BMW: Service Issues and Decrease in Sales - Research Paper Example

BMW: Service issues and decrease in sales The BMW Group in the US reported March (2009) sales of 21,125 vehicles, a decrease of 22.9 percent over the 27,404 vehicles sold in the same month of 2008. For the first quarter, The BMW Group also reported a year-to-date sales volume of 51,244 vehicles, down 25.2 percent, compared to 68,529 vehicles sold in the same period a year ago (BMW Sales Remain Low Down 26.8% - Mini Sales Decline 15.9% In March) Even though automobile industry in general is going through a bad patch, BMW seems to be suffering a lot because of its sales decline all over the world. Earlier, BMW was one of the highly trusted automobile brands in the world and the consumers never bothered to think twice when they took their purchasing decisions. However, technical problems, poor service quality problems and recession problems are causing severe damages to BMW sales all over the world. Moreover, competition is getting tougher as time goes on and BMW seems to be struggling a bit in countering severe competition from the competitors. This paper analyses the reasons for the decline of BMW vehicle sales all over the world focusing mainly on the service issues, technical issues, and recession problems. Poor service quality is one of the major reasons for the sales decline of BMW. Even though most of the other car manufacturers are giving more importance to after sales services, BMW seems to be not much bothered about such things. Only the satisfied customers can generate immense mouth publicity which is absent in the case of BMW brands at present. BMW consumers have lot of service problems which is evident from the following incident. The dealer in my area acts like they are doing you a big favor by accepting your service business. To even look at the car, it seems like they want $250. Then, the service advisors fail to keep you informed and do not advice of the issue. Once, we had the car there for 5 days and they were unresponsive even after I tried to call multiple times to determine the status. Also, they fail to offer a loaner car and, once, asked me if I could get off work early because their loaner van did not want to get into traffic to pick me up!! When the driver came to get me, he joked to me that BMW just meant "Bring My Wallet." If anything, I think he is right! (Expensive and many service issues) It should be noted that some technical problems occurred to Toyota recently; they called back around 8 million vehicles from the global market, repaired and delivered to the customers, absolutely free of cost. In fact the Lexus customers got a substitute vehicle also till the repair of their vehicle was over and that also free of cost. We are living in a world in which the automobile manufacturers are competing to raise their customer service standards. BMW on the other hand is charging heavily even for the manufacturing defects. BMW dealers act like dictators and the poor consumers are suffering from that. Nobody can blame a BMW customer, if he expresses an opinion as given in the above example. Complaints about the technical problems of BMW vehicles are growing day by day from the customers. One customer says; “I've had this vehicle since February 2003 with only 3,900 miles on it ... that's 8 months now, and I've been back to the dealer 6 times now and next week will be the 7th. Another says I purchased a 328i BMW in June 2000 and I have had nothing but problems with the car” (BMW Miscellaneous Problems). Such customer complaints about the technical problems of BMW vehicles are causing big problems to BMW’s sales ambitions. BMW had a reputation of making engines even for airplanes. Such big reputations about the company created immense trust in the minds of the customers. However, gradually increasing reported technical problems of BMW vehicles caused suspicions in the minds of the customers at present about the quality and reliability of BMW vehicles. Competitors are utilizing such opportunities to defame BMW and to increase their sales. “The big news right now is regarding high pressure fuel pump problems in various BMW models. The fuel pump issue is on the rise and it has been reported among drivers with 1-series, 3-series, 5-series, x3, x5 and x6 vehicles” (Welcome to BMW PROBLEMS .COM, the BMW drivers' on-line resource for consumer information) Theoretically, the increasing technical problems of BMW vehicles are the result of negligence from the part of BMW management. It should be noted that BMW is one of the oldest automobile manufactures in the world who had a better track record than any other automobile manufacturers in the world as far as technical issues were concerned. Under such circumstances, it is logical to formulate a hypothesis that management issues caused technical problems in BMW at present. The world GDP growth has been fluctuating a lot in the past years. In 2008 the market contracted with a decline in GDP of 2.6%. In 2009 however, world GDP grew by 1.6%. The projections for 2010 is a growth in GDP of 2.5% (IMF, 2009).This leads to the suggestion that the world economy is about to recover from the financial crisis. Projections for the years from 2011-2025 predict world GDP to increase steadily by 3.5%. For BMW’s operations it seems relevant to distinguish between the growth in emerging markets like China and India and the growth in Western economies like Europe and the US. The prospects for China and India are a GDP growth of 4.7% and 6.2% respectively, whereas the US and Europe grow by 2.2% and 1.8% respectively (Pløen & Olesen p.33-34). It is an accepted fact that the global wealth is slowly shifting from western countries to Asian region as a result of globalization. China and India were the least affected countries in the world as far as recession problems were concerned. America and other western countries are still struggling to get out of the recession problems which forced global companies to shift their focus more towards the Asian region. India and China like emerging economies on the other hand are doing everything possible to attract as much as foreign direct investments possible. Most of the European automobile manufactures already established their manufacturing units in Asia. On the other hand, BMW was little bit slow in responding to the changing business climate in the world. In fact BMW was reluctant initially in entering Asian market. Their reluctance served as a blessing to the competitors. Competitors already brought many models which are suitable to the mid-income Asian market. On the other hand, BMW is still trying to sell their expensive models in Asian market. Unlike in America or Europe, people in Asia have moderate income. They are on the verge of development at present. In other words, only moderately expensive vehicles will be better sold in Asia. BMW is trying to sell their expensive models in Asia also and subsequently their sales seem to be the weakest in Asian region. The crude oil price is increasing day by day and most of the Indians and Chinese are giving priority to fuel efficiency while purchasing a vehicle. BMW on the other hand gives more importance to performance at the expense of fuel efficiency which is causing problems for them to attain their sales target. To conclude, poor service quality, poor management and technical problems and recession problems are the major reasons for the sales decline of BMW. BMW still believes that reputation alone may help them in boosting their sales. They are forgetting the fact that current customers value other things like good service, better performance etc more than the reputation of a company. Works Cited 1. “BMW Miscellaneous Problems”. 2011. Web. 29 May 2011. 2. “BMW Sales Remain Low Down 26.8% - Mini Sales Decline 15.9% In March”. 2009. Web. 29 May 2011. 3. “Expensive and Many Service Issues”. 2009. Web. 29 May 2011. 4. Pløen Rasmus Ramshøj & Olesen Mikkel Kronborg. “Valuation of BMW”. 2010. Web. 29 May 2011. 5. “Welcome to BMW PROBLEMS .COM, The BMW Drivers' On-line Resource for Consumer Information”. 2011. Web. 29 May 2011. Read More