Reference no: EM132273594
BMW: Automaker Competes on the Digital Front
One of the biggest trends driving competition in the auto industry in recent years is the race to offer new and better “connected-car” technologies—including those that enhance safety, monitor maintenance requirements, provide Internet connectivity, and offer seamless integration with smartphones and wearable devices. A 2015 study of the worldwide auto industry projected that customer spending on connected-car technologies will exceed €40 billion ($42 billion) in 2016; that number is expected to more than triple to €122 billion ($129 billion) by 2021. Tech-savvy consumers increasingly expect their cars to serve as extensions of their personal technology, and one company working hard to exceed those expectations is German automaker Bayerische Motoren Werke AG—or BMW, as it is more commonly known.
BMW was founded in 1916 as a manufacturer of aircraft engines, but the company soon branched out into other areas. Today, the BMW Group manufactures motorcycles in addition to its three premium car brands (BMW, MINI, and Rolls-Royce), and it is now represented in over 140 countries—including 30 production locations in 14 countries. With close to 2 million cars sold in 2014, BMW is one of the world’s most-recognized luxury car brands, with a reputation for consistently delivering high-quality cars built on a foundation of advanced mechanical engineering. To maintain its edge, BMW is now expanding its focus to find ways to improve its cars through cutting-edge technological innovations.
According to Dieter May, BMW’s digital business models senior vice president, “Our competitor is not Audi, Jaguar Land Rover or Mercedes, but the space of consumer electronics players.” As May sees it, one of the biggest questions facing BMW—and other auto makers—in the coming years is “How do we take the connected home, personal digital assistants, and advanced sensor technology, and connect all these trends?”
BMW has responded to this question by building an extensive array of new technologies into its latest models. Through BMW’s iDrive information and entertainment system, drivers can access ConnectedDrive, a portal offering a wide range of location-based services, including concierge services, real-time traffic information, and access to more than 12.6 million searchable “points of interest,” ranging from gas stations to restaurants to tourist attractions. Another ConnectedDrive feature, the Head-Up Display, projects important driving information—such as current speed and warnings from the car’s night vision system—on the windshield, allowing the driver to keep his or her eyes on the road. The Speed Limit Info feature uses a car-mounted camera along with data from the navigation system to keep drivers informed of current speed limits, including those in effect due to road construction and weather conditions. ConnectedDrive, which can be controlled from the driver’s smartphone, also offers mobile office features, such the ability to dictate and send messages, and a ConnectedDrive Store, where users can purchase apps and services directly through the iDrive interface. And at the high end of BMW’s model line, the 7 Series full-size sedan, BMW’s flagship vehicle, is the first model to accept gesture-control commands for the iDrive display as well as a completely automated self-park feature that can be operated when the driver is outside the vehicle.
BMW is also working to ensure that the car-buying experience is keeping up with customers’ expectations by encouraging its dealerships to create more digital showrooms, with flat screen displays and virtual demonstrations to appeal to the many customers who are accustomed to the online shopping experience. In addition, BMW is adding “product geniuses”—like those found in Apple’s retail stores—to its showrooms. The specialists have no responsibility to sell; their job is simply to spend whatever time is necessary to explain and demonstrate each car’s various technological features to potential BMW customers.
To continue to develop the complex technological innovations it needs to maintain its edge over competitors, BMW has explored possible partnerships with technology companies such as Apple. Currently, however, the auto maker is focused on building up its in-house expertise and speeding up its internal software development cycles. In 2014, BMW spent over €4.5 billion ($4.75 billion) on research and development, and it spent, on average, more than €6,000 ($6,370) per car on connected-car technology. BMW is making it clear to potential customers and competitors alike that is committed to competing and winning on the digital front.
Critical Thinking Questions:
Other than selling more cars, what potential benefits do connected-car technologies offer auto makers such as BMW in terms of enhancing long-term customer relationships?
What responsibilities does BMW have to its customers regarding the data it captures via the various connected car technologies that it builds into its cars?
Of the primary components of an ERP system that were identified in this chapter, which modules are likely to be of highest importance to BMW if it continues to focus on in-house development of new technological features and services rather than partnering with an established personal technology company, such as Google or Apple? Would those tools need to change if BMW establishes a long-term partnership with a technology company?