Carmax System in China - Essay Example

The company expects to open five new stores in 2012 in the U.S market, with a total of 103 used car stores across U.S by the end of 2011, making CarMax the largest used car company in the U.S. The online market is the most active market, with more than 75% of used car customers in the country visiting the company’s websites, or buying their cars online (CarMax, 2011). The company has an integrated RFID system that tracks vehicles as an inventory management system; the system tracks vehicles throughout the purchase life; from the purchase, to reconditioning, test drives to the final sale (CarMax, 2011).

The use of the Radio Frequency Identification ensures that all vehicles in the company are scanned accordingly, tracked to prevent any possible theft or losses in the process. The use of RFID makes each vehicle to be linked to sales consultant, and aids in tracking the market pricing in wholesale of vehicles. The use of the RFID technology is critical in ensuring the management has the required real time information concerning storage and transportation, inventory, pricing, vehicle transfers, auctions, productivity, credit process, information among other processes (CarMax, 2011).

In addition to the above inventory management, the Electronic Repair Order System (ERO) is strategically used in reconditioning processes, and procedures in the company. The technology enhances quality, while reducing costs, which are then transferred to the customer as enhanced services and profitability (CarMax, 2011). The above information technology in inventory tracking, and in managing the repair works ensure that the company has a competitive advantage over other second hand car dealers in U.S. CarMax in United States market is highly developed with leading technologies in inventory and repair process.

This is due to the high volume of cars handed by the company annually, with large auction stores; about 103 stores across the U.S. CarMax Co. Ltd is a car accessory distributor for Hotai Motor Co. Ltd, a Taiwan based distributor of Japanese car maker, Toyota (CNA, 2011). The company started its operations in China in March 2011, by initiating two branches dealing with used cars, and car systems. According to Hotai, used car market in china is still at its infancy as at 2011, but with a great growth potential expected.

In China, the total car sales are about 20 million units, compared to the 300,000 units sold annually in Taiwan (CNA, 2011). Currently, the high sales volume of used cars in China portrays a rapid increase in the used cars market that will certainly surpass the purchase of new cars in the near future. A Study report conducted by Arthur D. Little, a world renown management consulting firm, indicates the annual sales volume of used cars in China will surpass the sales of new cars, by the year 2020 (Tong, 2011).

The compound annual growth of used cars in China between 2006 and 2012 was about 25%, and predicted to grow at much higher rates in the future. However, the Chinese used car market is on the budding stage, with more Chinese realizing a fertile market in used cars, boosted by increasing business in rental cars. The standard of used cars will mature with time, and the ratio of used cars to new cars expected to be more than 1 in the near future (Tong, 2011). Therefore, CarMax looks forward for a booming business in used car market in China in the near future.

The improving used car market has led CarMax to open two new branches in China; in preparation for the expected high demand of used cars in future. China has become the world leading market for RFID by value. For example, in 2008 the East Asia countries bought an equivalent of about $2.8 billion of the $5.29 worth of RFID spent globally. China alone spent $1.96 billion to