Factors that influenced BMW decline of unit sales from 1986 to 1991 in the US market.

Essay by Mel_GibsonUniversity, Master'sA, February 2003

download word file, 3 pages 3.7

Downloaded 169 times

There were many factors that influenced BMW decline of unit sales from 96,000 in 1986 to 53,000 in 1991 in the US market.

The entrance of Japanese manufactures in the US luxury car scenario in 1989 selling reliability with price competitiveness, an old fashioned positioning relating BMW's brand only to luxury/performance business and some economical and political events contributed to a loss of market share and image.

Environmental Analysis

Sales in US declined from 1986 peak of 96,000 units to 53,000 in 1991. By 1991, it had declined by 24% due to the Tax Reform about 10% and the Stock Market Crash of October 1987, both an economic and emotional blow to the luxury car market.

In general there was a change in social values and consumer behavior. The "conspicuous consumption" of the early 1980s gave away to a more value-oriented purchasing.

Despite this new consumer mentality, government actions, and the resulting declining overall market and luxury/performance segment, new competitors entered this segment reshaping it.

In 1989 the DM/dollar relationship reflected in a 24 % increase on price.

Market Analysis

In 1991 BMW's global participation in the market resulted in 60% of its automobiles being sold outside Germany and 33% outside Europe. Major county presence was Germany, USA, Great Britain, Japan, Italy, and France.

With 5.6% market share in Germany and 0.7% in US, BMW total production in 1991 was 533,000 representing 1.7% of world's output

In 1985 11,4 million of automobiles were sold in US, in 1991 it dropped to 8.4 million.

After August 1989, BMW developed its market plan focusing to basic issues: the composition of product line on the low end and the position of the "price ladder" overall, establishing a new strategy with focus in brand and product, franchise, and organization and people.

Customer Analysis

The Japanese manufactures established a new concept of the luxury car: a car that is so reliable and backed by such strong dealer service that even at a "luxury price" it represents a good value.

Consumer research revealed that there was a prestige associated with owing one of the Japanese luxury cars such as Acura, Infiniti, or Lexus - competitors' models. The ownership of one of these cars marked the person as a "smart, in-the-know, value-oriented buyer".

BMW buyer's median age varied between mid-30s to mid-40s with annual incomes between 100,000 to 300.000.

Competitor Analysis

The three main Japanese competitors at that point were Honda, Nissan and Toyota.

Honda's Acura was introduced in the US market in 1986, Nissan's Infiniti in 1989 and Toyota's Lexus in 1989.

The introductory pricing strategy of Infinity and Lexus helped make their reputation with the trade press.

So, the Japanese entries established reputations for reliability and dealer service. Their new distribution network strategy allowed them to set out requirements for dealer investments in physical plant and dedication of facility to the single brand.

They limited their product lines while BMW was having current eleven core models plus several specialty models and compressed the cycle for replacing models to as little as 4 years.

Company Analysis

As stated BMW's V.P. of Marketing: BMW was a highly focused, independent company with one business - the luxury/performance automobile business, and all investment, talent and resources focused to provide the world market with 500,000 automobiles per year. Company did not want to be the biggest, only the best.


Even having settle activities since the early 70s in US, and experiencing a great penetration in the middle 80s, BMW was not structured enough to compete against a oriented distribution, pricing aggressiveness and changing of image to a new demanding market.

Marketing Selection

Extend of the of consumer age range from 35 to 55, with three different approaches.

Sport models Segment: young executives, middle to upper class couples with annual incomes varying between U$ 100,000 to U$ 150,000

High Luxury Segment: well established business men, with annual incomes upper than U$ 150,000, located in big commercial cities

Company Segment: company executive's campaign.

Product Planning

4 different models: Sedan Basic - 375ib, Sedan Complete 375ic, Business Basic 750sb and Business Comprehensive 750sc

A very well structured customer care program with a 24 hours toll free customer assistance, roadside assistance, dealer bonus, quality certificated inspection, reduced rates in loaner car and an efficient telephone follow up


5% to 10% bellow competitors to the Luxury models and 10% to 15% to the sport segment, selling the image of premium price for completely equipped value car

Suggested prices: US 25,900 for the 375ib, US 28,200 for the 375ic, US 48,500 for the 750sb and US 50,900 for the 750sc

A premium discount of 5%, for the "My last car was a BMW".


Keep on supporting, training and increasing the number of exclusive dealers showing a health and customer oriented image.


An extensive media campaign featuring health and well succeed people.