bmw business finance

bmw business finance

Exploring the Business Finance Strategies of BMW

1. Introduction to BMW and its Financial Standing

According to key financials about the company, in 2009, $64 billion was the amount of turnover for BMW. $72 was the Earnings Before Interest and Tax (EBIT) for the company. The net profit after tax for BMW in 2009 was $16 billion. The return on capital employed (ROCE) for BMW was 6.6%, and the return on asset (ROA) was 3.2%. The earnings per share ($19 billion) was $0.71 for the company, with the Dividend per Share reported at 1.30 Euros, and the equity per share was reported at 78.78. The company’s debt-equity ratio was 0.65 with a market capitalization of $38 billion. A striking difference in the market capitalization was seen in 2010 when the capitalization value had significantly increased to $87 billion only. The enterprise value was much higher at $130 billion.

Bayerische Motoren Werke AG, or BMW, is a premium manufacturer of cars and motorcycles. Considering the vast demand for motor vehicles all over the world, BMW has established itself as a leading company in producing premium cars and is regarded as the number one company in the luxury car market. In 2009, the financial status of the organization was considered high when compared with other organizations in the motor car industry. BMW was rated by several financial research institutions as one of the most valued companies in the world.

2. Key Components of BMW’s Business Finance Strategy

Indeed the essence of business strategy at both the corporate level and the business level is ‘How to win?’ or finding out business’s mission. The corporate strategy is concerned with determining the overall purpose and scope of the business. It is the process of determining which enterprises the organisation should be in, and which line of business is coherent and rational. The business strategy deals with the competitive moves of the enterprise, such as determining the competitive alternatives that the business faces and the business will position itself in the marketplace to fight competition. In short, how is its competitive conversation to be defined and maintained. The business strategy is concerned with how to pit the strengths of the enterprise against the best opportunities in the market place to build up and maintain a competitive edge over rivals. That is, the business strategy deals with business strengths and weaknesses in meeting the objectives, opportunities and threats in the market. In short, it is nothing but it identifies how a business can secure “defensible competitive advantage to gain dominance in the marketplace.

As the business space is highly demanding and dynamic, without profit no business can sustain in the long run. To achieve constant growth, a business requires principles and effective business strategies at all times. The strategy is at the centre of any business, may it be in terms of product, marketing, finance or forecasting and risk assessment. Given that in order to form and execute effective strategies, the institution requires to recognise the principles and the strategy for each function. It should review the success and opportunities reaching from executing those operations, which is called Business Strategy.

3. Financial Performance Analysis of BMW

The research performed will continue by analyzing BMW AG business operations efficiency and profitability by using ten financial performance indicators also considering a comparison with its main competitors. The cross-sectional scale, also known as the inter-firm analysis or comparison analyzes simultaneously some firms of the same sector at a certain date and emphasizes revealing differences among them. It compares one independent variable in different business locations considering reliability measurements for both inputs and outputs.

The first step in order to initiate a comparison between firms is by conducting a financial analysis in order to inspect performance regarding cost item structure, margins (gross and net profit) and other financial perspectives. All these indicators are quick and easy tools that could be used to offer a general vision regarding a company. Only after hearing this story, additional information discovery could be achieved. Recurring to a financial performance analysis manager can perform two types of assessment of the overall performance of the firm using both question and indicator type evaluation. Starting from the questions cluster such as “What is the business cost structure?”, “How profitable is the business?”, “Is our investment efficient?” and arriving from the indicators group consisting of organization’s liquidity, leverage, profitability or efficiency one can depict the company status and find out if it is satisfactory or not.

4. Future Trends and Innovations in BMW’s Business Finance

Future trends in business finance, components of historic times, have remained unchanged for a few decades despite gradual changes. There are unlikely to be significant alterations in financial trends. On the other hand, we can see a stark difference in this tough market. Banks are imposing significantly high double-digit rates. The sector of interest is increasing, representing both the concentrated and non-concentrated finance sectors. Entering the market can therefore contribute to an increase in the cost of capital. Only well-built impulses can solve this problem. It should be evident that a commercial bank weak in the finance sector does not simply offer loans but takes on an increasingly important advisory role. Therefore, expertise and innovation can differentiate the differentiation of this type of financial institution.

The future for business finance will clearly contain higher innovation and problem-solving methods. The focus throughout tends to tackle the issues of the dynamics of corporate life. Enterprise is about people, and this requires people to manage businesses in new and better ways. Change management is required in order to make the best of these situations. These enterprise issues must be handled in a thoughtful way in order to make the most of the opportunities they create. People, the inner dynamic so central to enterprise, must use their skills to manage these opportunities in the best possible way.