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Overview of Honest Jim Cars

Question:

Discuss about the Value Creation in Facilities and External Environments.

Honest Jim Cars is a company that deals with the retail sale of cars from different manufacturers. Initially, the company only started out with a single car yard and limited variety of cars. Due to serious competition in the market and lack of sufficient promotion and funding, the company grew very slowly. However, after the initiatives taken by a well known loyal customer, the company slowly gained popularity and started to grow quickly. Currently, the company has three different car yards in Melbourne and is looking to spread over other states in Australia. After the retirement of the initial ownership panel, the company is now run by their sons who are now looking to make some significant changes in the overall operational policy of the company. In addition to the physical retail stores, the company is now looking to enter e-commerce, which is relatively new to car dealership. Furthermore, the current owners are now looking to implement a suitable business model that will help the company to grow within a particular framework.

In this report, an overall review process has been conducted on the industry, external and internal environments of the company as well as the requirements set by the company owners. Accordingly, a mock-up design has been developed for the proposed website for the company and in addition, a spreadsheet has been created using the sales data generated by the company that gives insight about the current business situation of the company.

Motor vehicle dealership industry in Australia has always been highly popular although it faced a sharp decline during the global financial crisis in the first decade of the 21st century. However, after that period, the industry again stood up and started to grow. The demand for cars increases as the number of student immigrants continue to increase in Australia (Bellini et al. 2017). Most of these immigrants seek to buy or rent cars as a medium for their transport. As per an estimate, the revenue generated by the car dealership industry in 2017 is $63bn and the annual growth is found to be 0.5%. Furthermore, the industry currently provides employment to more than 67000 people in the country.

However, although the industry is stable and the demand continues grow, the competition in the market is also very high. There are many large sized car dealers who dominate the industry and are also being franchised. As a result, small and medium sized car dealers often find it hard to get a significant place in the automobile dealership industry and it requires significant amount of funds and promotion to get a hold on the industry (Artto et al. 2017). The two largest companies in the industry are A P Eagers and Automotive Holdings Group who have significant shares on the overall car dealership industry in Australia. In spite of the competition, many small and medium car retails have grown up including Honest Jim, which is now looking to use a suitable business model and ecommerce in order to get a strong hold on the local and regional market in the country.

The Motor Vehicle Dealership Industry in Australia

There are several business models that are suitable for the company. However, the best business model that will help Honest Jim to grow in terms of size and revenue is franchise model. The franchise model helps any business organization to build a suitable brand value that attracts more customers than other organizations who do not have brand values. Furthermore, with the franchise model, the company can open more retail chains in various parts of the country and immediately gain success through brand value (Anwar and Zebari 2015). The target audience for such business framework should be the upper middle class and higher category of customers and the international immigrants who come to Australia for study and work. It is easier to attract the foreign immigrants with a proper brand value that also has significant international reach.

In order to gain success in the proposed business system, the company must create a suitable value proposition that will also be aligned to the business model. This is required in order to attract more customers in their stores that not only generates revenue but also helps in gaining competitive advantage over other organizations in the same business domain (Galiano, Rodríguez and Saco 2018). In this particular case, the franchise business model is necessary and for that purpose, the company needs to develop and upgrade its own brand value. The overall need for the company is to first create a brand value by become a franchise by pulling all its business components under one common identity and system.

In order to justify the value proposition, the company should open more retail chain stores in various parts of the country and also integrate business in all the stores using a common centralized server and a suitable ERP system (Kim and Talbott 2018). This will not only help the company to establish controlled approach to business but will also help them promote their brand equally through the various retail chains.

Based on the study of the internal environment of the company, a SWOT analysis can be conducted as follows.

Strength

Weakness

       i.          The main strength of the company is that it has gained a significant amount of reputation through a well known loyal customer.

     ii.          The company sells cars from excellent and popular car makers.

   iii.          The company has three separate car yards for retail sale.

       i.          The company does not have access to sufficient information system and information and communication technology (ICT).

     ii.          The company lacks sufficient upgrades to maintain competitive advantage in the market.

   iii.          The company lacks sufficient technical expertise to manage an upgraded information system and ecommerce.

