Application of Information Systems Strategy Concepts - Essay Example

Mannheim Overview Manheim Online, a subsidiary of Cox Enterprises in Atlanta, is an online site that purchases off-lease inventory of automobiles and offers wholesale used vehicles to US dealers. Manheim, the largest used auto reseller in the world, wishes to expand into European markets with its online sales, while continuing to develop and increase its supply from Japan’s AUCNET. To date, Manheim has 65 locations in the US and the UK. Manheim also operates auto reconditioning and painting services. It offers AutoConnect, a software package that can be used by used car dealers for a multitude of automobile tracking functions and is developing Tracker, another software package it plans to offer to dealers. Manheim does not take title of vehicles it offers for sale, those are retained by dealers or organizations wishing to offer the vehicles for sale. This saves money for the online reseller in tax and title fees. Manheim charges a minimal $30-$40 monthly fee for dealers to access its site from the internet. Manheim’s database of automobile inventory contains all information regarding each vehicle, such as VIN, color, condition mileage and many other details. Its database and online access system was developed by ICI, an IT consulting organization also used by Cox. Manheim does employee its own IT staff, though work is limited to database management. Value Chain Manheim’s value chain includes dealers and auto leasing companies who desire an inexpensive way to offer their used inventory for sale, used dealers looking to purchase vehicles and the customers who ultimately purchased used vehicles from the dealers. The reconditioning and painting services are also a key part of its value chain. Customers are auto dealers. Independent used car dealers as well as franchise dealerships who sell used autos can purchase vehicles at wholesale prices. Added Value Value is added for used car dealers who stand to increase revenues by purchasing at wholesale prices. They also reduce costs of traveling to multiple auction sites offline or traveling to auto leasing sites. Fees for membership with Manheim are reasonable compared to costs of travel and wages paid to staff for such activities. Vehicles are reconditioned and painted, which also increases revenue for used car dealers who can offer quality vehicles to customers. Customers are also dealers and leasing agencies who use Manheim’s low cost listing and reconditioning services to offer their vehicles. Using such channels increases exposure of inventory offered, which helps to reduce unwanted inventory. Increased inventory may add to storage and insurance costs for dealers and leasing agencies. Core Competencies Manheim’s core competencies are its wholesale listing services and reconditioning Services. It is the largest global non-factory painter and the largest US detailer. Manheim’s core competencies have changed slightly in taking the services online. The ability of customers to offer vehicles or purchase them online frees Manheim to focus on updating the used car inventory database. Cars can be processed more quickly and sold more quickly, as long as the detailing and painting process goes smoothly. Revenue Stream The internet has allowed Manheim to streamline its inventory process in reselling cars. It has also given Manheim’s business more exposure, as web based activities are not geographically limiting. Manheim has begun taking Japanese inventory from AUCNET, an electronic auction site in Japan. It is also in the process of considering European expansion of its services. For customers, the extranet used by Manheim allows Autos to be processed and listed online more quickly, which creates a faster stream of revenue for Manheim and its customers who wish to sell cars. It also provides more choice for dealers who buy used autos. Searching for used inventory to purchase can be an extremely time consuming activity, one which dealers now pay a small fee for, to view inventory from around the world, wherever vehicles are listed. It gives used car buyers choice in location and other search details such as make, model and other features. A dealer who prefers to carry late model GM cars can choose only those vehicles listed that meet the desired criteria. Going Online Manheim can develop an online auction very easily, but adding customer buying and bidding features to its current site. It should develop an online auction, though minimum prices should be set for all vehicle inventories. The problem is in determining whether entire fleets or inventories should be offered, as opposed to individual cars. Manheim stands to gain increased revenues, as long as minimum bid prices are stated. Interest for particular vehicles may come from multiple dealers, who will be willing to offer a bit more for inventories. One problem is that smaller used car dealers may be priced out of some inventories, as they are not willing or lack capital to purchase cars above wholesale prices. SWOT Analysis Manheim faces little to no threat from automobile manufacturers, though it also faces threat from other resellers, such as AutobyTel and AUCNET. Strengths for Manheim include