Business Strategy of Auto Nation Company - Assignment Example

Business Strategies: Assignment Business Strategies is related to how the business performs successfully and takes competitive advantages in a particular market. Due to the globalization the competition in the global market has become tough and every business has to strive hard to accomplish its goals and to keep the business on a proper track and thus attain both short term and long term goals of the business. This assignment basically focuses on one of the most successful and Fortune 100 companies, Auto Nation Company, and its business strategies. Introduction of the company: Auto Nation is the chain of the auto dealerships. The company founded in 1996 by H Wayne Huizenga. The head quarter is located in Fort Lauderdale, Florida. It is supposed to be the largest automotive retailer in United States of America, with 272 dealerships nationwide. It is such a big business where approximately 25,000 people are working. Auto Nation sells 37 different brands. The core brands sold by the companies are General Motors, Ford, Toyota, BMW, and Honda Nissan. It also sells various ranges of automotive products like used vehicles, spare parts and automotive services. This company has the three following operating segments, IT Opportunities and Threats: Auto Nation is very keen to upgrade its technology according to the changing technological environment. The company has strategically used the information technology in its operations. Mobile technology is a great opportunity for Auto Nation to develop. The company has recently launched a mobile website to reach more and more customers and increase the sale. Mobile is the best means of reaching to the maximum number of customers. People use their mobile phone while waiting, riding in a car, sitting on the beach. So this is the great opportunity which Auto Nation has grabbed to expand the business through cell phone communication. Data security and privacy is the major threat in all the businesses because they rely on information technology. Licking of important data misuse of the data, piracy can be the major threat but in the company like Auto Nation these issues are easily kept under control. Mission, Goals and Objectives: The vision of Auto Nation is the foundation of operational excellence. No compromise will be done as far as quality and customer satisfaction is concerned. This vision enables the company to set industry standard and improve consistently The Mission of the business is to become the best and top automotive retailer in America. Objectives of Auto Nation are to be America’s most successful automotive retailer by performing the business with highest standards of business conduct Porter’s Five Forces: An industry is influenced by five forces according to Michael Porter. The five forces are as follows: Rivalry, Threat of Substitutes, Buyers’ power, Suppliers’ power, Barriers to entry Rivals: As of now Auto Nation is the biggest and top 1 automobile group in America. But there are many rivals existing in the market. The major rivals of Auto Nation are as follows: Penske Automobile Group, Asbury Automobile Group, Group 1 Automotive, Ford of Dublin, Icahn Enterprises, Sonic and Lithia Motors Threat for Substitute: The threat for Auto Nation may arise from the availability of the substitutes. The recession is the major threat. Because of the recession and rapid increase in fuel price the people will not afford the cars and they will prefer to go by public transport. Of course the sale of used car option is there but again the people will think about saving the fuel because the old and used cars don’t have the mechanism which can assure of saving the fuel and thus they might not be cost effective. Buyers’ power: The concept of Buyer’s power is concerned with the influence of customer on the buying process. If there are more sellers and buyers are comparatively limited then in that case the price of the product is decided by the buyer. In case of American auto sector, there are buyers but in current situation due to the economic meltdown they are not in position to buy the cars. In such cases to attract the customers the company can decrease the price or give some offers to the customers. Suppliers’ power: It is the opposite of buyer’s power. When the supplier is dominating in the market the business becomes supplier oriented and the entire market has to depend upon the suppliers. In case of Auto Nation their suppliers are the car making companies and the customers who sell their used cars. Auto Nation can be on the dominating position. The business of core motor companies depends upon their volume of sale. Barriers to New Entry: In the current scenario it is desirable for Auto Nation not to try to occupy any new market but to concentrate on the existing market because it is the tough time for anyone to enter in the new market which has already been captured by the old and existing competitors; especially global market. SWOT Analysis: SWOT is the abbreviated form of Strength of the company, Weaknesses of the business, Opportunities the company has in the market and Threats of the current market. Strength: Auto Nation is one of the established companies and they have built a very strong image in the minds of the customer. Building trust in the customers’ mind is very important for achieving long term goal and goodwill from the customers. The company involves in the sale of both new brand cars as well as used cars also. It also gives the service to the customers. So it is the one single roof where various tasks are performed such as selling product as well as service and availability of the spare parts and after sales service also. Thus Auto Nation’s used car sales, and parts and service sectors is the strength. Parts and service made up 45 percent of Auto Nation’s