Opportunity

Threat

       i.          The company has sufficient budget to employ technically expert staff to bring suitable changes to the current system.

     ii.          The company has a great opportunity to develop a franchise and deploy brand value system in the business plan.

       i.          Due to lack of technical upgrades, the company is failing to cope with the strong market competition against some newly developed car dealer companies.

     ii.          Sudden increase in popularity of online car sales means the company faces the threat of losing a strong customer base unless it enters the online car sale business as well.

From the analysis of the internal environment of the company, it can be seen that the main issue associated with the business of the company lies in the lack of technical upgrades over the years. The company continues to follow the same business model from the start that is slowly starting to become obsolete (Ebben and Johnson 2015). Furthermore, the company lacks suitable personnel in the management team who are technically strong and able to handle new information system if it is implemented in the near future. However, with suitable budget for development and employment of technical staff, the company will be able to solve the issues and regain the control over the market.

Suitable Business Models for Honest Jim Cars

The external environment of the company can be analyzed using Porter’s Five Forces as follows.

Bargaining Power of Suppliers – For the case of Honest Jim, the bargaining power of suppliers is medium due to a number of reasons. Firstly, there are already many alternative car dealers available in the market and hence, even if Honest Jim refuses to pay the asking price to the supplier (in this case, the car manufacturer), the supplier will be able sell the cars to some other car dealers (González, Cárcaba and Ventura 2015). This problem increases the bargaining power of the suppliers. Secondly, Honest Jim has sufficient popularity and with future franchising, the company will gain high brand value. This should encourage the suppliers to sell to them as there are more chances of sales of the cars from a popular dealer. This aspect will decrease the bargaining power of the suppliers.

Threat of Substitutes – The company does not face much threat of substitutes as it sells cars of almost all popular brands. There are currently not many substitutes of the cars available in the market. Furthermore, the company sells all the different classes of cars like Sedan, SUV and Ute thus ensuring all the demands of various types of customers are met (Sipho and Daniel 2017). However, in the near future, with the development of new class of electric cars like Tesla, the threat of substitutes may increase.


Bargaining Power of Buyers – For this company, the bargaining power of the buyers ranges from medium to low. The primary reason for this is that there are several other car dealers that have established strong business line in the same area and have deployed information system to take care of the business operations (Landau, Karna and Sailer 2016). However, the bargaining power of buyers does not go too high because the car prices fluctuate very less between various car dealers and only depend on the market condition only.

Threat of New Entrants – Unless Honest Jim upgrades itself with new technical setup and business framework, it may face significant threat of new entrants in the very near future. New car dealers are growing up in the nearby areas with advanced technical setup and technically adept management teams that are driving their companies towards excellence.

Industrial Rivalry – Currently, the industrial rivalry is very high especially due to the growth of many car dealers in the last few decades in the country and the increase of popularity and demand of cars in the country (vom Berg, Gómez and Sandau 2017). Already franchised car dealers have established a strong control over the market whereas medium sized organizations like Honest Jim has only got control over a small part of a regional market.

The Franchise Business Model

The table for the raw data has been created and shown in the attached excel spreadsheet. From the analysis of the data in the spreadsheet, three insights that the managers can gain regarding the business have been identified as follows.

Trend 1: Ute is the most popular class of car and this particular class has generated most sales and revenue for the company in 2016.

Trend 2: In the entire period of 2016, the diesel cars have experienced much more sales than hybrid and petrol cars.

Trend 3: The customers are preferring the latest models of the cars only as evident from the high amount of sales for the cars manufactured in 2016 and lack of sales for older cars.

In the provided mock up designs in the Appendix section, three pages of the website have been provided. The justifications of the three pages are as follows.

Home Page – This is the page that opens when the customer enters the website. This page provides a number of information including new offers, slideshow of various cars sold and others. From this page, the customer can visit various pages like products, create account and others.

Product Page – When a customer clicks on a particular car, this page will open. This page will show details of the car, price, applicable offer and other similar cars available.

Purchase Page – When a customer checks out after selecting a car, this page will open and present the customer with payment options as well as request delivery location.


The elements used in the website as per HCI and web usability guidelines are as follows.

Visibility – All elements in the site are easily visible to the visitor.

Feedback – The elements have feedback system for the visitor. For instance, whenever the visitor selects a car to buy, the site will ask him to register or login first.

Consistency – All elements of the website are fairly consistent, each element is arranged in an aesthetic manner and is fully functional.

