BMW of North America

Problems of BMW Company’s

The BMW Group is a German car and motorbike producer concentrating on manufacturing vehicles for the premium facet. The facts demonstrate that BMW, as the first luxury car manufacturer in the USA has brought about an innovative customer-oriented marketing overture “Dream it. Build it. Drive it” (Alenuskin & Schotter, 2012, p. 1). The facts demonstrate that BMW SUV gross revenue in the USA was in decline; therefore, the situation required an instant reaction plan. Thus, with the creation of an innovative generation X3 model in 2010, the company has introduced a new online attendance, which allowed customers to watch the creation of their new vehicle with a help of a specific live video stream (Glassman, n.d.).

BMW had to evaluate its “customerization” initiative seriously. The option has been accessible to all customers who desired to customize their cars. The initiative has numerous advantages, as this process allows BMW’s clients to understand that they are a constituent of the huge brand, which provides them with a feeling of exclusiveness in regards to their purchases (Boston, 2015). Despite the fact that the initiative is highly successful in regards to the newer models, the procedure appears to be subtracting the operations from local car dealerships. In addition, clients are accustomed to obtaining the things, which they desire to have right when they want it. This appears to be a serious weakness of the “customerization” procedure and initiative implementation on the US market (Muller, 2010). Despite the fact that the issue has been addressed partially by shifting a number of the operations to the USA, this process still does not solve that general issue. BMW is also supposed to lower the quantity of dealerships in the USA and limit the number of models of cars accessible. Moreover, due to that fact that the gas prices and environmental awareness are on the increase, BMW Company is supposed to invest more in making a luxury fuel-efficient hybrid to sustain emulative with other luxury brands, including Audi and Mercedes Benz (Alenuskin & Schotter, 2012, p. 2). The current paper will review the BMW’s innovative incentive “Dream it. Build it. Drive it”, reviewing macro and micro problems of the company, the problems leading to change the marketing strategy, the company’s systems, which have been affected by the incentive, and possible alternatives of this overture.

Macro Problems

Several macro problems have led the company to initiate such an overture. The facts demonstrate that the automobile revenues decreased by 37 percent merely three years ago, in 2008 as the result of the 2007-2008 world fiscal crisis (Alenuskin & Schotter, 2012, p. 2). It provoked the “Big Three” auto companies, including General Motors, Ford Motor Company, and Chrysler to apply for extremity loans, the total combined sum of which accounted for $34 billion (Alenuskin & Schotter, 2012, p. 3). The companies applied for these loans, as they could assist in avoiding dismissing as much as three million people. In fact, Congress sanctioned these unprecedented extremity loans. The majority of the costs were supposed to be utilized to equip consumer loans and innovative consumer-oriented incentive projects in order to propel the total sales (Alenuskin & Schotter, 2012, p. 3). The second macro reason concerns the fact that the customer profile and possibilities have changed. The analysis of 2011 demonstrates that the United States had 254 million recorded passenger vehicles and more than 205 million drivers who had official license (Alenuskin & Schotter, 2012, p. 3).

The quantity of cars, together with the medium age of the US car customer profile, has been increasing constantly since 1960, demonstrating an elevated amount of vehicles per household (Alenuskin & Schotter, 2012, p. 3). Nevertheless, the year 2008 demonstrated that alterations in the consumer conduct appeared (Alenuskin & Schotter, 2012, p. 4). Price-susceptible American customers demonstrated a tendency to keep their vehicles for a longer time than usual. The medium age of vehicles in the USA was forthcoming to a record of 11 years (Alenuskin & Schotter, 2012, p. 5). Despite the fact that a government appointed a specific $3 billion “Cash for Clunkers” vehicle replacement program, it had a provisional impact on new car gross sales in 2009, while the majority of the U.S. vehicles were still aging (Alenuskin & Schotter, 2012, p. 5). Thirdly, the recent years have demonstrated that people show a tendency to drive fewer miles and less habitually due to the combination of high costs, elevated urbanization, enhanced alternative travel selections, and unstable perspectives on car ownership. One of the major principal social trends affecting the future of the car sales concerned the decreasing interest in cars among young people. Young people tend to become progressively more environmentally conscious and irresponsive to traditional advertising. They have selected to walk, use bicycles, and ride public transport. These three macro problems have demonstrated the BMW company that a new approach to customers is required, which would stimulate them to purchase a new car regardless of all financial crises (Alenuskin & Schotter, 2012, p. 6).