gross profit in 2008. The major strength of Auto Nation is as compared to its rivals is its balance sheet. Auto nation is in much better position as compared to the rivals such as Sonic or Lithia Motors. Weaknesses: It is the weakness of Auto Nation as it is criticized for not giving a treatment of equality to its employees and there is racial, nation origin, and religious harassment. It is the complaint that non white employees are being harassed. (Bias Breakdown, Asian and Blacks Lead in Perceived Discrimination at Work, by Amy Joyce, Washington Post December 9, 2005) It means that the HR department lacks its control and the employees are not properly treated. The company should better know that the employees are the greatest asset of the business. Opportunities: Having possessed the topmost rank Auto Nation can boast the strong network of the customers. As mentioned before the fuel cost is increasing day by day. The car making companies prefer to be eco friendly due to the environmental issue. Due to this the sale of the used cars is a challenge for Auto Nation as this company gets significant revenue from the sale of used cars. Here the company can design a strategy for getting competitive advantage by developing the kit which can make the old cars usable in an eco friendly manner. Due to recession, the demand for new brand models can be decreased. This is also an opportunity for Auto Nation to focus on the sale of spare parts as well as used cars. Auto Nations relatively large size, store network, ability to command volume discounts, and ability to market its local brands in unison, the company enjoys something of a cost advantage over competitors. Threats: Oil prices are fluctuating. The market is still settling down from the global recession. The market is tight. These are the external threats which are not in the hands of any business. In case of Auto Nation they should focus on domestic market and particularly it is desirable to concentrate on the service and sale of spare parts rather than selling the cars. Alternate strategic approaches: The new strategy and technology was implemented in the sales and service efforts of Auto Nation. Auto Nation has changed the strategy of mass marketing and now the new strategy is being implemented. Auto Nation has formed 62 different groups and segregated the customers into these groups. The company prints only the messages which are relevant to each customer. The customers who get the related communication feel that they are connected. The strategies designed by Auto Nation are customer oriented. The future plans of the company include the deeper customer study which may help to interact with the customers. Proposed Business Strategies: The proposed business strategies focus on the establishing and nurturing the relationship with the customers. The following major proposed business strategies are there: Give a positive customer experience at the stores. Leverage the significant scale to improve the operating efficiency Increase the productivity Build a powerful brand in each of the local markets The strategies are basically supported by the use of information technology. The company uses the internet to develop and acquire customer leads and referrals and they leverage information technology to increase the customer relationship. Scott Zientarski, director of database and direct marketing, realized that the firm requires taking efforts to find out the best customers within that mass of names, and then strive hard so that they stayed with AutoNation for the long term. Conclusion: Auto Nation’s progress is rapid and consistence due to the effective business strategies. In the unpredictable atmosphere of global economy, it is necessary for them to be alert and take constant review of the market and the strategies should be flexible so that the company would quickly adapt and adjust itself to the changes. Assignment 2 Executive Summary for the whole project The entire project is the study of different business strategies in auto industry. For the study and discussion the auto company taken into consideration is America’s no. one auto retailer Auto Nation. In the first assignment the history of the company is given along with the mission, vision and objectives of Auto Nation. Next discussion is company analysis on the basis of Porter’s five forces and SWOT analysis. The next point discussed here is the business strategies used by the company to keep no one position intact in the market. The next point that is discussed is the “Value Chain Analysis.” Nolan’s The Stages of IS growth model is discussed with the reference to Auto Nation. Finally the IS system in Auto Nation is described which is followed by the Ethical and Social issues related to IS in the company. Value Chain Analysis: Value Chain Analysis is the chain of various activities which are performed in the company. They are Inbound Logistics, Operations, Outbound Logistics, Marketing and Sales, Service. Inbound Logistic activity is concerned with receiving and warehousing raw materials and their distribution to manufacturing as they are required. In case of Auto Industry the received material the finished new brand cars, used cars and spare parts. The spare parts include wheel, so they receive their finished material from the car companies and those who sell the used car Second activity that is operation consists of the process of transforming inputs or raw material into finished products and services. They need spare parts for the used car. Second activity is the warehousing and distribution of finished goods. Auto Nation is the largest automobile retailer in the United States and it has more than 371 vehicle franchises in 17 states. This is the largest sale retailers online also. The physical dealership offers products as well as services which include vehicle maintenance and repair services, spare parts of the vehicles, extended service contract, arrangement of finance for purchasing of vehicles. Before describing the stages of IS growth model of Nolan it is necessary to understand the concept of the model. Stages of IS growth (Nolan) and its application in Auto Nation: Stages of Growth model is a model for the growth of information technology in business organizations. It was first developed by Richard Nolan There are total 6 different stages, they are initiation, expansion, control, and maturity, Initiation Stage: Auto Nation was founded by a billionaire entrepreneur Wayne Huizenga. Auto Nation was founded in 1996. At its initial stage marketed itself under the Auto Nation USA brand, but then it switched to the local branding strategy in 1999. With many ups and downs the company finally flourished. 