The ongoing globalisation and the interrelated trade of goods and services are an integral part of today’s business. In particular, the automobile industry plays an important role within the global environment, because of their strong linkages within the global economy.
The increased international commitment of car manufacturers is driven by, on the one hand issues of limited opportunities in their respective home markets and, on the other hand, superior opportunities in emerging markets such as China or India. Therefore, motives for entering new markets can be either proactive, for example, expand market share, lower costs or the availability of resources or they can be reactive, for example, to remain competitive. For instance, German car manufacturers are faced by a highly competitive home market, not only within the mass market, but in the premium market as well. BMW, for instance, has been proactive by taking the opportunity to enter new markets such as China where it has produced cars since 2003. Furthermore, BMW assemblies its cars with a reassembly production process in India, Thailand, Malaysia and Indonesia.
However, these are just a few emerging economies where the company seeks its opportunities. Emerging economies such as Brazil offer auspicious potential for foreign investors as well. Brazil is the eighth largest economy by Gross Domestic Product (GDP), the fifth by population and the fourth largest car market in the world. While other companies just consider investments in emerging markets, BMW already benefits by exporting its cars to Brazil. Nevertheless, to take full advantage of the market the company contemplates entering Brazil´s car market by foreign direct investment. Consequently, BMW has to investigate the Brazilian market very thoughtfully.
The aim of this report is to critically analyse and evaluate the automobile industry as well as the business environment in Brazil with reference to BMW. Furthermore, the report identifies recommendations to develop a long-term market entry strategy in order to act successfully in the market.
Table of Contents
1. Introduction
2. BMW within the Global Automobile Industry
2.1 Automobile Industry at a Glance
2.2 Competitors, Suppliers and Potential Entrants
2.3 Buyers and the Risk of Substitutes
2.4 New Opportunities in Emerging Markets with Focus on Brazil
3. Business Environment in Brazil
3.1 Political and Legal Factors
3.2 Economic and Infrastructural Factors
3.3 Sociocultural and Technological Factors
3.4 Strategic Reasons for Expanding to Brazil
4. Market Entry Strategy
4.1 Current Market Strategy and Selection of Preferred Entry Mode
4.2 Identifying Strategic Options for Preferred Entry Mode
4.3 Recommendations
5. Conclusion
Objectives & Core Topics
The primary objective of this report is to critically analyze the global and Brazilian automotive markets to provide BMW with a well-founded, long-term market entry strategy that addresses both the opportunities and the inherent risks of emerging economies.
- Analysis of the global automotive industry using Porter's Five Forces.
- Evaluation of Brazil’s macro-business environment via the PESTEL framework.
- Assessment of current internationalization strategies, specifically focusing on Completely Knocked Down (CKD) production.
- Development of strategic recommendations using the TOWS matrix.
- Strategic planning for entry into the Brazilian market while navigating local regulatory and economic conditions.
Excerpt from the Book
1. Introduction
The ongoing globalisation and the interrelated trade of goods and services are an integral part of today’s business. In particular, the automobile industry plays an important role within the global environment, because of their strong linkages within the global economy (Haugh, Mourougane, and Chatal 2010).
The increased international commitment of car manufacturers is driven by, on the one hand issues of limited opportunities in their respective home markets and, on the other hand, superior opportunities in emerging markets such as China or India (Lang et al. 2010). Therefore, motives for entering new markets can be either proactive, for example, expand market share, lower costs or the availability of resources or they can be reactive, for example, to remain competitive (Rao 2010: 46-47). For instance, German car manufacturers are faced by a highly competitive home market, not only within the mass market, but in the premium market as well (Business Monitor International 2011). BMW, for instance, has been proactive by taking the opportunity to enter new markets such as China where it has produced cars since 2003 (BMW Group 2011). Furthermore, BMW assemblies its cars with a reassembly production process in India, Thailand, Malaysia and Indonesia (BMW Group 2011).
However, these are just a few emerging economies where the company seeks its opportunities. Emerging economies such as Brazil offer auspicious potential for foreign investors as well (Keese and Farinha 2011). Brazil is the eighth largest economy by Gross Domestic Product (GDP), the fifth by population and the fourth largest car market in the world (Economist Intelligence Unit 2011, Euromonitor International 2011, PricewaterhouseCoopers 2011). While other companies just consider investments in emerging markets, BMW already benefits by exporting its cars to Brazil (Reuters 2011). Nevertheless, to take full advantage of the market the company contemplates entering Brazil´s car market by foreign direct investment. Consequently, BMW has to investigate the Brazilian market very thoughtfully.
Chapter Summary
1. Introduction: Outlines the relevance of the automotive industry within the global economy and introduces the motivation for BMW to evaluate Brazil as a strategic market.
2. BMW within the Global Automobile Industry: Analyzes the global automotive market landscape, identifies competitive forces, and highlights growth prospects in BRIC nations.
3. Business Environment in Brazil: Uses the PESTEL framework to evaluate the political, economic, and sociocultural conditions for business operations in Brazil.
4. Market Entry Strategy: Examines suitable entry modes for BMW and proposes recommendations based on the TOWS concept for a successful long-term market entry.
5. Conclusion: Summarizes the findings and provides a final assessment of the strategic approach BMW should take for market entry in Brazil.
Keywords
Automobile Industry, BMW, Brazil, Emerging Markets, Market Entry Strategy, Globalisation, CKD Production, Foreign Direct Investment, PESTEL Framework, Porter's Five Forces, TOWS Concept, Passenger Cars, Premium Market, Economic Growth, Localization.
Frequently Asked Questions
What is the core focus of this assignment?
The report focuses on evaluating the feasibility and strategic approach for BMW to transition from pure exports to a more established market entry model in Brazil.
Which frameworks are applied to the analysis?
The author utilizes Porter’s Five Forces for the automotive industry, the PESTEL framework for the Brazilian business environment, and the TOWS matrix to generate strategic recommendations.
What is the primary research goal?
The goal is to develop a long-term market entry strategy that allows BMW to act successfully in the Brazilian market while managing risks.
What is the proposed market entry strategy?
The report recommends a two-step approach: starting with Completely Knocked Down (CKD) assembly and transitioning to a fully capable manufacturing plant once the business is established.
What does the main body cover?
It covers a global industry overview, a detailed analysis of the Brazilian business landscape, and specific strategic options for market entry.
Which keywords define this work?
Key terms include Emerging Markets, Market Entry Strategy, BMW, Brazil, PESTEL, and CKD Production.
Why is Brazil considered an attractive market for BMW?
Brazil is identified as an emerging economy with significant potential for premium car sales due to a growing middle class and increasing demand for quality and safety.
What is the significance of the "local content" requirement mentioned?
The government requires a local content of 65% for cars to avoid higher import taxes, which necessitates a shift from importing fully assembled vehicles to local assembly or manufacturing.
How does the author propose to manage labor relations?
To mitigate the risk of strikes and labor tensions, the report suggests forming formal relationships with regional trade unions.
- Arbeit zitieren
- M.Sc., B.A., B.Sc. Marcel Keller (Autor:in), 2012, BMW: Entering the Automobile Market in Brazil, München, GRIN Verlag, https://www.grin.com/document/269268