Micro Problems

Several micro problems have also led the company to initiate such an overture stated above. Firstly, the company has faced a scarcity of raw materials, as the company suppliers were incapable of producing the items the company purchased from them to add to the car. The company could not allow itself to market a car that was not 100% constructed and ready (Maguire, 2013, p. 12). Moreover, the company could not stimulate the car sales heavily and financially, as it was not able to follow and sustain the demand. This made the company postpone the institution and the establishment of the innovative marketing strategy for a long time (Maguire, 2013, p. 12). Secondly, any vehicle is a competitor as the major reason why people buy cars is to travel. Thus, the company had to take into account the competitive nature of the US automobile industry. The major competitors of BMW are 2012 Audi A7 and 2012 Jaguar XF (Maguire, 2013, p. 16). The first competitor, 2012 Audi A7, is approximately $1800 cheaper as compared to the basic price of the customer profile (Vuskane, 2011, p. 17). It obtains 16 mpg in the city (5 less than BWM) and 23 mpg on the highway (7 less than BMW) (Vuskane, 2011, p. 17).

It is obvious that BMW is the green or eco-friendly selection, which gives the company advantage over its competition. Nevertheless, the macro problem of customer profile has demonstrated that people are more interested in saving money than the environment. The second competitor, meaning 2012 Jaguar XF, is approximately $4,400 more expensive as compared to the medium basic price (Vuskane, 2011, p. 17). It obtains 18 mpg in the city (3 less than BWM) and 28 mpg on the highway (2 less than BMW) (Vuskane, 2011, p. 17). Nevertheless, BMW is regarded as more fuel-effective car that allows saving more money than its competitor. In addition, BMW demonstrates a slight shortage regarding horsepower as compared to its major emulators. BMW 535 x-drive has 300 horsepower, which makes it a very powerful car (Vuskane, 2011, p. 19). On the other hand, Audi’s A7 has 310 horsepower. This difference is hardly noticeable (Vuskane, 2011, p. 19). However, Jaguar has 385 horsepower, which is essentially more powerful (Vuskane, 2011, p. 19). The customer profile demonstrates that customers desire to have a fast car that is also eco-friendly and safe for traveling with the whole family.

Causes

The first negative cause, which stimulated the concept of the customization project to appear, was the time when the global financial crisis had hit consumers hard, and the majority of households put expensive purchases on hold. In addition, the analogous period demonstrated that fuel prices had reached $4 per gallon (Alenuskin & Schotter, 2012, p. 7). Secondly, BMW’s North American overall sales had plummeted by 30 percent in comparison with 2008. The new customization program was a departure from the traditional North American car purchase model, where consumers were accountable to purchasing a vehicle and instantly taking away from the lot of dealership, after usually obtaining some liberal rebates or other overtures (Alenuskin & Schotter, 2012, p. 7). Thirdly, the American automobile gross revenue decreased by 37 percent in comparison with the previous year because of the 2007-2008 global fiscal crisis (Alenuskin & Schotter, 2012, p. 2). The fourth positive cause demonstrates that consumers have become more informed, and they shifted to more personalized individualistic products, seeking manufacturers that could provide precisely what they wanted. Customized resolutions appeared as an innovative aspect in the commerce, where customers were able to choose among a great quantity of possible characteristics to suit their personal requirements utilizing Web-grounded buying systems. In addition, the Internet altered the manner in which people purchased vehicles (Alenuskin & Schotter, 2012, p. 5). One-click access to data about the characteristics of comparable cars and the best available prices has put pressure on the profitability of dealers. Moreover, the facts demonstrate that more than 70 percent of acquisitions were performed with the help of online research in 2011 (Muller, 2010).

