Bmw Economic External Environment

The dimension of the external environment which is the most important for any company is the economic dimension. Economics can be described as the social science that deals with the production, allocation and distribution of scare resources in order to please the unlimited wants and needs that individuals boast. Economics is also research into aspects such as interest rates, inflation, gross national product and unemployment in order to predict the direction of the economy.

Increasingly, the world’s economies are becoming more closely interconnected and no one economy can buck the trends seen in other countries.

In a recession, like the one we saw in 2007, demand for cars declines, a situation which all car manufacturers face from time to time. During such periods the strength of individual brands and the product portfolio help reduce negative economic effects.

BMW (Canada) Ltd. buys BMW cars in Euros (€). At times when the Canadian dollar is strong (like these days) imported cars cost more to buy. Conversely, when the Euro is strong imported cars cost less to import.

The rate of the US Dollar also impacts on BMW Group's overall revenue, for instance revenue in 2004 was 6.8% higher than 2003, thus signifying a new high for the company. However, the weakness of the US Dollar against the Euro continued to have an adverse impact on reported revenue; in the USA in particular, revenues in Euro terms trailed those of the previous year, despite a new record high in sales volumes.

Worldwide, however, this effect was more than compensated by the sharp increase in cars sold.