BMW - Situation Analysis

Mid-Level Luxury Performance Sedans Situation Analysis

By Craig Schlesinger and Jason Wachter

I. The Mid-Level Luxury Performance Sedan Market

Consumer Overview

This market attracts consumers exhilarated by the thrills of driving. They are willing to spend more on their cars to obtain a desired level of performance. Although these drivers are primarily concerned with speed and handling, they are also interested in the luxury components, safety features, and durability of their automobiles. Fuel-efficiency is neither the first nor the last thing on their minds – they are not willing to sacrifice performance for the environment, but they are environmentally conscious enough to stay away from low-mileage sports coupes.

These consumers have adventurous aspirations for their driving experience. They want nimble turning capabilities and powerful engines. They are not interested in efficient, basic cars suited for point-to-point driving. Rather, they want fuel-injected speed and sports-tuned suspension designed for what lies between those points. These owners crave vehicles with an attitude to assuage their need for excitement.

For some of these mid-size luxury performance owners, driving is a reflection of their day-to-day lives. They tend to be youthful and exuberant, and they invest in these sedans to fit an image and satisfy a craving for performance. They cannot necessarily afford more expensive sports cars, but are willing to pay higher prices to avoid association with lower-level automobiles.

1

They are also more interested in performance and handling than space and size. As young adults, they have no need for

sports utility vehicles or minivans for family purposes, and their purchasing habits reflect this. 36.2 percent of adults

aged 25-34 drove four-door hard-top sedans, while only 26.6 percent and 11.2 percent drove sports utility vehicles (SUVs) or minivans, respectively.

Other mid-size luxury performance drivers are older in body

but younger in spirit. They see driving as an escape from the

rigor of their routine, and seek a performance car with practical features. They may have families, for which they

need efficient vehicles with sufficient space. These consumers don’t necessarily see themselves as middle-aged or older; they’d like to think they are younger than what their

birth certificate indicates.

Despite their age, these drivers tend to occupy the middle-to-

upper income bracket. For instance, consumers with household incomes greater than $75,000 are 16 percent more

likely to purchase a four-door hard-top sedan than the average consumer. As is usually the case, education and income figures for automobiles are strongly related. Consumers who

have graduated college are 22 percent more likely to purchase a four-door sedan than the average consumer.


Vehicle Overview

Mid-level Luxury Performance Sedans are a unique product category in the vast field of automotives. Vehicles in

this segment are engineered to provide maximum performance, and are intuitively designed with responsive

suspension, powerful engines, and sleek exterior lines. The mid-level luxury performance sector is a crossover – a hybrid between gas-guzzling sports cars, fuel-efficient lower-level sedans, and expensive luxury vehicles.

Mid-level luxury performance automobiles are as aesthetically pleasing as they are fun to drive. They are

typically fitted with cutting-edge automotive technology to create an ultimate driving experience. They are

performance cars first and family sedans second. These cars are built to perform and detailed to impress, aggressively attacking the road while smoothly accommodating their drivers.

Pricing for these vehicles tends to fall between $30,000 and $39,000, reaching no lower than $26,000. Some cars in this segment can be upgraded with various packages and features, at which point prices may reach higher than

$50,000.

2


3

Entry and Exit in the Market

Several manufacturers have recently tried to enter the mid-level luxury performance sedan market, while other brands have fallen considerably. For instance, Ford Motor Company’s Jaguar brand lost nearly a third of their light vehicle

sales during 2006. They only sold 20,683 vehicles, as opposed to 30,424 during the previous year. Their premium luxury sales notwithstanding, Jaguar has clearly lost a substantial amount of market share in lower-to-mid-level sedans.

Audi, however, has recently repositioned their A4 model to appeal to this target market. The basic 2.0 liter model starts at $28,900 and churns out 200 horsepower. The price is considerably lower and the engine less potent than most

cars in this segment; however, there is a 3.2 liter model available that offers 255 horsepower at a higher price. The vehicle itself is smaller, offering passenger volume among the lowest in its class.