transaction speed in offering online auto auctions, existing supply chain and ability to expand globally into the European markets. Dealers are able to quickly list vehicles and make purchases. Another strength for Manheim is the current demand in the used car market. In the US, buying a new car is no longer viewed as a symbol of wealth. “It is becoming an accepted fact that purchasing a good used car is a mark of shrewdness” (MacKeown & Watson). Many used vehicles still carry a portion of their warranty and fees for transfer are relatively low. Though leasing programs offer drivers a way to have a new car without purchase, mileage limits often discourage those who tend to drive extensively. Sales representatives, contractors and others must pay an additional fee for incurring extra miles. Many drivers still want to own their own vehicles. Weakness comes from the limited market that Manheim will be able to offer many Cars in the European market. Differences in vehicle configuration in the UK and in types of fuel used will eliminate US, Canadian, Mexican, German and many other buyers. Opportunity does exist, however, in moving UK vehicles from one dealer location to another. Opportunity also exists for dealers to purchase European cars that are suitable and desirable. BMW, Audi, Porsche and other foreign made models are desirable in the US, though priced out of reach for many US consumers. Offering such foreign made vehicles provides a way for more US consumers to own them without paying new car prices. Threats for Manheim come from other automated auto sales companies, though without online processes, they are weak. Threats increase when other auto resellers develop online auctions. In the US, eBay motors is an example of competition that Manheim might face. Offering the foreign made vehicles may keep Manheim more Competitive. The core business can be extended without cannibalization. Concerns Auctioning vehicles that are not sold by Manheim online are legitimate. Dealers who wish to purchased vehicles may wait until they go to auction, hoping for lower prices. Cannibalization risks While this is a concern, it is unlikely that most dealers will want to wait. There are Many risks involved in waiting. Being outbid by other dealers is one risk. Failing to maintain adequate used car inventory by waiting for auction, or fear of missed opportunity is another. The process in which Manheim proposes to offer online vehicle auctions, only after being listed for some time, combined with minimum bid prices should eliminate risks of cannibalization. Demand and opportunity for increased revenue from used car dealers should reduce the risk of cannibalization as well. Manheim is wise in outsourcing its IT needs. Obtaining talented IT professionals is a time consuming and often labor intensive task for most firms. Once developed and running smoothly, little maintenance of its site is required. For Manheim costs in acquiring and keeping talented IT professionals is reduced. Continuing to use an outside developer is a good idea. Auction processes can easily be incorporated into Manheim’s online system. One of Manheim’s additional strengths is in being a first producer of the online reselling system. There is risk in hiring its own IT staff, who may decide to take the knowledge of Manheim’s system elsewhere. Manheim is also the first to offer software specifically for tracking and inventory purposes for used car dealers, which also works with its online system. Developers could again take the knowledge in the software development elsewhere. Outlook for Entering European Markets Manheim can use its current IT system to enter European markets. Changes may be needed in availability of various languages for its web site and software. European operations do need to operate differently due to differences in vehicle configuration. UK vehicles might be offered strictly to other UK dealers, whether in Australia, England, Wales, Ireland or Scotland. Manheim currently uses its own reconditioning facilities. In Europe, partnering with existing facilities may prove more beneficial in terms of Cost savings. Building new facilities and training new technicians is not only costly, but requires knowledge of and adherence to European labor and tax laws. Auto Connect Software Auto Connect is specialized software that dealers who wish to sell or purchase Vehicles from Manheim can utilize. There are additional software packages available only through Manheim, that provide desktop tracking for dealers and leasing functions for dealers. Auto Connect allows dealers to quickly link to the Manheim site and view autos by make, price and other specifications. The ease of use creates added value for customers who use Manheim to sell or purchase used vehicles. Those who do not use the software may spend more time viewing vehicles that Manheim offers. They will realize the necessity for such software, in order to gain advantage in viewing and selecting vehicles before others dealers. Utilization of the software also keeps dealers focused on Manheim’s site, as opposed to other online auto resellers. References MacKeown, P & Watson, R. Manheim Auctions. Communications of AIS. 1, 20 pp.1-20. Read More