1999 was the critical year for Auto Nation. In the first quarter of 2000 the company had a loss. It resulted into the closure of company’s 23 used vehicles. Thus the initial stage resulted into loss for Auto Nation. Expansion Stage: In 2000 the CEO of the company Michael Jackson told that the Auto Nation is now concentrating on new vehicle retailer. In July 2000 Auto Nation decided to capitalize on brand recognition by changing the names of 28 of their 30 car dealerships in Florida to Maroone. Auto Nation adopted the strategy of capitalizing brand recognition by changing the names. Although the name was changed the Auto Nation name was displayed underneath. Auto Nation thus fully controlled the market of automobile and started stepping towards the most popular are highly praised automobile retailer in America. Control Stage: The use of computer in the business functioning is the next process of contagion. Auto Nation’s next very strategic step was to develop the online Auto Nation brand and establishing partnership with well known internet companies. On May 15, 2000, Auto Nation and AOL announced to ally and build the world’s largest virtual auto dealership. The Auto Nation started an effective training program for its managers. The program aimed at establishing operating standards in the business. Thus the company tried to control the operation and the system through the competent and trained managers. Maturity Stage: The company came at its matured status after post terrorist attack on September 11 2001. The major decision was taken by the company and that is not to offer loss leading loans. Auto Nation decided to way out from the loan-origination aspect of the auto business in December 2001. The companys exit from the loan business had little impact on outstanding loan deals. In 2002, Auto Nation topped, in both used-vehicle sales as well as new vehicle. Nation officials reported first-quarter earnings of $91.7 million, or 28 cents a share, compared with the earlier years $59 million, or 17 cents a share. The companys streamlined focus on selling new-and-used cars is proving to be a successful business choice. The company thus reached to maturity level in its business. Portfolio of IS according to McFarlan’s Matrix Strategic High Potential Key Operational Support Strategic: The E-commerce marketing strategy is the critical application to sustain and grow the business and to reach maximum numbers of potential customers. As part of our e-commerce marketing strategy, Auto nation has focused on the following IS activities (1) developing websites and an Internet sales process. that appeal to online automobile shoppers, (2) obtaining high visibility on the Internet through search engines such as Google, through our own websites, through social media websites such as Facebook, and through strategic partnerships and alliances with e-commerce companies, and (3) developing and maintaining a cost structure that permits us to operate efficiently. High Potential: In the period of recession the sale of used vehicle has got a high potential. So it is equally important to focus on this sale also. The company’s used vehicle business strategy is related with utilizing the web based vehicle inventory management system to leverage the local market inventory and to optimize the supply, mix and pricing. Key Operational Like other industries auto industry also depends upon the media for growing its business and thus achieving success. Auto Nation is taking marketing efforts for building its business with a broad base of repeat, referral, and new customers. In addition to the online efforts, the company is active in marketing and advertising through newspapers, radio, television, direct mail, cell-phones, and outdoor billboards in our local markets. Support: The Company supports its employees, because well trained personnel are essential for enhancing the quality and standard of the service. During the training program the Information System is widely used. The employees of the company, from the senior management to the technicians participate in the Business Ethics Program, which includes web-based interactive training programs, live training workshops, written manuals, and videos on specific topics. Suggested generic management strategies (Parsons) linked to IS and justification for this in regard to your company: Gregory Parsons has divided the generic IS strategies into six different categories: 1. Centrally Planned Strategy – Information System is planned centrally yet responsibility for its execution and control is distributed; In Auto Nation the common or central website is AutoNation.com, the auto nation group manages the operation of approximately 270 different websites for the franchises. These websites were developed in a very short time span of 18 months. The websites for individual dealers are connected with the main website, www.autonationdirect.com. 2. Leading Edge Strategy – Leading age technology is the technology which auto nation used to achieve the competitive advantages. Some crucial decisions were taken by the management. They were related to reduce the cost and thus increase the benefit. 