University of the People

BUS 5117: Strategic Decision Making and Management

Written Assignment Unit 7

Case Study: Porter’s Diamond Model analysis: BMW

Porter's Diamond, aptly known as Porter's Diamond National Advantage Theory, is a model

designed to help understand the competitive advantage that a country or group possesses due to

certain factors to its disposal, and to explain how governments act as catalysts to their market's

position in a competitive global economic environment (Chappelow, 2022).

The model was created by Michael Porter, a recognized authority on business strategy and

economic competition and founder of the Harvard Business School Institute for Strategy and

Competitiveness (Chappelow, 2022). It is a proactive economic theory rather than simply

quantifying the competitive advantage a country or region may possess. Porter diamonds are also

known as "Porter diamonds" or "model diamonds".

Bayerische Motoren Werke AG (BMW) is engaged in the manufacture and sale of automobiles

and motorcycles, financial services, and other entities. The Automotive segment designs,

manufactures, assembles, and sells automobiles and off-road vehicles of affiliated brands: BMW,

MINI and Rolls-Royce, as well as spare parts (Forbes, 2021). The motorcycle section is centered

around the upper section.

The industry exports more than 17% of the world's cars, with total sales of around €426 billion in

2018. Germany ranks first among European countries, creating around 882,000 jobs and

producing BMW, Audi, Volkswagen, and Mercedes for national and international markets.

Germans use apprenticeship to train students as highly skilled workers for vocational education.

With outstanding automotive design, technological innovation and workforce, BMW ranks as the

world's third most valuable automotive brand in 2019.

Use Porter's Diamond framework, which consists of four improving factors:

The German automotive industry generated total sales of over €378 billion in 2020, compared to

€436 billion the previous year (Minds, 2021). Germany's auto industry workforce continues to

draw on apprentices from the country's vocational training. The German automotive industry

benefits from a strong industrial core, state-of-the-art infrastructure, a highly skilled workforce,

and innovative R&D (Minds, 2021). The success of the brand lies in its excellent automotive

design, technological innovation (Minds, 2021).

Demand Conditions

Germany ranks first among European countries, with about 882,000 jobs in the production of

BMW, Audi, Volkswagen, and Mercedes for domestic and international markets. BMW has

become a prestigious global brand with 31 factories in 14 countries, including the largest car

manufacturing plant in the world (Minds, 2021). The country is a major site for automakers and

innovative suppliers and home to powerful brands such as BMW, Audi, Volkswagen, Mercedes,

and others (BMW Group | Company Overview & News, n.d.). Around 34% of BMW's suppliers

are in other European countries, with a split of around 55-45 between Western and Eastern

European countries (Maverick, 2021).

Related and Supporting Industries

It discusses the availability of relevant businesses and other supportive and stimulating

businesses near your organization to create a competitive advantage. BMW relies on a network

of more than 100 auto parts suppliers around the world (Minds, 2021), although around 50% of

its suppliers are in Germany or are subsidiaries of German companies (Maverick, 2021).
Firm Strategy, Structure, and Rivalry

Organizational strategy, structure, and competition provide a business with a competitive

advantage. The automotive industry faces competitive challenges at home and abroad. Most

companies now use more modern technology and design than BMW, which makes it difficult for

customers to choose. They have all the structure and strategy, but new entrants like Tesla have

come along, doing wonders in the industry, and putting competitive pressure on BMW.

For BMW, these environments and components are uniquely suited to help the company increase

global growth through continuous progress and upgrades. Therefore, by focusing on these

components and improving them, BMW can become one of the top brands in various countries

(Porters Diamond Model of BMW, n.d.).

For BMW, factor conditions include the following:

• Natural resources

• Capital resources

• Human resources

• Scientific knowledge

• Technological innovation

• Infrastructure

Bruin (2017) states that the presence of supporting actors and competitors in a business creates

positive pressure and encourages industry players to dominate and grow through development

and internationalization. Support and related companies have also been particularly helpful to

BMW in taking the brand to new heights over time. On the other hand, for BMW, organizational

structure, and setup as well as strategic direction and decision-making are important to facilitate

the international development and expansion of the organization.

mid-range people to get a higher market. To achieve the objectives within the current deadlines,

BMW must strongly communicate the strategy carried out for these projects. Therefore, the

organization is now expected to enter more different countries, which will undoubtedly increase

the turnover and bring it to a new level (Mallik, 2017).

International business strategy for BMW

The best strategy for MBW to stay competitive is to use a competitive strategy based on market

size, competitive services, and R&D. They can use this strategy to open more outlets and train

employees in modern technology to produce vehicles that create an emotional connection with

customers.

Best market entry option for BMW

A company's decision to sell in an international market can be likened to a decision in the

domestic market, but there are certain factors to consider in international trade. Instead of

creating strategic joint ventures with other partners, BMW should focus on building its own

production points and marketing its own brand.

In conclusion, Porters Diamond model analysis shows why BMW outperforms internationally

with Mercedes-Benz and Audi with 4,444 vehicles and is one of the best-selling luxury

automakers in the world (Maverick, 2021). In fact, the company has appeared in the Dow Jones

Sustainability Index (DJSI) every year since 1999 and ranked #1 in 2020, beating out 38 other

automotive companies in the automotive sector (Maverick, 2021).

BMW Group | Company Overview & News. (n.d.). Forbes. Retrieved March 15, 2023, from

https://www.forbes.com/companies/bmw-group/?sh=192bdda63e9c

Bruin, L. de. (2018, October 23). Porter’s Diamond Model EXPLAINED with EXAMPLES |

B2U. B2U - Business-To-You.com. https://www.business-to-you.com/porter-diamond-model/

Chappelow, J. (2022, March 11). Porter Diamond. Investopedia.

https://www.investopedia.com/terms/p/porter-diamond.asp

Mallik, S. (2017, May 30). BMW- International Business Analysis and its marketing strategies.

Enroll My Experience. http://enrollmyexperience.com/bmw-international-management-research-

study/

Maverick, J. B. (2021). Who are BMW’s main suppliers? Investopedia.

https://www.investopedia.com/ask/answers/060115/who-are-bmws-main-suppliers.asp

MINDS, B. (2021, February 23). Porter’s Diamond Model analysis: Louis Vuitton and BMW.

Medium. https://brand-minds.medium.com/porters-diamond-model-analysis-louis-vuitton-and-

bmw-322409777e3d

Porters Diamond Model of BMW. (n.d.). Essay48. https://www.essay48.com/13616-BMW-

Porters-Diamond-Model