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Provide an essay about report that is to suggest a market entry plan for BMW Group; however, it that will propose this company to choose Somalia as a new market to start business operation.
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#BMW Entry Plan into International Market Problem Solution Essay
##Introduction
The purpose of this report is to suggest a market entry plan for BMW Group; however, it will propose this company to choose Somalia as a new market to start business operation. This report will discuss the background of the company, strengths, and weaknesses of BMW, market position, global business environment, and economic position in Somalia, income statement, balance sheet, and cash flow statement and so on.
Company Profile
Ranker (2014) stated that BMW Group was established in 1917; now, it is one of the ten biggest car makers in the world and it owns three finest brands and occupies robust position in motorbike division and runs flourishing financial-service business; moreover, it targets to engender lucrative augmentation and incomes through the first-class fragments of the global vehicle markets.
According to the report of BMW (2014), it has resolutely placed on the finest zone of the global vehicle industry because of the three major brands, namely, BMW, MINI, and Rolls Royce; moreover, the company is dedicated to provide the best quality products and services through excellent research, development, sales, and marketing; these issues reflected through its performance.
##Products
Ranker (2014) provided the characteristics of the products of the company in the car sector; apart from making countless models of vehicles, BMW also offers financial services; however, the next table provides brief description of its product line:
###Figure 1: Products of BMW
Source: Self generated from Ranker (2014)
Strengths and Weaknesses of BMW
The strengths and weaknesses of the company have considered briefly in the table below:
SWOT Analysis of BMW                                                                                                              
Strengths                                                                                                                     It has super brand reputation as it is the third most expensive automobile company valued at twenty nine billion dollars; in 2012, Forbes noted it to be the most highly regarded company in the planet;
It is building environment friendly carriages by making them additionally proficient; in fact, it has twenty models that release carbon-dioxide as low as 140g/km; it is also making environment friendly fuels like hydrogen;         
It has excellent engineering abilities, financial capabilities, comprehensive product-range, extensive modernization and quality management system; moreover, BMW recruits the expert employees to manufacture the cars             
Weaknesses                                                                                                                    Making excellent cars and recruiting experienced labor force influence the company to rise costs; so its costs are greater than that of the major rivals, like Toyota, Volkswagen, and GM        
BMW makes luxury-cars that necessitate top graded equipment, experienced labor force, and huge brand image; in this context, the company is bound to ask higher prices; however, customers believe that it asks excessive price for its products
It makes excessively few acquisitions and alliances, and without acquisitions, the company finds it difficult to develop even with elite manufacturing-abilities                                        
###Table 1: Strengths and weaknesses of BMW
Source: Self generated
Market Positioning of BMW
The market positioning of BMW is very strong indeed throughout the world; it remains to the most prestigious and favorable brands amongst the customers; as a result, it positions itself amid the best selling brands throughout the globe.
Cain (2012) noted that BMW remained to position itself as the top selling luxury brand in the USA by holding more than eighteen percent of the luxury car market; it is notable that Mercedes-Benz’s positioned itself as the second car marketer whilst Lexus was in the third position according to the survey; this has been illustrated in chart below:
###Figure 2: Market Positioning of BMW in 2012
##Source: Cain (2012)
Integrated marketing communication (IMC) Strategy
The IMC tactic of the company would be based on coherent integration of online and offline promotional tools to put together and uphold brand awareness, and obtain, foresee, please and aware the clients; it is important to note that the online and offline tools would comprise of event sponsorships, contests, websites, interactive demonstrations, displays, hoardings, and printed advertisements.
All the marketing operations would be synchronized with each other; otherwise, clients will just observe isolated interactions; however, it is significant to state that films have played a major role in advertising the cars of the corporation; for example, the corporation got vast publicity when Mini Cooper was featured in a film; so, it is a necessary IMC choice.
Sustainable Competitive Advantages enjoyed by BMW
It is notable that super brand awareness, excellent technologies, great research and development, unique car designs, customized designing for clients, perfect promotional and advertising tools and mediums, highly talented labor force, proficiently prepared corporate and global strategies, and nice corporate cultures are the key competitive advantages of this firm; the following chart outlines the sustainable competitive advantages of BMW:
###Figure 3: Sustainable competitive advantages enjoyed by BMW
Source: Self generated
Population characteristics and socio-cultural factors of Somalia
With population of about 10428043, Somalia belongs to clan and sub-clans; these hierarchical-descent factions are innermost part of Somali society; conventionally, clans unite for getting safeguard, water, land, and political power; moreover, rural societies are essentially democratic and councils of men make decisions.
Current Global Operating Environment
The purchasing power of the global customers had slowed significantly in the recessionary period; therefore, this luxury car manufacturer had experienced severe challenges in India, Brazil, and Russia, but BMW made profits from international market even during the time of global financial and economic crisis; however, the global economy stabilized in 2013 and it manufactured a record volume of cars.