Cadillac has recently entered the mid-level luxury performance market, aggressively repositioning its image with the CTS model (which replaced the Catera in 2003). Cadillac has fought its way into the market, competing with many

established brands in this segment. The Cadillac CTS will be further investigated later in this analysis.

Several other brands have attempted to enter the mid-level luxury performance market segment, offering similarly

priced cars with comparable features. Lexus has attempted to appeal to this audience with its IS 250 and IS 350 models, which the car maker labels as “Sports Luxury Sedans.” The IS 250 is available in rear-wheel drive and all-

wheel drive, and offers 204 horsepower, starting at just over $34,175. The IS 350 has considerably more power, offering 306 horsepower at a price just over $36,000. However, Car and Driver magazine, an industry-specific publication, explains on its website that the IS model “is intended to be sporting and it handles confidently, but doesn’t

beat the class leading BMW 3 Series or Infiniti G35,” noting further that “it’s as frisky as Lexus gets.”

II. Prominent Competition

4

Acura TL

The Acura TL, voted “Best in Class” by Kiplinger’s Personal Finance in 2006, is an elegantly designed car with high-class engineering. Starting at $33,725, it appeals more to older buyers seeking class and performance than to younger buyers looking

for a sporty ride. However, the Acura TL boasts considerable power, offering 258 horsepower. There are not many upgrade options for the TL, other than a $2,500

navigation system (the sports version is the TL Type-S, which churns out 286 horsepower and is priced nearly $5,000 higher than the base TL). This vehicle comes standard with many luxury and performance features, unlike many other models that

offer various engine and drive configuration options. Its five-star front driver and passenger crash rating rank the Acura TL among the safest vehicles in this market

segment.

The 2008 Acura Facts Guide suggests that the TL is engineered for the performance

and luxury sector and is intended to compete with vehicles such as the BMW 3-Series. The guide also states that the TL is positioned to appeal to a group that “tends

to be mature, married men who place comfort and practicality at the forefront of their buying decisions.” Although a performance sedan, the TL has clearly been stamped as a luxury car with sporty features, rather than vice versa. The guide estimates that

its buying demographic is predominantly educated, middle-aged men (along with most cars in this segment) with median household incomes between $135,000-

$160,000.

Acura boasts additional accolades on its website, offering professional reviews from

top-line publications. For instance, The San-Francisco Chronicle states that “the third generation Acura TL is not only attractive, but nimble, quick, and comfortable.”

The Acura TL sold 70,493 units in 2005, second only to the BMW 3-Series.


5

Cadillac CTS

Cadillac has recently repositioned itself, aggressively pushing its CTS model into the mid-level performance luxury sedan segment and targeting a younger audience. The CTS, restyled in 2003 and given a fresh start with a

new name (it replaced the now-defunct Catera), starts at $33,490. It boasts comparable engine performance to the TL with similar luxury features and

accessories. Its length and overall size rank among the leaders in this segment, and it comes standard in All-Wheel Drive.

The car has been completely redesigned to compete with European luxury performance sedans. The exterior has been remodeled with sleek, classy

lines, and the interior furnished with French-stitched leather. New technological features, such as an optional DVD Player and a standard Radio Data System that allows the driver to pause and re-listen to radio, give the

car a sophisticated feel. Cadillac has successfully reinvented itself by attracting a younger demographic while still appealing to older generations.

No longer are mid-level Cadillacs associated with a sluggish ride and uninspiring luxury; the new CTS conjures thoughts of refined styling and premium performance.

Car and Driver ranks the CTS as one of its 10 Best Cars of 2008, noting that

the final result “is a ride that is easy on the eyes, comfortable on your backside, exciting to drive, and competitive with the best from Europe.”