Systems Affected

Structural System Affected

The initiative “Dream it. Build it. Drive it” has affected numerous systems of the company. The first obvious system affected concerns the structural one. The company asked its customers to explain what they desired to see in their car in order to create the perfect vehicle. Thus, the car planned by the innovative initiative was designed on a basis of the needs and requirements of BMW customers. The car is characterized by better fuel mileage than the similar sedans of BMW’s close competitors, while it still demonstrates all the power the customer would expect a BMW to have (Glassman, n.d.). The car is a family vehicle, yet a professional one. Thus, it seats five people, has plenty of head and shoulder room and leg space for all five occupants (Glassman, n.d.). The features have advanced the technology as well as the long list of extra options buyers can choose from. The car also appears in very sleek colors, which truly accent the curves. Moreover, the car in known to have a greatly high security ratio, therefore, BMW customers are assured fully that they are protected (Glassman, n.d.). The warranty on this car is also exceptional. All these features bring an emotional quality (Glassman, n.d.). The car’s external look is quite catchy. The transmission shifter is a customized new design that takes much less space. Moreover, the vehicle owner does not need any specific keys to mess with, as there is merely a peculiar button (Boston, 2015). In addition, the front-row bucket seats provide the customer with a possibility to imbibe and feel completely cozy and convenient. Satisfied customers are a must for premium manufacturer such as the BMW Group. The most common BMW Individual trimming options include expensive leather and woods for the interior, advanced sound and video systems, aerodynamic exterior enhancements, and unique body colors. For example, BMW offers 500 side-mirror combinations, 1,300 front bumpers, 5,000 seat combinations, or 9,000 center consoles (Alenuskin & Schotter, 2012, p. 9). This has been a main obvious difficulty for production as vehicle constituents arrived from more than 170 suppliers situated in the United States and around the globe (Alenuskin & Schotter, 2012, p. 9).

Psychological System Affected

The customer-oriented sales and production process enable on-schedule vehicle delivery and demonstrate a solid degree of pliability in making all car equipment alterations. Moreover, even vehicle motion outside of the verified manufacturing locations can be recorded safely and certainly. The port magnetic field provokes the transporter to submit a signal to the nearest antennas (Alenuskin & Schotter, 2012, p. 9). They simultaneously provide vehicle position data to the allocation server as a specific time indication. Then, the server computes the location of the vehicle form the individual time information of the antennas (Alenuskin & Schotter, 2012, p. 9). Limpidity during the whole procedure of the manufacturing chain is a main innovative customer-oriented initiative constituent. The new vehicle defining and locus system enables to define mechanically, gather, and register all vehicle movements in a process of production and even after it (Alenuskin & Schotter, 2012, p. 9). Car’s transponders provide a recognition indication each four minutes concerning the locus that is obtained later with a help of specific antennas (Alenuskin & Schotter, 2012, p. 9).

On the other hand, car dealers claim that corporate executives have overestimated the actual customer impatience factor. The facts demonstrate that the conception of massive customization was alluring. It provided the manufacturers with the possibility to customize items at decreased prices, lowered oncosts, and resulted in greater facets (Alenuskin & Schotter, 2012, p. 11). Regarding the customers, the conception indicated the advantage of discovering precisely what they desired without acquitting excessive premium prices. Dealers would not have to fund large inventories (Alenuskin & Schotter, 2012, p. 12). With mass customization, customers receive exactly what they want for the price they expect. Another operational challenge was managing the pool of suppliers who had to be able to combine suppleness and short lead times for customized products at reasonable costs. Simultaneously, the possible future scope of elective assortment had to be controlled percussively, for the company not to demonstrate the quantity of product options beyond a pliable or price efficient amount (Alenuskin & Schotter, 2012, p. 12).

Managerial System Affected

The innovative initiative is an issue that has been created mostly by the dealers and hypercompetitive nature of BMW business. Nevertheless, not all managers and employees of BMW were condemned with the custom-based assortments from BMW; particularly, a number of the dealerships were unsatisfied (Muller, 2010). General Manager of a BMW dealership in Vancouver, Dimitri Kotsalis, regards that the new initiative is all about a sense of urgency (Alenuskin & Schotter, 2012, p. 8). His experience demonstrates that customers do not mind waiting. On the other hand, the product manager, Joseph Wierda, believes that the concept of BMW’s new campaign assists with the engagement of customers at all three stages of the sales process (Muller, 2010). It concerns the initial checking on the Internet, where customers “dream” about the car, the second stage that involves individual customizing or “building”, and the last stage that culminates in delivery and, ultimately, “driving” it (Alenuskin & Schotter, 2012, p. 12). Massive customization has provided manufacturers with the possibility to customize items at decreased prices, lowered oncosts, and resulted in greater facets. Dealers were not supposed to fund large inventories (Muller, 2010).

