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Management

Read the following case study below and answer the questions that follow:
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 Infofeature 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 as 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.
Adapted from: Principles of Information Systems, Stair & Reynolds, 2018

QUESTION ONE

1.1 With the use of relevant research examine the potential benefits connected-car
technologies offer auto makers such as BMW in terms of enhancing long-term customer
relationships? (20)

1.2. With the use of relevant research determine 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? (15)

1.3 With the use of relevant research examine the advantages and disadvantages for 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?

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