Study the case below and answer the questions given at theend:
BMW: Marketing Subsidiaries in ForeignMarkets
BMW is a German manufacturer of high-quality motor cars, Abouthalf of its sales are in the German market, with the other halffrom exports. In reappraising Its markets and distribution strategyboth in Germany and abroad, the company believed that its multiplelayers of distribution were causing inefficiencies in its marketingefforts.
BMW Germany
Originally, BMW had a dual distribution system in Germany. Itemployed a strong wholesaler system along with direct distributionby BMW to large dealers. This system seemed to work effectivelybecause BMW's market share in Germany doubled in 10 years. However,the company found share competitive distortions with this dualapproach. For example, the wholesalers that received the samecommission for wholesale transactions as for retails sales had goneinto direct competition with retailers. The larger direct dealerssometimes sold more than the wholesalers but received the smallerdealer discount. The problems arising from BMW's distributionstrategy caused the company to abolish its German wholesalernetwork. BMW expanded its direct dealer system to replace thebusiness formerly handled by the wholesalers.
BMW Abroad
The company was planning to initiate a more direct sellingmethod in its foreign markets as well as at home. It realized theneed for care in order not to disturb existing import channels.However, the company believed that it was desirable to replace thepresent independent importers in foreign markets with company-ownedmarketing subsidiaries. The independent importers buy the cars fromGermany and then resell to accredited dealers --- who sell them tothe public, In moving to company-owned marketing subsidiaries, BMWwas following the international marketing approach of Volkswagenand Daimler-Benz (with Mercedes). One of the major argumentspresented for going direct was that BMW could save the 15 percentcommission the company paid to its importer distributors in foreignmarkets.
France
In line with its new policy of more direct distribution inforeign markets, BMW formed its first marketing subsidiary inFrance. BMW Import SA replaced the former independent Frenchimporter (which had been called BMW France but now was renamed SFAMFrance). SFAM France continued to sell BMW cars to consumersthrough its retails outlets in Paris and in the provinces. Sales todealers henceforth were made only by BMW Import SA, the company'swholly owned marketing subsidiary. This seemed to be successful inFrance.
United States
In implementing its new direct marketing approach in the U.Smarker, BMW faced two alternatives. It could either take-over itspresent U.S. importer-distributor or establish a new and separateBMW marketing subsidiary as in France. The company wondered whichof these alternatives would be best for the important U.S. market.BMW had about 250 dealers in the United States.
a) Do you see any disadvantage for BMW in going todirect distribution in foreign markets?
b) What advantages might the company realize byoperating through its own marketing subsidiaries?
c) In marketing the decision for the U.S. market, whatquestions would you ask? What variables would youconsider?
