Le groupe BMW (document en anglais)

BMW

1. What was BMW’s status in the market in 1986?

• Its unit sales was 96,000 cars in the US which was 6.8% market share in the luxury/performance segment in the US. (The segment of luxury cars has about 1.4 millions of retail sales in the United States.)

• Its worldwide unit sales were growing.

• Mercedes was its main competitors while its Japanese competitors haven’t entered the US market yet.

Who was buying BMW and what were they buying?

• People who positioned itself as yuppies or “on the way up.”

• They were socially responsible and skill individuals.

• They were smart, in-the know, value-oriented buyers.

• They wanted to control their driving rather than being control by their cars.

• They wanted a prestige, fun, excitement, long-term trust and confidence.

• Their ages were between 38 to 46, which was younger than the average ages of other luxury cars.

• Their incomes were between $100K to $320K.

• Most people buy 3-series, which has about 50% of its sales. It was followed by 5-series (32%) and 7-series (16%).

1. 3-series: age between 38-42, income between $100K and $140K

2. 5-series: age between 42-46, income between $120K and $220K

3. 7 series: age between 43-48, income between $220K and $330K

2. What caused the unit sales decline from 1986 to 1991

• In 1987, both Tax Reform Act and Stock Market Crash dropped the sales from $1.45M to $1.3M, which was about 20% units decline.

• The Tax Reform Act made the luxury cars more expensive. The stock market crash made the economic and emotional below to the luxury car market.

• In 1991, Luxury Tax and Gas Guzzler Tax increased the BMW price and dropped the sales below $1.1M.

• New competitors, such as Acura, Infinite, and Lexus, entered the market. They had better distribution channels. Their customer satisfactions were scored higher than BMW.

• The appreciation of DM increased the costs of German made cars.

Could BMW have prevented it given its position in 1986?

• Most of the above factors are external factors that BMW can’t control, so I don’t think BMW can prevented what were happened in 1986.

• The factor may change the BMW’s position:

1. Its pricing strategy: It raised price to offset the changes of tax and currency, which led BMW to the less competitive position. If they could reduce its profit and remain its price in the US market. It may change its position.

2. If they already had manufacturing plants in US, they may avoid some tax imposed.

3. If they already had some inexpensive new model ready to launch, it might change its position.

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