BMW Case Study - Globalization of Manufacturing Operations

BMW CASE:

Globalizing Manufacturing Operations

INTRODUCTION

This case focus on the dilemma that the president of BMW Manufacturing Corp., Al Kinzer, faced in 1995 in relation to BMW's new plant at Spartanburg, South Carolina and a dramatically increased demand in the U.S. market for the Z3 model.

To study the BMW case, the background information and role of new plant at Spartanburg will be described at the beginning. Secondly, the 3 alternatives options will be analyzed and compared accordingly to determine a proper conclusion. Finally, the recommendation will be presented with various considerations.

BMW BACKGROUND

BMW was found in 1913 by Karl Rapp as an aircraft engine design shop. After WWI, it started building motorcycles and then expanded into motor vehicles industry during the 1930's. After WWII, the company suffered again but survived later when Herbert Quandt took over the control in 1959. The company rapidly grew considerably and reached a market value of nine billion U.S. dollars in 1979; however, it was still small compared to the big U.S. auto manufacturer. Profits continued to grow up quickly. By 1995, BMW had thirty-four wholly owned subsidiaries, fourteen in Germany and twenty around the world. They also discovered that U.S. market would be the largest and fastest growing market for BMW.

BMW soon realized that many threats impacted its market share in U.S. The Japanese auto manufacturers started building plants in the U.S. to deal with the increased U.S. demand at a lower cost than importing their cars. BMW's U.S. export situation was made even worse by the appreciation of German mark and additionally the higher German labor costs. As a result, the decision was made in 1991 to bui...

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...system. Surely, it will take time for setting up a new plant and making production working smoothly with the quality assurance. How to shorten the learning curve for these works would be the first priority for BMW to think of.

Investing more on building a facility would be a long-term consideration. For the short-term, we suggest BMW should concentrate on production of the Z3 in the Spartanburg, and ship the 318 back to Germany for production. The 318 has worldwide demand, while the trend in the U.S. prioritizes the Z3. 318 or other 3 series have high potential on gaining market share in the future, and eventually the production will be shift to low cost production line to stay competitive. With international production, having the flexible manufacturing capabilities to produce a broader group of products will play a crucial role in future vehicle industry.