In 2005, the Cadillac CTS sold 53,959 units, accounting for 25% of Cadillac’s sales volume. Sales increased by six percent in 2005 for this

model.


6

Infiniti G35

The Infiniti G35 is a major player in the mid-level luxury performance market, offering a powerful engine and sophisticated luxury. The G35 is available in four models, the G35, the G35 Journey, the G35x AWD, and the G35 Sport 6 MT.

Starting prices are as low as $31,850 (for the basic model), and as high as $34,350 (for the AWD model). The vehicle comes standard with a 306 horsepower, 3.5 liter

V6 engine and one of the largest wheelbases in its class at 112.2 inches. The body is larger than many competitors, offering 99 cubic feet of passenger volume room, compared to 97.9 cubic feet for the TL and only 93 cubic feet for the BMW 3Series.

As a larger car, the Infiniti G35 tends to attract an older, more mature audience,

similar to that of the TL. Its style is arguably the least sporty in its class, but its interior may be the most luxurious. As one owner stated in Autoweek magazine, “the biggest improvement is in the interior. Everything looks and feels more expensive.”

The performance, however, is unquestionably impressive, offering one of the more

powerful engines in the segment and a standard vehicle-speed-sensitive variable-assist power steering. Another customer told Autoweek that “the suspension is surprisingly effective for a car this size, with little lean and near-dash neutral balance,

and I can see why the engine is revered – the power curve just keeps going and going.”

The G35 successfully balances class and performance, hedging slightly more on sophistication than some of its competitors.

Infiniti sold 62,507 of its G35 model in 2005, a four percent decrease from the

previous year.

II. Major Competition Breakdown and Analysis

7

Courtesy of Company Websites and forbes .com

III. The BMW 3 Series

8

History

The BMW 3 Series was introduced in 1968 as the BMW 2002, and it was engineered to fill a void in the car market

between American-born muscle cars and small two-seater sports cars. The 2002 was the first official “sports sedan” to enter the American market, and consumers enjoyed its performance capabilities and sufficient space. The 2002 was re-branded as the 3 Series soon after, and it has been remodeled and restyled several times since its inception.

The new 3 Series is accepted as an industry benchmark and a leader in the mid-level luxury performance sedan

market.

1928

DIXI DA 1 1929

DIXI DA 2 1961

3200 I

1991 3 Series

2008

3 Series 2000

3 Series


10

The 3 Series Brand

The BMW 3 Series is often bought as a performance vehicle, more so than many of its top competitors. Whereas

the TL, CTS, and G35 are larger and associated with a slightly more mature audience, the 3 Series is seen as a sportier vehicle with luxurious features. A BMW is a statement of the person who drives it more so than an Acura, Cadillac, or Infiniti. It is clearly a neck-tie brand, offering its owners an association with a confident and edgy

product. The 3 Series has a vivacious and flashy personality, a reflection of the automaker and its customers.

Like other BMW models, the 3 Series undergoes a restyling and re-imaging every seven years. BMW prefers to keep its models in the introductory and growth stages, rather than let them slip into maturity or declining stages. BMW names all of its models according to series number and the engine type; thus, the 328i is a 3 Series model

with a 2.8 liter engine. Unlike most car companies, BMW deviates from giving its models new names to generate publicity.

The BMW 3 Series is often seen as an authoritative product in the mid-level luxury performance sedan market. In its 2008 Facts Guide, Acura states that “the TL is engineered…to take on icons of performance and luxury such as

the BMW 3 Series and Lexus ES 350.” Many consumers are under the impression that the 3 Series is a prestigious automobile, still superior to most of its competition. Their buying habits are a reflection of this image: the BMW 3

Series sold 96,358 units in 2005, which accounted for approximately 40 percent of all BMW sales for that year.