The current global business environment would be difficult for the global companies because of high public debt levels in Europe, the uncertain conflicts in the Middle East, and domestic political divergence in different countries; however, it would gain competitive advantages over the competitors in the US, Chinese and Indian market though it has recalled near 140,000 vehicles in China. However, the next table provides more information:
GDP Growth
According to the report of BTI (2014), GDP annual growth rate along with GDP per capita (PPP) illustrated poor economic performance since GDP annual growth rate was only 2.6% in 2012 and GDP per capita (PPP) was $547 in 2010; however, income from exports contributed 50% of the national GDP; however, the next table shows more information:
                  2008      2009      2010      2011      2012     
GDP Annual Growth Rate       2.6      2.6      2.6      2.6      2.6     
GDP purchasing power parity (PPP) $5.26 Billion $5.39 Billion $5.52 Billion $5.67 Billion $5.90 Billion
GDP                1.98      2.32      2.39      2.48      2.6     
###Table 2: GDP per capita (PPP) growth rate
Source: (Indexmundi, 2014, para.1)
Labor force in Somalia
According to the report of World Bank, more than 70% of the total labor force is engaged in the agriculture sector as the national economy fully based on this segment; on the other hand, rest 29% labor force is working in the industry and services market; however, the following table gives more information about Labor force in Somalia:
###Figure 4: Labor force in Somalia from 2004 to 2014
Source: (Trading Economics, 2008, para. 1)
At the same time, Young (2014) reported that 70% of the total young people are unemployed and they endeavor to cross Mediterranean Sea with intent to leave this country to get jobs; some individuals are working for terrorist organizations and piracy groups; therefore, multinational companies are unwilling to operate business in this country.
Exports from Somalia (2006 to 2012)
Simoes (2014) stated that livestock and other agriculture items are the key export products and main export items include bananas, hides, fish, charcoal, scrap metal; in addition, major exports partners are Oman and Yemen; however, the next table provides more information:
###Table 3: Total exports from 2006 to 2012
Source: self-generated from Simoes (2014)
Imports (2006 to 2012)
The report of Simoes (2014) illustrated that machinery and equipment, chemicals, petroleum products, foodstuffs, construction materials are the main import items; however, subsequent table provides more information about imports:
Year Total Imports ($ billion) Import Sectors              Value     Percentage (%)
2006 0.8            Other Vegetables             $191,294,398 18      
2007 0.58            Raw Sugar                $188,695,556 18      
2008 0.8            Rice                   $56,583,059  5.4      
2009               Wheat Flours               $45,137,945  4.3      
2010 1.26            Bovine                  $44,454,546  4.2      
2011               Concentrated Milk            $41,841,731  4       
2012               Woven Fabric of Synthetic Staple Fibers $36,000,634  2.5      
2013               Cement                  $25,857,637  2.3      
###Table 4: Total imports and the main import partners from 2006 to 2012
Source: self-generated from Simoes (2014)
Major trading partners’ countries
The main Export partners Percentage (%) The main import partners Percentage (%)
Oman           51       Ethiopia         25      
Yemen           28       India           19      
India           4.6       Oman           17      
Pakistan         2.9       China           9.6      
Lebanon          2.8       Pakistan         6.2      
Hong Kong         2        Yemen           5.4      
Brazil          1.9       Turkey          3.9      
China           1.8       Egypt           1.5      
###Table 5: The main import partners of Somalia
Source: self-generated from Simoes (2014)
Political Factors of Somalia
BTI (2014) addressed that Somalia is going through severe violence and serious humanitarian crises due to long-term civil war although the population consists with homogeneous ethic group of the Muslim, but they engaged themselves into irrevocable conflicts in order to exercise power and to collapse the state mechanism.
In 2011, the local armed force along with the peacekeeping troops had defeated the Islamist armed groups and the overseas powers who have economic interest in the countries along with NATO expressed their optimism that the federal government would be capable to enhance reconciliation practice and reconstruction progression.
Al-Shabaab had taken control over the majority parts of the country from 2007 and increased its power to take control over the few parts of Mogadishu by 2011, but intervention AMISOM with a force of 10,000 troops, and sudden aggression of Kenya following the footstep of Ethiopia Al-Shabaab was forced to escape from Mogadishu in 2011.
At the same time, Al-Shabaab was likely defeating due to combine pressure and continued political negotiation; as a result, the municipal election were held in November 2012 where the opposition wined in the local governmental bodies that provided further hope to the international communities for a sustainable peace building.
Legal Factors of Somalia
USAID (2014) reported that it has been keeping continuous cooperation and support to Somalia with the aim to unification, rebuilt and quick recovery of the economy by attracting foreign investors and improving job opportunities, but its legislation related to the business and commercial climate made it difficult to put the country in an international standard.
The commercial law of Somalia is very weak and conflicting in nature and does not provide safeguard to the business transactions; though, there are some provisions, but in practice, it is difficult to execute any business contract of agreement with the Somalia companies.
