Competition in the U.S. Automotive Retailing Industry
Competition in the U.S. Automotive Retailing Industry
Retail establishments in the automotive industry primarily engage in the retail sales of new or used automobiles. These establishments often maintain repair departments, and carry stocks of replacement parts, including tires, batteries, and automotive accessories.
The economic and business characteristics of the automotive retail industry starts with their marketing and distribution channels. Nationwide, the auto industry retailers generate around 533 billion dollars each year.
Developed largely before World War II, the current automotive industry was structured when demand was well above supply. Presently, over capacity in combination with demands for an innovative blend of products and services is swaying the industry into consolidation. For example, the purchasing alliance between Ford, GM, and DaimlerChrysler has formed the world’s leading business-to-business Internet company in terms of scale of operation and revenue. This online enterprise brings together all of their suppliers, streamlining their entire chain supply. These types of activities represent a significant percent of the value of a new vehicle and are an important potential source of cost savings.
The changes in this area reflect a shift from capital-intensive-operations (involving inventory investment) to information-intensive-operations (providing the right vehicle at the right time). This shift is leading to the development of the flexible and highly entrepreneurial structures as mentioned above.
The U.S. is a highly diverse market consisting of regional sub markets. Local environments, regional characteristics, economics, and lifestyle all come into play. In the past, mass produced vehicles was an accepted practice in the automotive retail industry. Today, however, mass produced automotive models are not working in the American market. In response to the shift in consumer preferences, the variety of products supplied by the automotive industry has risen dramatically.
For example, in one target market, lifestyle changes shifted from a one person per family wage earner...