The industry is also impressed with the BMW 3 Series. On its website, Car and Driver identifies this vehicle as a

segment leader. “The Benchmark for sports sedans,” the website states, “the 3 Series blends comfort, luxury, speed, and handling in a way that escapes other carmakers.” CNET.com, a product-review website, notes that the 3

Series is “quite an ego boost,” a reference to the psychological attraction of the car. Edmunds.com further praises the 3 Series, stating “[The 3 Series] is endowed with world-class suspension, steering and brake components, [and] these cars have an ability to communicate with their drivers that is unmatched in the entry-level luxury class, and

indeed unmatched by most cars at any price.” Edmunds.com awarded the 2007 BMW 3 Series the “Editors Most Wanted Sedan Under $35,000.”


9

Specifications and Pricing

The BMW 3 Series is available in several different models: the 328i, 328xi, 335i, and 335xi. The ‘xi’ models come

standard with all-wheel drive, while the ‘i’ models are rear-wheel drive. BMW’s most prevalent model, the 328i, offers a 3.0 liter, inline six-cylinder engine that pumps 230 horsepower. The 335 models are more powerful, with turbo-charged engines that offer 300 horsepower. The base price for a BMW 328i is as low as $32,400, but starting

prices may be as high as $40,000 for the 335 models.

The BMW 3 Series is the smallest vehicle out of its top competition, offering only 93 cubic feet of interior room, and the wheelbase is longer than only that of the Acura TL. However, its four-star front-end crash rating suggests that it is a rather safe vehicle, despite its performance attributes and relatively small size. Other safety features

include a rollover protection system and crash-sensor system that automatically unlocks doors and switches on hazard lights. The 3 Series is also considerably fuel-efficient, offering an estimated 20 miles per gallon city and 29

miles per gallon highway.


11

Distribution

In terns of an automotive company, distribution refers to the volume and prevalence of its dealerships and

production sites. BMW dealerships appear in all 50 states, and production occurs at 23 plants in 12 countries. Specifically, the 3 Series is produced in Leipzig, Germany; Munich, Germany; Regensburg, Germany; and Rosslyn, South Africa.

The Tri-State, New York, New Jersey, and Connecticut area is home to 49 BMW dealerships, all carrying 3 Series

models. There are 23 dealerships in New York, 18 in New Jersey, and eight in Connecticut, suggesting that BMW is rather well-dispersed throughout each state. These “BMW Centers” house many replacement parts and services,

as well as “Certified Collision Repair” and “BMW Spa” services for car-maintenance.

BMW 3 Series Owners

MRI PLUS

IV. The BMW 3 Series: Sales Data and Demand Analysis

12

Sales Figures

The BMW 3 Series sold 96,358 units in 2005, the most

among its prominent competitors. The Acura TL placed second, selling 70,943 units, and the Infiniti G35 sold 62,507 units. The Cadillac CTS, although last among its

top competitors, sold 53,959 units, a six percent increase from the previous year.

Sales of the 3 Series line of models accounted for approximately 40 percent of BMW sales in 2005. Sales

increased by nearly one percent for the 3 Series from the

previous year. 3 Series Ownership Demographics: Age

The largest percentages of those who owned BMW 3 Series models as of fall 2006 are between the ages of 25-34 and

45-54. MRI data shows that 54.1 percent of those who own a 3 Series are in either of these age groups. The BMW 3 Series clearly targets two age groups aggressively – younger, ambitious professionals with money to spend and an image to generate, and an older generation looking to their cars for freedom, independence, and a youthful spirit. Adults aged

25-34 and 45-54 are 18 percent and 69 percent more likely to own a BMW 3 Series than the average adult consumer, respectively. This further indicates the extent of the 3 Series’ popularity in these age brackets.

However, senior citizens tend to stay away from a luxury performance sedan. Adults aged 65 and older are 86 percent less likely to own a BMW 3 Series than the average consumer, suggesting that older generations seek a vehicle with more

safety and comfort features than speed and handling capabilities.

