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In 1996, United States was the world's largest sales market for the 7-Series. (21) |
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"The Sporting Utility" |
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Bayerische Motoren Werke AG, also known as the Bavarian Motor Works in English speaking countries, has its history traces back to 1916 (1), when two German airplane engine makers merged into what it is known as BMW today. BMW has long been known for its powerful engines and sporty exterior. Their automobiles and motorcycles have gained a significant market share in the luxury car market due to their commitment in quality, continuous improvement and updated technologies. The recent acquisition of Rolls Royce demostrated their wealth and strength, as the 1997 sales figures will be another record breaking year for BMW. (2)
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Bavarian Motor Works (BMW) was formed through a merging of two airplane engine makers.(3) |
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End of WWI. Treaty of Versailles also prohibited BMW from furthur making airplane engines. (4) |
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The first BMW Motorcycle was finished -- the R32 |
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BMW bought a motor factory Eisenach and built its first car -- The Dixi |
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The first BMW sedan was produced -- the 3/20 |
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The first BMW Sports Sedan was introduced -- the 6-cylinder 303 |
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The BMW introduced the BMW 328, gaining wide success. |
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BMW halt its production due to the destruction of the Eisenach, Durrerhof, Basdorf and Zuhlsdorf factories due to World War II. |
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BMW built its first postwar motorcycle -- the R 23. |
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The year where BMW produced its first post World War II car, the 501 sedan, but it was a financial disaster. |
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The new motorcycles R50 and R60, were produced. |
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BMW's new set of small cars, the Isetta was produced. |
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BMW is in financial problems. However, the BMW 700 is the first major success after the financial crisis. |
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The new 1500 model established a new trend of small sporty cars. |
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The first imported BMW arrives. |
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BMW formed a new subsidiary, BMW Motorsport GMBH. |
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BMW of NA was established as the U.S. importer. |
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Construction of Spartanburg plant in South Carolina. |
| The factory now is the sole producer of the Z3 roadster. | |
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British's largest and last independent car maker -- Rover Group joins the BMW group. (5) |
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BMW acquired British Rolls Royce for US$580 million. |
BMW's history started eighty years ago when two airplane engine maker, Rapp Motorenwerke and Otto Werke merged in 1916 to become what we now known as the BMW today.(6) At first, BMW contined to build plane engines, which had set world records as being builder of higher flying plane in 1919. (7) The Treaty of Versailles endeded World War I and forbidded BMW from making plane engines (8). Because of this resriction, BMW turned its focus into making car and motorcycle engines. At last, in 1923, the first BMW motorcycle, the R32 was born. Not much after the launching of the R 32, BMW headed off into making its first car, the Dixi 3/15 in 1929. (9)
During the 1930s, BMW gained the image of being the fastest and most powerful cars ever produced through their domination of the motorcyle and auto races. (10) However, teh outburst of World War II has left BMW's 3 main factories and halted production for 3 years after the war in order for reconstruction.
Finally, in 1951, BMW launched its
first post World War II motorcycle and cars, but it was a finnancial disaster
for them. Until they have formulated a new financial structure in
1959, basically
the 1950s was the decade where BMW
had its most difficult years in history.
After surviving the terrible 50s, the 1960 decade can be noted as BMW's boom years. During the 1960s there was a new fad of driving compact, sports cars. With their background in producing fast, reliable sports car, they have introduced a new line of sport cars with the name of Isetta. The Isetta was a great success. Beginning with the success of the 1960s, BMW has found their niche in building midsize, luxury sedans, capturing some of the market share of their lead rivals Mercedes Benz.
In 1975, BMW North America was established as the U.S. importer in North America. It was not until 1994 that the first American made BMW rolled off the Spartanburg, South Carolina plant.(11) During the same year, BMW took over the last independent British automaker, Rovers. This marks one of the major expansion of the BMW group. With good financial years and their commitment of continuous improvement, BMW have recently (March 1998) acquired another British Luxuary company, the Rolls Royce.(12)
Figures in the first half of 1997 have already indicated its record breaking sales year in 1997. (13) It seems that the continual success of BMW will put BMW at the top of every auto manufacturer's idea company.
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.
(14) BMW tries to benefit from the lessons of production
efficiency that the Japanese demonstrated and American’s flexible and change
plan. “Our status is our driving pleasure, not our badge,”
said BMW of North American President Victor Doolan. (15)
BMW populated their top management ranks with Japanese and American transplant alumnus. BMW’s plants tries to combine the best of Japanese and American manufacturers techniques with distinctive German-style attention to detail to run its business successfully. (16)
(1) Bernd Pischetsrieder,
Chairman of the Board and CEO of the BMW AG
Pischetsrieder started out at the
Munich-based car maker in 1973. He worked his way up to the top spot
in 1993 with his stints in production and quality assurance.
(2) Henrich Heitmann, Chairman of the Board and CEO of BMW (US) Holding Corp. Heitmann joined BMW in 1985, previously he served as general counsel at Volvo.
(3) Al Kinzer, President of BMW Manufacturing. Kinzer was a 15-years veteran and the highest-ranking American of Honda's Ohio operations.
(4)Victor Doolen, President
of BMW of North America, also the chief salesman in the region.
Currently, there are five trends that will shape up the future of the global industry. Heitmann, Chairman of the Board and CEO of BMW AG, spoke out at a 1997 New York Auto Show about the current trends and BMW’s action toward the trends. BMW expects themselves to be in the forefront of the logical responses to each of the five trends.
