BMW Group Essay

2030 Words9 Pages
1. Introduction
The purpose of this essay is to provide a complete analysis of BMW Group. First, some background information about the company will be provided for a better comprehension of this study. Next, BMW will be assessed from a microeconomic point of view: its demand curve, organisational structure, customers, suppliers, strengths, weaknesses and its operating environment. Then, this firm will be reviewed in context of its sector from a macroeconomic perspective and more specifically its market environment, followed by a PEST analysis of other external factors such as GDP, interest rate, cost of raw materials. This study will be further quantified by a ratio analysis in order to evaluate BMW’s financial health. In the end you
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Different factors such as a rise in raw material cost, rise in the wages, and marketing costs can make the MC curve shift upwards from MC0 to MC1. But as long as the MC curve keeps within the interval defined by points A and B, the price, demand and quantity produced will remain unchanged as MC will still be equal to MR. Prices are pretty sticky in the automobile market. If BMW decides to raise its price above P, its competitors will keep their prices unchanged. As a result, some consumers will switch to cheaper substitute goods and demand for BMW will fall proportionately more than the increase in price, so we can conclude that for any price above P, demand is relatively elastic. On the other hand, if BMW decides to lower its price below P, then its competitors will follow and cut their prices too. As a result, even a big decrease in price will only lead to a small increase in demand, so we conclude that for any price below P, demand will be relatively inelastic. Since BMW and its competitors don’t want to lose out on market share, nor on profits, they will all produce at the profit maximising price P. Fig 1: Kinked demand curve faced by firms under competition oligopoly.
The next aspect that we are going to analyse is the income elasticity of demand for BMW’s cars (fig2). From economic theory we know that as income increases, demand for luxurious goods will increase more than proportionately. This
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