Moreover, protection of property, weakness in export or import, indemnity to the elites, corruption, lack of protection to the investors made it difficult for a safe business with the old business communities, but the newly managed business organizations are comparatively less corrupted and have honor to the international trade practice; therefore, they kept hopes of doing business in this region.
Pro-Forma Income Statement
The marketers assume that BMW would be able to make profit from this new market and it would gain $704,152 in 2015; however, the next table gives more details:
Specification               2015    2016    2017   
Sales                   $4,976,400 $5,500,400 $6,054,000
Total Cost of Sales            $3,582,200 $3,731,000 $3,854,000
Gross Margin                $1,394,200 $1,769,400 $2,200,000
Operating Expenses                              
Sales and Marketing Payroll        $30,500   $35,000   $40,000  
Advertising/Promotion           $28,000   $10,000   $12,000  
Web Page Maintenance            $7200    $5000    $5200   
Cleaning/Maintenance            $13,200   $12,000   $12,000  
Travel/Auctions              $6200    $4000    $6000   
Total Sales and Marketing Expenses     $115,800  $101,000  $115,200 
Expenses                                   
Payroll                  $81,700   $88,000   $95,000  
Depreciation & Leased Equipment      $3200    $4000    $5200   
Utilities and Insurance          $21,600   $21,000   $23,000  
Rent                    $96,000   $96,000   $100,000 
Payroll Taxes               $68,012   $77,400   $88,500  
Total General and Administrative Expenses $232,506  $243,700  $263,450 
Total Other Expenses            $10400   $8800    $8800   
Total Operating Expenses          $355,506  $351,100       
Profit Before the Interest and Taxes    $1,038,696 $1,418,300 $1,814,950
EBITDA                   $1,039,496 $1,419,300 $1,816,150
Interest Expense              $32,764   $35,960   $32,600  
Taxes Incurred               $301,780  $414,702  $534,706 
Net Profit                 $704,152  $967,638  $1,247,646
###Table 6: Income Statement
Source: Self-generated
Possibility & feasibility of financial, distribution, & marketing partnerships
a Market structure and analysis              It will use direct channel                           
b Currency considerations                 US Dollars to mitigate risk                           
c e-Commerce                       BMW will an e-commerce website for Somalia                   
d Impact of regional and global trade integration     Differentiation will mitigate rivalry from traders               
e Potential volume of trade                400 vehicles annually                              
f The marketing mix components              Sale the signature products at fixed prices, with proper promotion and placement
g Key cultural dimensions affecting marketing operations Their culture is to serve as foundation of immense unity, but clashes occur too;
###Table 6: Possibility and feasibility
Source: Self-generated
Key reasons to enter the market
It is important to note that the company has presence almost in every part of the world; in fact, it has begun its operations in most of the African countries as well; as a result, Somalia remains to be the key choice to enter because BMW has no operations there. In addition, the above economic, social, and demographic discussion demonstrates that Somalia is a prospective country for maximizing profit.
Three potential risks of foreign market expansion
Potential risks                                                          The company confronts growing rivalry from its direct rivals and now tends to contend on value rather than differentiation; furthermore, the markets for luxury-cars are flooded in the industrial countries, accordingly increasing rivalry
Taxation policy and growing costs of raw metals will raise the expenses for auto manufacturer and result in constricted proceeds;
Exchange rate variations intimidate the company’s income if the value of euro begins to escalate against other currencies    
Strategy to mitigate the risk                                                   It should follow cost leadership strategy to reduce operating costs and mitigate other risks                                                                        
###Table 8: Three potential risks and strategies
Source: Self-generated
Three potential benefits of foreign market expansion
Potential benefits                                                                     As clients nowadays are more responsive to the pessimistic affects caused by cars fuelled by petrol, the market for BMW’s environment friendly cars are increasing
Increasing per capita income and living standard in developing countries mean that the number of clients able to purchase BMW cars are increasing as well
Rising fuel costs reveal big markets for the hybrid and hydrogen vehicles because clients swing to cheaper fuel types;                  
Strategy to maximize each benefit                                                             It should focus on the hybrid car marketing through IMC strategy to increase sales                                        
###Table 9: Three potential benefits and strategies
Source: Self-generated
Two ways in which you would adapt the operational strategies
With vulnerable socio-economic condition of Somalia, BMW is going to take entry in this market and to do so BMW would identify a potential importer who would be financially solvent and capable to distribute BMW cars nationwide (Keegan & Green, 2013); therefore, it will use import strategy to enter this market.
To identify such potential dealer, BMW would communicate with the ‘Somali Chamber of Commerce’ and serve general letters to the SCCI members to apply for dealership with their present business profile and some copy of previous letter of credit in order to prove their potentiality, from the applicants, the company would select one distributor to enter in this market.
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Write a summary for this essay.
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The purpose of this report is to suggest a market entry plan for BMW Group; however, it will propose this company to choose Somalia as a new market to start business operation.