Forbes.com


13

3 Series Ownership Demographics: Gender

The 3 Series also tends to be gender-specific, preferred

more by men than by women. 42 percent of those who own a BMW 3 Series are men aged 18-49, and this demographic were 38 percent more likely to own this

car than the average consumer. Conversely, only 30.7 of those who owned a 3 Series are women in this age

group, and their index figure of 100 indicates that they were just as likely to own this vehicle as any other

consumer.

3 Series Ownership Demographics: Education

BMW owners also tend to be more educated than their

counterparts. Nearly 50 percent of 3 Series owners are college graduates, and these people are 97 percent more likely to own a 3 Series than the average American

consumer. Only 2.3 of 3 Series models are owned by those who did not graduate high school.

3 Series Ownership Demographics: Income

As is typically the case, educational figures give insight

to the distribution of a product among income brackets. 1.9 percent of those with household incomes greater than $150,000 own a BMW 3 Series. People in this

income bracket are 331 percent more likely to own this car than the average adult consumer. Considering the

vast coverage of the automotive industry and the various makes and models, this is a considerable penetration figure. BMW 3 Series owners tend to hold

jobs as managers and business and financial professionals: individuals in these industries are 101

percent more likely to own this sports sedan than the average American adult.

3 Series Ownership Demographics: Race

Nearly 90 percent of BMW 3 Series owners are either

white or Asian-American, suggesting that 3 Series ownership is very race-specific. Asian-Americans in particular are 288 percent more likely to own this vehicle

than the average adult consumer. African-Americans, however, are 69 percent less likely to own a 3 Series, and

African-Americans account for only 3.5 percent of 3 Series owners.


14

3 Series Ownership Demographics: Region

3 Series sales are skewed towards the coasts, particularly the western region of the United States. 40.5

percent of 3 Series owners are located in the Western Census Region, and individuals in this region are 82 percent more likely to own this car than their counterparts. Conversely, individuals in every other census region (Northeast, South, and North Central) are less likely than the average American consumer to own a

3-Series. 3 Series Ownership Demographics: Media

41.7 percent of 3 Series owners watch CNN, a premier news outlet. This suggests that these owners tend

to be educated consumers attuned to global and domestic affairs. Watchers of CNN, as well as other well-established news outlets such as CNBC, MSNBC, and Fox News Channel are all more likely to own a 3 Series than the average American consumer. Watchers of networks geared towards women such as

Lifetime and Women’s Entertainment are less likely to own a 3 Series than the average consumer, whereas ESPN’s male-dominated audience is 10 percent more likely to own this vehicle.

Although The Economist offers a small audience base, readers of this reputable publication are 530 percent more likely to own this sports sedan. Similarly, readers of Forbes and Fortune magazine make up over 20

percent of BMW 3 Series owners, indicating that these individuals are either financial professionals or interested in financial news. 15.3 percent of those who own a 3 Series model read Sports Illustrated,

further illustrating that this car has a predominantly male audience.

IV. The BMW 3 Series: Demographic Breakdown

15


16

3 Series Ownership Psychographics

As educated, sophisticated and active consumers, BMW 3 Series owners tend to fit two specific VALS

(Values and Lifestyles) groups. Some 3 Series owners are Achievers: goal-oriented individuals who value prestigious and well-made products. They own a 3 Series because it is a reputable automobile and well-established model. A 3 Series is also a demonstration of their success, a quality that many Achievers look

for in the products they purchase.

Innovators readily accept new technologies and ideas; thus, they purchase cutting-edge, high-class products. They may own a 3 Series because it is a reflection of their independence and personality. Innovators are successful individuals with high purchasing power, and they seek edgy, sophisticated products marked by

luxury and performance. They crave refined products that tend to be relatively expensive.