Technical System Affected

BMW used parts from the 3 Series sedan in making the X3. For example, its rear suspension system came from the E46 330xi all-wheeled drive model (Muller, 2010). The F25 X3 had a 3.0 liter in-line six-topper petrol motor that was either ordinary rushed or merely with a help of a pair scroll turbocharger (Alenuskin & Schotter, 2012, p. 12). The premium “xDrier35i model used a 300-horsepower turbocharged engine, and the xDriver28i had 240 horsepower” (Alenuskin & Schotter, 2012, p. 12). The base “six-cylinder engine operated at 25 mpg and the turbo version at 26 mpg” (Alenuskin & Schotter, 2012, p. 12). All US market vehicles came with an 8-speed automatic transmission. All X3s were equipped with BMW’s Diver all-wheel drive system (Boston, 2015). Implementation of the “Dream It. Drive It. Build It.” program required essential adjustments at the plant in Spartanburg, in BMW’s supply chain, and its IT system. Apart from installing cameras on the assembly line, BMW moved the complete production of the redesigned X3 from Europe to reduce the delivery time for the USA (Boston, 2015).

Goals and Values

The BMW Group demonstrates a specific mission statement. It plans to turn into the global forward manufacturer and marketer of premium items and premium attendances for personal mobility. In order to become capable of achieving this mission, the company has launched an innovative customer-oriented initiative, known as “Dream it. Build it. Drive it”. The major objective of this initiative is to present specific directives for BMW to sustain concentrated on portability and long-range value origination in an altering and emulative setting and to obtain essential effectiveness enhancements (Vuskane, 2011, p. 5).

The BMW Company has understood that the customer market profile changes, while more people become more environmentally friendly, cost-sensitive, and online-comparison-interested. It has helped the company to change its production process, providing their customers a possibility to create a car of their dream, selecting the properties they desire to see it their car. The major goal of BMW Company is to overrun its competitors in the industry, while incorporation of their customers in the production process allows equipping the car with all characteristics that customers believe to be better in the cars of BMW emulators (Vuskane, 2011, p. 5). Secondly, the BMW Company is interested in adding value to its products. Above that, the BMW Company has an objective of promoting their brand value and overall customer service. In regards to the pricing strategy, BMW has an objective of utilizing value-grounded pricing (Vuskane, 2011, p. 7). The majority of BMW customers are concerned with the company’s value. The company is interested in assuring that its customers understand and feel that they get great value from BMW products. Therefore, the BMW Company has an objective of equipping the most luxurious and technologically advanced characteristics possible (Glassman, n.d.).

Alternatives

The first alternative is to launch the initiative concerning the alternative sources of energy, for example, solar one for use in BMW cars. The customer profile has demonstrated that customers are highly interested in protecting the environment. Therefore, this trend can be used actively within the company to involve even greater quantity of customers into their customer profile. The addition of a new alternative energy platform to BMW’s energy portfolio can be another step in the demonstration of the company’s commitment to sustainable methods of generating power. The second alternative is to target a young generation of possible BMW drivers. The selected group is wealthy enough to afford BMW cars. This group is seriously concerned about the technology, while BMW cars are known to be quite technologically advanced. The group is affluent, highly-educated, and tech-savvy. This is a visible market segment, and these people would enjoy all the infotainment options. The third alternative is to target a new media in a face of women. It will provide a possibility to include marketing channels in various glossy magazines and TV programs with celebrity guests. BMW has several empty nests in this channel and this alternative will bring new customers, meaning women who are interested in a new car and desire to customize it for them and their children.

Recommendations

Firstly, it important to provide the possibility to see how the desired car is built to all BMW customers. Therefore, BMW has to extend the concept of online customization in order to address the issues of impatience in American car buyers’ profile. It is recommended to install video cameras along the assembly line and broadcast the process of how a BMW vehicle comes to life. The provision of such videos is a great method of keeping people excited about the process and waiting for the arrival of their new vehicle. Secondly, BMW is recommended to make its short films more accessible. BMW Company will be able to get maximum benefits from minimum costs. Moreover, these short films will help in attracting more attention to the new customer-oriented initiative, informing the customers who are unaware of the initiative of the possibility of creating a car of their dream and controlling the process of its creation. Finally, it is recommended to target a wider customer profile, including all possible segments that might be interested in a customized BMW X3. This should concern younger generation, women, and people interested in eco-friendly vehicles.