Bmw North America, Inc. White Paper

A BRIEF PARENT HISTORY

The Bavaria-based, international company, BMW AG, had its beginning in 1913, at the dawn of German aviation. Upon seeing limited success supplying "aeroplane" engines for the Austrian Army, BMW explored the motorsport market. The company launched their first motorcycle, the famous R32, and it became the hallmark of German motorcycles for decades to come.

In 1927, BMW produced their first automobile, the tiny "Dixy." By 1933, BMW was producing cars that could be called truly theirs, offering a line of coupes, convertibles, and luxury sedans, which ultimately appealed to the higher end of the automobile market. The Bavarian company would come to export its high-end vehicles all over the world. In 1994, the company sought growth in the United States, and started producing automobiles in Spartanburg, South Carolina.

BMW IN AMERICA

The BMW name has been held in North America by BMW North America, LLC since 1975. The BMW Group in the United States has grown by leaps and boundsÐ'-- Since the 1980's, BMW has made successful acquisitions of MINIÐ'--a brand targeted to the lower end of their market, and Rolls-RoyceÐ'--a brand targeted to the higher end of their market.

WHERE IS BMW NOW?

Nationally and internationally, BMW markets its high-end vehicles as "Ultimate Driving Machines." The brand seeks to evoke thoughts and feelings of "power" and "performance." Europeans have widely agreed that the U.S. market is perfect for the brand because of its "snob appeal." BMW's main competitors in America's High-End market include Lexus, Mercedes and Audi brand automobile manufacturers.2

BMW has marketed and advertised their vehicles according to this "Ultimate Driving Machine" brand association. BMW takes pride in being popular among driving enthusiastsÐ'--those who are adamant about the "fun-factor" of driving a car. To further target this segment, in 2001, BMW teamed with Hollywood producers, directors and big-name actors to produce "The Hire," an online short-film series highlighting the vehicles being pushed to their performance limits. It can be said that BMW is always concerned with utilizing and expanding their already strong brand image. Advertising Age estimated BMW's advertising expenditure of $443 million in 2005, making BMW the world's #68 advertiser.2

It would seem as though BMW's investments in developing and maintaining brand loyalty in the United States are paying off. However, with the urgency surrounding rising gas prices and the "green movement," we need to explore looming internal or external threats or opportunities for continued growth in the North American market.

The purpose of this document is to report any insights regarding the Sales and Customer Service of BMW in the North American market, as well as discover and highlight opportunities for growth in these areas.

BMW'S CURRENT SALES AND MARKETING STRATEGY

"A company is your competitor if customers value your product LESS when

they have the other company's product than when they have your product

alone."

-Brandenburger & Nalebuff (excerpt from their book, Co-opetition)

Overall, it can be understood that sales is the lifeblood of any organization. In order to be successful, it is required that BMW understands its customers and why they buy from BMW. The company understands that its products serve as status symbols for their customers.

BMW markets their vehicles as symbols of raw power and performance, which strive to communicate the message of automobile superiority among its competition.

The company's website offers some key ways in which it sells its brand in the United StatesÐ'--"To maintain brand image and ensure customer expectation is met, the dealers comply with various requirements and corporate guidelines. BMW considers corporate identity and brand image to be paramount in maximizing awareness of the differences between it and its competitors."

The maintenance of its strong brand is where BMW starts with its marketing.

SALES

From a sales point-of-view, the BMW brand has made strong gains in North America with October sales of 26,821 vehicles. This is an increase of 9.6 percent over the volume of October 2006, when the company sold a total of 24,464 vehicles.

BMW North America has also reported that their year-to-date sales of 275,094 vehicles is an increase of 8.2 percent over last year's total of 254,297 vehicles at this time last year.

In addition to these sales totals for October in the United States was their BMW Certified Pre-Owned line of vehicles. In October 2007, 7,998 of these vehicles were sold. This holds an increase of 48.5 percent when compared with the number of vehicles sold in October of 2006. For the year-to-date, Certified Pre-Owned vehicles sold by BMW in the United States totaled 72,443 vehicles.

Overall, the BMW brand line of light trucks had the largest year over year increase in sales. The light truck line of vehicles had 4,367 vehicles sold in October of 2007, compared with 3,356 vehicles sold in October of 2006. This was an increase of 30.1 percent.

CUSTOMER SERVICE / SATISFACTION

J.D. Power & Associates recently ranked the BMW 3 Series as "Best in Overall Performance and Design:"

Overall Performance and Design

Performance

Style

Comfort

Features and Instrument Panel

BMW 3 Series

Award Recipient

Acura RDX