3. Free Market Strategy – Though every country has adopted the free market policies and thus the businesses all over the world have become global. But as far as the social and environmental factors are concerned the government has to interfere in the private business. For example it is mandatory for the auto sectors to manufacture the vehicles with more fuel efficient and eco friendly vehicles. Auto Nation like all other automobile companies has to pay attention on the fuel cost and environmental issues while selling the new brand cars as well as used vehicles. 4. Monopoly Strategy – Auto Nation is the number one auto mobile retail company in USA. It has fully controlled the market. It has maximum franchises spread all over the country It has also established its monopoly in online business. In future it is very necessary to keep this monopoly intact and for that the company has to pay attention on the quality and the customer satisfaction. 5. Scarce Resource Strategy – Sustainable use of natural resources which are very limited. In such cases it should be the first priority of the responsible auto giant like Auto Nation to find out the alternatives for fuels, paying attention on promoting the fuel efficient vehicles. Because the fuel and the crude oil in the nature is very limited. 6. Necessary Evil Strategy – For maintaining the steady growth of the business it is very necessary to create customer loyalty in the competitive environment. The managers of auto nations are designing the strategies which are customer oriented as well as depend on the future variables which are unpredictable. But the leaders of AutoNation are aware of the necessity of taking into consideration the unpredictability of the market. Proposed IS strategy and alignment of the business and IS strategy With the advent of information and technology the AutoNation has developed information system to enhance the existing business. The IS strategies in Auto Nations aim at being connected with the customers via internet, to collect the data of the customers, find out the best customers, to be in touch with all the dealers via website and internet. Thus the IS strategy aims at achieving the business strategies of the company. While talking about the proposed strategies of Auto Nation AutoNation Chief Executive Officer Michael J. Jackson says, "This branding initiative, supported by an innovative advertising campaign, leverages AutoNations scale, both on and off the Internet," Mr. Jackson adds, "The strategy moves AutoNation from a fractured brand identity comprising dozens of different market brands, to a single Internet brand that blends seamlessly with a handful of strong market brands. This initiative, which is fully embraced by our key manufacturer partners, will help AutoNation establish its brand identity much more quickly than would otherwise have been possible." IS Strategies with Ethical and social issues in implementing the proposed IS strategy "The Information strategy brings together the business aims of the company, an understanding of the information needed to support those aims and the implementation of computer systems to provide that information. It is the plan for the development of system towards some future vision of the role of information systems in the organization.” (Wilson 1989) Auto Nation is using HP’s suit of enterprise management solutions as well as services and support to consolidate and integrate its computer systems. The purpose behind this is to develop e commerce infrastructure. Thus it has developed the IS strategies by spreading computer network. The HP solution compasses automotive database. Every technology, if used properly can be the blessing and if used in a wrong way can be dangerous to the business as well as society. Social and ethical issue in Information system arises from processing of data into information. If the data is misused it may be the legal issue and it and proved to be dangerous to the society. While keeping the ethics it is required that every user of Auto Nation’s Information Technology should use the IT resources in a professional and responsible as well as lawful manner. This ethics are applicable for the associates, consultants, vendors and business partners. Everybody is responsible for keeping privacy of company’s computer accounts and secret passwords. Everyone is expected to report about the violation of any rule to the management. Only the authorized data is accessed to everyone of the company. All the data stored on company system will be the property of the company. The people from Auto Nations are allowed to use personal mail and telephone on a limited basis and those are permitted as long as they do not hamper or interfere in company’s work and employees’ job performance. According to Michael E. Maroone, President, & Chief Operating Officer,” To succeed in our business, you have to have a passion for it… But you must also have the guts to do the right thing… And that is what Auto Nation’s Business Ethics Program is all about!” Conclusion: As per the thorough study of strategic business of Auto Nation it can be concluded that the perfect vision, strategic implementation is the key to the success of Auto Nation. It has long term goals and the company is seriously initiating towards achieving those goals. Immense professionalism is seen in every function of the company. The company is customer oriented and the satisfaction of the customer is the major objective of the company. The company is fully aware of the social responsibility and functioning accordingly. That is the reason why it has become successful in maintaining its position of no 1 automobile dealer in America. Read More