Accessibility – The website is accessible to all internet users regardless of operating system.

Home Page – The home page is made as attractive and informative as possible.

Navigation – Navigation options are well developed and integrated in the website.

Three additional tools that can be used by the company that will increase competitive advantage are as follows.

Test Drive – There can be a new page that will allow customer to apply for test drive.

The Value Proposition for Honest Jim Cars

Driver Test – This new page will allow customers to apply for driving test and earn license.

Car Customization – This new page will allow the customers to customize the car they will be purchasing.

Conclusion

In this report, an overall business evaluation for Honest Jim Cars has been provided. In order to get sufficient insight, both the external and internal environments have been analyzed and accordingly, a new business model has been proposed. It has been found from the analysis that although the company enjoys significant amount of success in the market, it requires sufficient technical upgrade and a suitable business model in order to maintain the business success as well as market competitiveness. Hence, franchise business model has been proposed that will help the company to establish a brand value. Furthermore, implementation of ERP system has been suggested so that the company can open more new retail chains but at the same time can be able to maintain business continuity and control over the entire retail chain.

References

Anwar, G. and Zebari, B.A., 2015. The Relationship between Employee Engagement and Corporate Social Responsibility: A Case Study of Car Dealership in Erbil, Kurdistan. International Journal of Social Sciences & Educational Studies, p.45.

Artto, K., Ahola, T., Kyrö, R. and Peltokorpi, A., 2017. Managing business networks for value creation in facilities and their external environments: A study on co-location. Facilities, 35(1/2), pp.99-115.

Beard, T.R., Ford, G.S. and Spiwak, L.J., 2015. The Price Effects of Intra-Brand Competition in the Automobile Industry: An Econometric Analysis.

Bellini, E., Dell'Era, C., Frattini, F. and Verganti, R., 2017. Design?Driven Innovation in Retailing: An Empirical Examination of New Services in Car Dealership. Creativity and Innovation Management, 26(1), pp.91-107.

de Oliveira, L.K., de Oliveira, G.F. and de Abreu Vieira, R., 2016. Identifying solutions for car vehicle deliveries in urban areas: a case study in Belo Horizonte (Brazil). Transportation Research Procedia, 16, pp.425-432.

Dömötörfi, Á., Péter, T. and Szabó, K., 2016. Mathematical modeling of automotive supply chain networks. Periodica Polytechnica. Transportation Engineering, 44(3), p.181.

Ebben, J. and Johnson, A., 2015. Simply sport bikes case study. The CASE Journal, 11(1), pp.113-122.

Fresneda, J., Korschun, D. and Kothandaraman, P., 2016. CSR as an Adaptive Selling Tool: a Novel Framework and a Robust Analysis Proposal. In Celebrating America’s Pastimes: Baseball, Hot Dogs, Apple Pie and Marketing? (pp. 373-387). Springer, Cham.

Galiano, A., Rodríguez, V. and Saco, M., 2018. Analysis of the behaviour of the clients assisted and sales variables in the different phases of the product life cycle. European Journal of Management and Business Economics.

González, E., Cárcaba, A. and Ventura, J., 2015. How car dealers adjust prices to reach the product efficiency frontier in the Spanish automobile market. omega, 51, pp.38-48.

Kim, Y. and Talbott, J.S., 2018. Marketing social selling jobs: a re-labelling strategy. Marketing Intelligence & Planning, 36(1), pp.2-16.

Landau, C., Karna, A. and Sailer, M., 2016. Business model adaptation for emerging markets: a case study of a German automobile manufacturer in India. R&D Management, 46(3), pp.480-503.

Lindquist, J.D., 2015. New Dealer Choice: The Buyer Perspective. In Proceedings of the 1987 Academy of Marketing Science (AMS) Annual Conference (pp. 260-264). Springer, Cham.

Sipho, M.S. and Daniel, T., 2017. External environmental considerations in the planning of strategies of car dealerships.

vom Berg, B.W., Gómez, J.M. and Sandau, A., 2017. ICT-platform to transform car dealerships to regional providers of sustainable mobility services. Interdisciplinary Journal of Information, Knowledge and Management, 12, pp.37-52.

Xiao, J. and Ju, H., 2016. The determinants of dealership structure: Empirical analysis of the Chinese auto market. Journal of Comparative Economics, 44(4), pp.961-981.

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