First, the product life cycle is shortening. The time available to respond to changes has become shorter. To keep pace, BMW would have to produce a new3-Series every six months. (17)
Trend Number Two is that “quality and reliability alone are the price of entry into the market not the marks of distinction.” (18) To succeed, manufacturers have to provide some “differentiation” and additional value over competitors. BMW’s differentiation is their combination focus on the passive and active safety of their car. Heitmann pointed out that every BMW sold in the U.S. has anti-lock braking and all-season traction control. BMW is one of the two manufacturers in the world to offer dual-threshold products on all BMWs.
Trend Number Three: customer demands for individuality and personalization lead to an enormous number of product’s variants. (19) BMW’s goal is to offer the customers with unlimited choice, permitting customers to order directly from the factory instead of choosing from the dealer stock.
Trend Number Four: new hybrid products, which tend to blur the customary distinctions among vehicles. (20) Other product, for example, station wagon merged with the hatchback to yield minivans, while trucks blended with sedans to produce a form of sport-utility vehicle. BMW does not intend to follow this trend or copy other automaker’s hybrids, but expects to create “markets of their own” as needed, stated Heitmann.
Finally, Heitmann believes that “sheltered”
niche markets are disappearing. For example: with the Z3, BMW
knew it would control the roadster market not for a long time.
That expectation was proved correct, as others edged into the same niche
with their own roadsters.
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In 1996, United States was the world's largest sales market for the 7-Series. (21) |
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"The Sporting Utility" |
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R1200C* is the newest model being launched. |
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4 Cylinder, in line engines |
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Single Cylinder |
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The new model being introduced in 1998. |
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A combination of a moped and a motorcycle. |
BMW's motorcycles comes in the series of R, K and F series.
The design of the newest BMW automobiles take about four years
to complete. (23) Each 5,7, and 8 Series BMW that
rolls off the assembly line requires about 2 and a half days to produce.
First of all, let's discuss the relatively compact 3-Series. The 3-Series
varies a bit in size with different models, with the 328is coupe and the
328i convertible being the most compact. All 3-Series comes with
air conditioning, Stereo cassette, power windows and door locks and a
speed manual transmission as being standard. (24)
Next comes the 5-Series. It has been BMW's second best selling
cars after the 3-Series. (25) It includes the 528i, 540iA
and 540i models. The 1998 5-Series have included several safety features
such as the side impact airbags, anti-lock brake system etc as basics.
The 7-Series symbolizes ultimate luxuary and comfort with a style of class. New features made available this year for 7-series are rear side-impact airbags. (26) In James Bond's movie,Tomorrow Never Dies, he drove away a specially made BMW 750iL with lots of gadgets that came with the car.
The 8-Series combines luxuary with BMW's trademark of sporty look. Its 1998 design deviates a little bit from the big round front headlights and replace it with smaller ones.
The Z3 roadster is compact and powerful, best suited for anyone who
enjoys driving. This line of sports car is solely being produced in the
United State's BMW plant, Spartanburg, South Carolina.
BMW's strategy is to keep its own costs down while adding more values to its products, such as traction-control system and an antitheft system. (28) BMW tries to differentiate its products from other automobile producers. BMW's differentiation is their combination focus on the passive and active safety of the car.
BMW's potential customer are around the age of forty, less often married, more often female, and physically active. BMW target group of customers have homogeneous wants of good performance, handling, and fun to drive. BMW begin to shift its image from being a pure status symbol for yuppie males to slightly expand its base among women.(29)
BMW emphasizes on a mature work force
that produce a higher degree of handcrafting and does not go for younger
and cheaper labor. The average age is about 33 years old and the
average hour wages is about $20 an hour.
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BMW's revenues, profits, assets, stockholder's equity and earning per
share have all increased from the previous year. Gross revenues show
a strong increase from 1995 to 1996 at a rate of 14%. "In 1996,
BMW for the first time delivered more than 100,000 cars to customers in
th United States. Sales of 105,800 units were 13% higher than in
the previous year. (30)" In addition, earnings per share
increased from DM27.10 in 1995 to DM 28.10 in 1996, an increase of 3% per
share.
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BMW is small when compared to its major competitors, Volkwagen and Mercedes
Benz. The battlefield for BMW is tough. Although BMW leads
the luxury import market, the market becomes as tough as the market under
$20,000.(31) Other competitors constantly tried
to produce new designs to attack BMW. Many competitors took actions against
BMW’s threat. One of BMW’s major competitors, Acura responded competitively
against BMW by combining peppy performance with design and luxury in the
market. The dividing lines that once separated luxury vehicles, high-performance
roadster and big sports utility vehicles are blurring (32).
BMW’s other major competitor, Mercedes Benz is blending luxury and convenience
with its M-class sport utility vehicle to compete directly with BMW’s Z3
(33). Volkswagen introduced the new A8 and A4 series
of sporty sedans to fight back BMW’s Z3 roadster. Jaguar fired back
by producing new highly acclaimed model. Ford and GM also tried to
claw their way back into the luxury market. With such competitive
competition in the market, BMW needs to respond quickly. However,
decreasing their prices may not be the ideal solution. By decreasing
their prices, customers might think BMW’s quality decreased along with
the price, which will degrade their reputation.
BMW faces major
problems and distractions in the Asian market. The existing local-content
regulations and high import tariff duties stop BMW from charging into the
Asian market.
Since different
countries have different regulations, BMW must statisfy and comply with
the different regulations in every place. (34)
In China, the government does not allow BMW to directly market their product. BMW must sell its products to a government organization for distribution. However, problems still exist. China requires automobiles sold in their country to have 80% local content. In that case, it's impossible for BMW to manufacture its parts in China, since they do not have a plant in China.
In India, the tariffs are too high. The tariffs make it impossible for BMW to import a painted body into India According to India's local-content regulation, BMW must not import more value than they're exporting.
Although BMW
wants to go global on their products, they have to be careful and comply
with the different laws and regulations in host countries.
