monetary value. This is one of the most important strengths behind BMW. As a worldwide brand, it’s worth more than $40 billion in the United States. As a vehicle, it’s third to only Toyota and Mercedes-Benz.

It’s safe to say there’s a correlation between brand recognition and value. Having such a strong brand value means it’s a clearly recognized, desired automobile for people all over the world. When you see it, you know it. You want it. And maybe, you get it.

BMW is more than a car to pick up the kids after school. Or a vehicle for a quick grocery run on a busy Saturday morning. BMW’s are a sign of prestige. Everything about the car — from the exterior to the marketing — screams luxury. If you have a BMW, it must mean you’re atop the social class. Not to mention the company has a near flawless record of building perfect vehicles while maintaining its luxurious appeal.

With a brand so easily recognizable, BMW can push out related products without breaking their marketing budget. Once you hear the name, it inspires confidence in consumers. Especially the brand loyalists.

Weaknesses of BMW: A small selection in a compressed market

The BMW brand only has three names under them: Rolls-Royce, BMW, and Mini. However, the BMW cars outsell the other two by a large margin. In fact, three years ago, less than 4,000 models of Rolls-Royce were sold. The Mini faired better at more than 2 million units sold. Still, more than 90 percent of total sales of the BMW brand is from selling BMWs. Everything else barely scratches the surface.

What this means is, BMW relies heavily on their BMWs to sell well. If they didn’t, the company would be drowning. And not in profits.

The company focuses primarily on luxury vehicles. You won’t find a line of trucks or vans here. It’d be smarter to diversify their offerings; still provide vehicles, but in the range of lower to middle class. At the moment, if you can’t afford a luxury car, BMW has nothing to offer you. Instead, you’ll turn to a different brand, like Subaru or Ford, to meet your needs.

People still buy cars based on reliability and price. These are the people who need their car to take their family to and from a dance recital. BMW achieves this (and more). But it’ll never be a vehicle a middle-class family can easily drop a down payment on.

If the economy takes another hit, BMW might flounder. Consumers’ buying needs would shift; instead of luxury, they’d search for a cheap and study vehicle. Until ideals switch back, BMW would be sitting there. Waiting. Because they’ve nothing simpler or cheaper to offer in their short line of options. And if money isn’t an issue but consumer taste changes, BMW isn’t in a place to offer something other than the one thing they’ve relied on for decades.

Debt is another issue. In 2015, BMW’s debt had reached all-time high. They threw funds towards electric vehicles and technological investments. As automated driving slowly crested the news, BMW threw themselves in as fast as possible. But progress has been slow. With huge debt hanging over their heads, the brand can’t invest in other ventures at a whim like they could several years ago.

Opportunities of BMW: Autonomous driving and gas price spikes

Gas prices increases mean consumers will be looking for smaller vehicles. When the prices were lower, having a bigger vehicle like SUVs or trucks were practical. Now, with the prices rising, owning a smaller vehicle makes more logical sense for consumers. BMW never built a line for medium to larger vehicles, so until now, their vehicles weren’t top of mind. Thanks to increased fuel prices though, their sales may see a sudden jump.

We’re also seeing more information about autonomous vehicles. Although the focus has been mostly on Tesla and Google, neither of these brands are selling models to the public. Although the monetary value of this market isn’t precise, BMW believes it’ll be the way of the future in the coming years. That’s why they’ve pushed into supporting the change with their funds.

People crave new models of cars. A newly released vehicle is expected to match recent technological advancements. Brands need to release cars more frequently to meet consumer demands. BMW is in a good place to fill this need.

Having the best of the best technology is an expectation when buying a luxury car. It’s something smaller to medium cars can’t compete with as easily because adding new tech would increase prices. Their customers aren’t equipped to pay more for a few gadget increases, but BMW’s clientele is.

Threats of BMW: Environment friendliness at a price

BMW faces competition from worldwide brands.

It was already competitive operating in the west. However, now we’re seeing an increase in vehicle production from international brands. We’re also witnessing an increase in technological changes.

New companies are entering the scene, meeting the expectation of luxury and technological advancements. Tesla is achieving both as they focus on autonomous driving cars. Although BMW is investing in these changes, they’re not at the forefront. Not like Google and Tesla.

Policy changes in the government are raising the costs for vehicle development. More emphasis is placed on improving the environment by limiting greenhouse gas emissions. Brands, like BMW, may need to come up with another way to meet government demands without suffering from rising production costs. Since the market is so competitive now, recouping costs isn’t such an easy feat.

And production of vehicles in the United States may slow down in the coming years. Although new vehicles increase sales every year, the market growth is stagnating. Oversaturation means there are too many options and not enough people buying. BMW isn’t an exception.

Photo by Taneli Lahtinen on Unsplash