BMW: THE 7-SERIES
Brief History of Bayerische Motoren Werke:
BMW, a German company is a producer of automobiles and motorcycles. Designed as an aircraft manufacturer and originally founded in 1913 by Karl Fredrich Rapp, the company was commissioned to build the V-12 engine for Austria-Hungary. In need of extra financing, Rapp reconstructed the company as the Bayerische Motoren Werke. In 1917, Rapp left the company and it was taken over by Austrian Franz Josef Popp who later named it BMW. BMW continued their endeavors in producing for the German panzer (airplane) and the motorized division of the German airforce. It was not until after the World War that BMW was banned from manufacturing for three years. In 1952, they began manufacturing automobiles. In 1959 BMW found themselves in a tough financial situation, as they almost had to sell their interests to Daimler-Benz, the number one auto producer as well as their number one competitor. However, with the opposition of the workforce and labor unions as well as an individual named Herbert Quandt, shares were increased by 50% and the company did a turn-a-round.
As recently as 2004, revenues for BMW were $44 billion dollars with an employee base of 105,972 (HBR 2004). Today, BMW accounts for 10% of the market share with 70% of their sales from Europe and 30% of sales from United States and Japan. These figures equate to the success of BMW and have helped them gain brand recognition as the "Ultimate Driving Machine."
What are the causes and consequences of BMW's quality problems with newly launched products? What should be done to improve "launch quality"?
The development and launch of a completely new or redesigned model line was a complex, time-consuming, and expensive undertaking for BMW. Stylists in BMW's design studios began exploring various alternatives for the car's exterior appearance six years before the scheduled introduction. BMW typically spent two years in styling (with less concentration on quality), longer than most other automobile companies, and far longer than the six months typically spent by the Japanese luxury carmakers. It can be said that some of the causes of the quality problems originated with the competition of Japanese automakers. When Japanese entered the market they concentrated on quality and excellent reliability (more practical for everyday use) for their automobiles along with a lower price tag and shorter production time. In fact, BMW is known to spend $40-50 million dollars on design quality for only one of their models, while Japanese car maker Toyota distributes $20 million on design quality for all their models. From 1970 to 1990, sales volume of BMW grew by a factor of 15, and car production grew from 160,000 to 500,000 units/year. As stated in the study guide, the world's 16th largest carmaker held 1.5 % of the world market: "By the late 1980s, new competition began to challenge the European high-end producers." In 1986 Honda introduced Acura, in 1986 Toyota (Lexus) and Nissan (Infinity). By 1990, Honda's Acura and Toyota's Lexus were consistently topping the J.D (Power Surveys on Customer Satisfaction and Initial Quality in text book). Also, Japanese automakers increased competitiveness in the U.S. luxury car market. Between 1986 and 1989 their share jumped from 1.9% to 11.8%, while European share fell from 29% to 22% (textbook). After clay models and drawing were evaluated, BMW's management would give final approval to the overall style and product concept. Product engineers then translated the product concept and style into a vehicle with the specified characteristics. A vehicle under development was divided into 30 major modules. An interfunctional team from design, product engineering, production engineering, prototyping, vehicle testing, procurement, manufacturing, and other functions was responsible for each module of the car from start to finish. Because the product-engineering...
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