The Product Adoption Curve is another tool that is useful for identifying the psychographic attributes of consumers. BMW 3 Series owners tend to be innovators, which represents approximately 2.5 percent of the consumer population. Innovators seek cutting-edge, technologically-advanced products, and are likely to

purchase a sophisticated sports sedan such as the 3 Series. Some 3 Series owners are Early Adopters, which represents approximately 13.5 percent of consumers. Early Adopters like to be among the first to purchase

a product; this attitude reflects that of a BMW 3 Series owner. Early Adopters tend to inspire others to try the refined products they purchase.

V. The BMW 3 Series: Advertising and Marketing

17

Overview of Automotive Industry Advertising Expenditure

The automotive industry spent $1,801,354 per day on advertising in the fourth quarter of 2007, a six percent decrease

from the fourth quarter of the previous year, when the industry spent nearly $2 million per day. The industry spent $712,741,560 on network television advertising in the fourth quarter of 2007, a five percent decrease from the fourth quarter of 2006. This accounted for 40 percent of total automotive industry advertising expenditure for this quarter.

Internet advertising expenditure, however, climbed 32 percent, up from $110,111,161 in the fourth quarter of 2006 to $145,327,050 in the fourth quarter of 2007. Whereas advertising in national magazines stayed relatively constant, the

amount of money spent on advertising in national newspapers fell nearly 50 percent to $1,970,383 in the fourth quarter of 2007. Spending on national newspaper advertising accounted for only one percent of the industry total.

Specifically, Advertising Age, an industry-specific publication, estimates that BMW spent approximately $448 million on advertising in 2006, ranking it 72nd in the world.


18

BMW’s Aggressive Advertising

BMW has always promoted its products as superior vehicles, confidently asserting its position as an industry leader. The

company has associated its brand with class and prestige and has established its models as benchmarks in their respective segments. BMW labels itself “The Ultimate Driving Machine,” further suggesting its eminence as an automobile maker.

With the help of Austin-based advertising agency GSD&M, BMW launched an alternatively designed campaign in 2006. Rather than focusing on automobile specification and design, this series of print and television advertisements labels

BMW as a “company of ideas.” The advertisements portray the company as a cutting-edge, idea-generating company that takes risks and enjoys its freedom as an independently-held company. The television ads focus on stereotypical bureaucrats who neglect or reject ideas and separates BMW as a company that “makes sure great ideas live on to become

Ultimate Driving Machines.” The print ads follow similar themes of BMW’s freedom as an independent carmaker and the risks this allows them to take.

One particular print advertisement in this campaign challenges the viewer to match several other carmakers with their respective parent companies, and it lists competitors such as Lexus, Infiniti, Mercedes, Audi, and Volvo on the left-hand

side and their parent companies (Toyota Motor Corporation, Nissan Motor Corporation, Ltd., DaimlerChrysler AG, Volkswagen AG, and Ford Motor Company, respectively) on the right-hand side. The copy of the advertisement explains

“BMW has the autonomy to build cars the way [they] want to build them,” further suggesting that other automakers may not be able to justify novel risks to their parent companies, limiting their creativity and production potential.

BMW has also attacked other carmakers. For instance, BMW recently ran a separate aggressive campaign pitting itself against Audi Motor Corporation, owned by Volkswagen Worldwide AG. BMW, promoting its 3 Series line of cars,

sarcastically congratulates Audi for winning the “South African Car of the Year 2006,” then closes the advertisement by noting that the 3 Series was named “World Car of the Year 2006.” Audi ran advertisements responding to BMW’s offensive promotional strategy. Audi responded with an advertisement congratulating BMW and noting that its A4 model

was the winner of six consecutive Le Mans 24 Hour Races. The A4, however, has not reached the sales or consumer satisfaction level as many of its competitors, including the 3 Series.


19


20

BMW Joint-Campaign with HD Radio

BMW began campaigning with the HD Digital Radio Alliance to promote the High

Definition radio service. BMW, which offers HD radio in their cars, provides the Alliance with a substantial corporate customer to promote its services. Peter Ferrara, the President and CEO of the HD Radio Alliance, states that “to have BMW as a

marquee name to implement HD Radio is uniquely satisfying,” suggesting that BMW’s strong brand identity will in turn help HD Radio market its product.

