“Bavarian Motor Works” Case Analysis

BMW is the upper class car manufacture in the world. It has its best branding strategy and technology. However, due to the entrance of Japanese car manufactures in U. S. auto market, there are basically two problems that BMW needs to fact in order to stand its position and status in U. S. auto market. First of all, Japanese auto companies create high-performance cars to wrestle the luxury car market, and they are cheaper price and lower cost of maintenance. Secondly, Japanese auto companies have serve the best quality of service and the up-to-date technology to compete German cars.

Executive Summary: In order to rectify the problems that Japanese companies brought, BMW must take some actions regarding this. It needs to put a much greater emphasis on the quality of customer service. This would help BMW to have the long-term relationship with customers, which can gain the sustainable competitive advantage. Company Background: Bavarian Motor Works – “The Ultimate Driving Machine” is also known as BMW, and it is the English translation from Bayerische Motoren Werke. “Bayerische Motoren Werke AG, German manufacturer of automobiles, motorcycles, and aircraft engineer.

Based in Munich, Germany, the company is the leading auto exporter in Europe. The English translation of the company’s name is ‘Bavarian Motor Works'” (www. usedcarmart. co. uk/bmw. php) It was founded as an aircraft engineer manufacturer in 1916. BMW has been dramatically affected by social, political, technical, and economic change. The company enjoyed success during World War I. After the war ended, the Treaty of Versailles forced severe restrictions on aircraft construction. In an effort to survive, BMW used acquisitions and joint ventures to move into the production of motorcycles and automobiles.

In order to compete with industry power, BMW introduced its building block concept of auto development. Based on a family of automobiles with interchangeable parts and common body designs, this concept allowed production flexibility and provided a foundation for a strong marketing concept. BMW’s philosophy is to build driving machines that respond faithfully and enjoyably to their driver’s commands while also providing the safety, practicality, style, quality, reliability and durability that help make long-term ownership a rewarding experience.

“Use its heritage of engineering and designing and its philosophy to provide drivers with high-performance cars to make driving a pleasure of life” (BMW. com). In 1992, BMW announced that it would locate its North American manufacturing facility in Spartanburg County, South Carolina. BMW began construction on the plant in 1993 and shipped its first car, a 318i sedan, in 1995. The 23-month span from the groundbreaking in South Carolina to the first shipment is considered the fastest automotive start-up in history. Currently, in the U. S. automobile market, BMW has 1.

2% of market share, and the sale volume has increased 20. 8% (from 20,250 unites to 101,257). It seems that BMW does not have the large market share in U. S. , but BMW truly has the strength to compete with other luxury car manufactures in U. S. market. BMW’s goals are: to reinforce the image and mystique of BMW products, to keep continuing process of innovation in the area of engineering and technology, to improve service and dealer relationship, to stabilize continuing sales growth of each subsidiary, and to control completely all subsidiaries’ sales, demand, and capital expenditures.

Customers Analysis: Customers of BMW are those who would like to experience the best quality and service from their cars. Basically, to categorize BMW customers, there are five main groups of people who purchase BMW based on the differences of models. The first group is that buyers of the 300 series two-door model were the youngest group, and their average income is $72,000. They are more likely to be unmarried. Then, the four-door buyers tended to be married with children. They were most often older households in which both spouses had incomes.

The median income for owners of this model was $82,000. In general, the 300 series owners were professionals and middle-level managers. Moreover, one in four purchasers was female, the highest percentage for any BMW model. In general, people who buy 300 series think that its size fits women and young adults. The second group is the 500 series. While the 500 series was considered a close substitute for the 300 series, its buyers were slightly different. A higher percentage of owners were man, and their median income was higher. They consider the 500 series is a family car.

And then, the third group is the 600 and 700 series. The 600 series and the 700 series buyers were in their mid-to-upper-forties with income of $140,000 and above. These segments consisted almost completely of self-employed individuals and business executives. People who buy 600/700 series want to show their social status. Moreover, the next group is the M and Z series, these two series are the sport cars. They are for people who like to enjoy the fast speed. Lastly, the X series, this is a group of people who love SUV. They like to drive with a plenty of space in their cars.

They also like to carry their families to travel for vacation. Environmental Analysis: There are several factors that are important in the analysis of the automobile industry. First of all, the changing world competitive environment has had an enormous impact on the auto industry. From 1945 to the mid-1970s, the barriers to international auto trade had been progressively dismantled. Thus, by 1974, tariffs were a low 3 percent, 6. 4 percent, and 10. 9 percent in the United States, Japan, and the European Economic Community respectively.

Then, with the exception of Italy, there were no import quotas barring auto trade. This unprecedented level of “free” trade, however, did not immediately affect the inter-competition among auto producing nations. The consumers of each nation demanded different characteristics in their autos. Producing nations, as a result, were content to satisfy domestic needs and unable to compete effectively in foreign markets. However, several factors had converged that drastically altered the competitive situation in the world automobile industry, such as oil shortages, price shocks, and environmentalist pressures.

They created a much more homogeneous demand for similar auto characteristics. In the same period, the production quality and capabilities of the Japanese began to provide products that fit this demand cheaply and efficiently. The increased presence of the Japanese on world markets, forced increased levels of competition. The influx of Japanese automobiles created trade imbalances of unprecedented magnitude, which caused heightened government influence on the industry through the implementation of voluntary quotas and other protectionist measures.

Second factor is that automobile manufacturing was also a big industry in many developed countries, accounting for approximately 7 percent of the value of international trade in the same period. Automobile manufacturing also represented a major employer in many economies. The effects of the highly competitive international auto industry were dramatic. In an effort to compete, many producers sought to take advantage of labour and production cost differentials and began to globalize their manufacturing. Moreover, the last factor has impacted on the auto industry is the September 11th tragedy.

The terrorist attack has a tremendous effect on whole global economy, and of course, the auto industry as well. The September 11 effect had brought the sale volume up. According to VOA News, John Birchard states, “For the first of months after the September 11 terrorist attacks in America, new car and truck sales in the United States raced ahead, fueled by automakers’ programs of no-interest loans” (Birchard 1). Because many auto companies were worried about the sale volume were going to drop, they offered the special interest term to motivate their customers to purchase cars.