Mass Customization: The BMW Way

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Case Details:

Case Code : OPER051
Case Length : 12 Pages
Period : 1990-05
Organization : BMW Group
Pub Date : 2005
Teaching Note : Available
Countries : Germany
Industry : Automobile

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Background

BMW's history can be traced back to 1913, when Karl Friedrich Rapp (Rapp) established the Rapp-Motorenwerke to manufacture aircraft engines in the Munich district of Germany. In 1916, while the First World War was on, the company secured a contract to manufacture aircraft engines for the Austria-Hungarian army. Rapp needed additional financing to honor this contract. To meet this need, he entered into a partnership with Camillo Castiglioni and Max Friz in 1917. The new partnership company was named Bayerische Motoren Werke GmbH. However, the company soon ran into difficulties because of over-expansion and the partners had it to sell to Austrian industrialist, Franz Josef Popp, in 1917.

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In 1918, Bayerische Motoren Werke manufactured its first aircraft engine, the Type IIIa, which powered a biplane to reach an altitude of 5000 meters in 29 minutes, creating a world record. After the First World War, the Treaty of Versailles (1919) banned Germany from producing aircraft. Therefore, the company had to shift to manufacturing railway brakes. In 1922, Bayerische Flugzeugwerke AG, another company from the Munich region that manufactured small aircraft, was merged with the Bayerische Motoren Werke to form BMW AG.

BMW started manufacturing motorcycles in 1923 and the company's first model the R32 was launched in the same year. It was a 500cc shaft-driven cycle designed by Max Friz. BMW continued manufacturing motorcycle models until the company's foray into car manufacture in the late 1920s.

In 1928, BMW bought a car manufacturing unit in the Eisenach region of Germany. Along with the unit, the company acquired the rights to manufacture a small car called 'Dixi' which was based on the Austin Seven car⁴. This was BMW's first car and was marketed under the name BMW 3/15.

By the early 1930s, BMW had begun designing and manufacturing its own cars, and by the late 1930s, had introduced several successful models. The company's 327 saloon and 328 roadster were considered very advanced at that time (the roadster especially was the most successful sports car of its time and was even nominated as the Car of the Century in 1999 by a panel of auto experts)...

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4] Austin Seven was a British car named after Sir Herbert Austin, its designer. The Austin Car Works were located at Longbridge in England. The plant at Eisenach was producing the cars under license from the British company.