BMW Films

BMW Films, launched in 2001 to promote the company and its cars, was a series of

revolutionary short films that showed BMW vehicles as the centerpiece of several action-packed plots. Television commercials encouraged viewers to see the films on the company’s website; the films were viewed nearly 100 million times. The films

were directed by prominent film makers and used intricate plot twists and effective dialogue to accentuate the features of the vehicle in the movie. Although well-made

and entertaining, the movies were very expensive advertisements that said little about the functionality and unique properties of the car.

TEDTalks

BMW has forged a partnership with TEDTalks, an annual conference in California during which 1,000 thinkers are invited to spread their messages and preach their

ideas. The TED (Technology, Entertainment, and Design) provides a platform for BMW to spread its ideas and promote its company as a haven for productive and

inspiring ideas. As an innovator, BMW fits well with the spirit of the conference, and it provides another outlet through which the automaker can share its ideas, beliefs, and concepts.


21

3 Series Target Market

BMW’s target market for the 3 Series sports sedan consists of well-educated, relatively affluent males seeking an

automobile to satisfy their need for excitement and luxury. In some cases, these men are also looking for a performance car that can serve as a practical family vehicle, offering sufficient space and safety features. While there are some women driving the 3 Series model, the target market is approximately 70 to 80 percent male. BMW also targets a rather

wide age group: males anywhere between the ages of 25-55 are candidates to purchase this car. The 3 Series is well-suited for sophisticated consumers deliberately searching for a refined car with a sporty ride.

3 Series Specific Advertising

The 3 Series is a well-established leader in the mid-level luxury performance sedan market, and BMW promotes the

model aggressively with clever advertising. Recent advertisements have shown how the 3 Series has developed throughout the years, including one spot that shows the changes the vehicle has undergone as it speeds around a track. Another spot, which can be found on BMW’s North American website, explains how the 3 Series has grown to become

a cultural icon and has obtained a loyal following.

VI. Strengths, Weaknesses, and Recommendations

22

Strengths

BMW has clearly established strong brand identity and

brand equity, and the 3 Series has become a leader in the mid-level luxury performance segment. The 3 Series is now associated with premium performance, high-class

luxury, and unquestionable quality. There are ample opportunities to build on the strength of the 3 Series

brand, especially as several automakers attempt to attack the mid-level luxury performance sedan market. BMW also maintains a high level of freedom because they are

an independently-held company.

The car itself is well-engineered and offers superior performance and handling to many of its competitors. While the 3 Series may be smaller than some of its

competitors, it is relatively fuel-efficient and safe, making it a practical choice for older generations

seeking a family-friendly automobile.

Weaknesses

Although the BMW 3 Series had the highest total sales in its

segment in 2005, some of its competitors are advancing significantly. Sales of the Cadillac CTS grew by six percent in 2005, and the automobile was named the 2008 Motor

Trend Car of the Year. The Acura TL is a critically acclaimed automobile and adored by most of its loyal consumer-base,

and the Infiniti G35 is a well-made car that offers more luxury features and a larger interior than the 3 Series. Audi is still trying to reposition is A4 to compete with the 3 Series,

and Lexus has made its IS model a serious competitor in the mid-level luxury performance segment.

BMW also faces challenges from an environmentally-conscious population. More and more consumers are looking

for fuel-efficient automobiles, and at 20 miles per gallon city, the 3 Series is relatively fuel-inefficient when compared to

many other mid-level sedans and hybrid vehicles.

Some of BMW’s marketing and advertising expenditures

have been misdirected in recent years. Although well-made and extremely entertaining, the BMW Films series produced

limited year-over-year sales increase. Recent campaigns have focused less on the cars themselves and more on BMW, possibly limiting the exposure of the automaker’s models

(including the 3 Series).

VI. Strengths, Weaknesses, and Recommendations

23

Recommendations

BMW should continue to build on its company’s strong brand as well as the prestige of the 3 Series model. The

company should continue to produce clever advertisements, and place these advertisements across all mediums, especially on the Internet, a medium that has grown substantially as of late. However, BMW should not misappropriate its advertising and marketing budget, as it did with the expensive BMW Films series. Rather, the

automaker should ensure that its brand and model awareness remains high.

BMW should also invest in more fuel-efficient technology for their performance lines, especially the 3 Series. Although the 3 Series is fuel-efficient relative to its competition, there are many new cars on the market that are much better on gas than the 3 Series.

BMW should also target women with their 3 Series model, focusing on the safety and practicality of the vehicle. The 3

Series consumer group is male-dominated, consistent with the mid-level luxury performance sedan segment in general. If BMW can capture a substantial female consumer base, it can gain market share ahead of its competition. Aside from young, professional women seeking an exhilarating automobile, BMW should target the older female demographic,

which holds significant decision-making power within their families.

VII. References

24

1)! 2008 Acura TL. Company Brochure, 2007. 2)! 2008 Acura TL Facts Guide. Acura Sales Training Brochure, 2007.

3)! 2008 BMW 3 Series Sedan. Company Brochure, 2007. 4)! "Acura TL." Acura Company Website. Feb. 2008 <acura.com>.

5)! The All-New 08 CTS Press Accolades. Cadillac Brochure, 2007. 6)! "Audi A4." Audi USA Company Website. Feb. 2008 <AudiUSA.com>. 7)! "Audi." Volkswagen Company Website. Feb. 2008 <Volkswagen.com>.

8)! "Avon to Restructure U.S. Distribution Operations." Material Handling Management 62 (2007). RDS TableBase. 20 Feb. 2008.

9)! "Best Luxury Sedan 2005." Forbes. Feb. 2008 <Forbes.com>. 10)! "BMW Brand Study." Feb. 2008 <Stealingshare.com>. 11)! "BMW Company Website." BMW USA. 22 Feb. 2008 <bmwusa.com>.

12)! "BMW Dealers Around the World." US Auto Parts. 20 Feb. 2008 <usautoparts.net/bmw/dealers/index.htm>.

13)! "BMW Germany Profile." Ad Brands. Feb. 2008 <Adbrands.net>. 14)! "BMW Unveils New Advertising Campaign." The Auto Channel. Feb. 2008

<theautochannel.com>.

15)! "Cadillac CTS." Cadillac Company Website. Feb. 2008 <cadillac.com>. 16)! "Car Reviews." Edmunds. Feb. 2008 <edmunds.com>.

17)! "Fall 2006 Automotive Product Report." MediaMark Research Inc. Feb. 2008 <mriplus.com>. 18)! "Infiniti G35." Infiniti Company Website. Feb. 2008 <Infiniti.com>. 19)! "Infiniti." Nissan Company Website. Feb. 2008 <Nissan-Global.com>.

20)! "Investor Relations." BMW Group. Feb. 2008 <bmwgroup.com>. 21)! "Lexis IS." Lexis Company Website. Feb. 2008 <lexis.com>.

22)! Neff, Natalie. "2008 Cadillac CTS." AutoWeek 30 July 2007. 23)! Pavlus, Don. Personal interview. 22 Feb. 2008. 24)! "Sedan Search." Car and Driver. Car and Driver Magazine. Feb. 2008 <CarandDriver.com>.

25)! "The Vals Segments." SRI Consulting Business Intelligence. Feb. 2008 <sric-bi.com/vals>.

*Images courtesy of Google Images unless noted

Date post:	13-Sep-2014
Category:	Documents
View:	39,382 times
Download:	1 times

BMW - Situation Analysis

Documents