Buchanan Automotive Competition
Now Viewing Buchanan Automotive's competition in: Automobile Dealerships
Call Preparation Questions
Customers, Marketing, Pricing, Competition
What are the company's most effective marketing and promotional vehicles? - Marketing and promotional vehicles include newspaper, TV, radio, and outdoor (billboard) advertising and direct mail.
How important are national marketing efforts by car manufacturers? - Dealers benefit from national advertising from car manufacturers, which are among the largest TV advertisers.
How effective are manufacturers' programs as a dealer marketing tool? - Manufacturers may offer consumer incentives, such as cash rebates and low interest financing, to drive sales.
How would the company's customers describe the level of service they receive? - With intense competition between dealers, customer satisfaction has become an important differentiator and a key tool in developing repeat sales.
What role does the Internet play in the company's marketing strategy? - Internet sites allow dealers to reach customers beyond local markets. Auto manufacturer and syndicated websites, such as Autotrader.com or cars.com, help generate sales leads and drive dealership traffic.
How does the company's pricing compare to the competition's? - The average retail price for a new car is about $29,000, according to the NADA. Retail prices for used cars average $16,000.
What is the company's biggest competitive threat? - For vehicle sales, auto dealers compete with private-market sellers, who are increasingly using the Internet to bypass traditional retail channels. Companies compete with various retail outlets, such as oil change centers, tire stores, and independent service shops and chains, for service revenue.
Competitive Landscape
Consumer spending and interest rates drive demand. The profitability of individual companies depends on the volume and mix of cars and services sold. Large companies can offer a wider selection of cars and have advantages in marketing, purchasing, and finance. Small companies can compete effectively by offering superior customer service or serving a local market. Annual revenue per worker averages $600,000 for new car dealerships and $700,000 for used.
Business Challenges
CRITICAL ISSUES
Volatile Demand - Consumer demand for cars can vary significantly from year to year, due to a variety of factors, including changing economic conditions, consumer spending, inflation, and fuel prices. Sales for particular brands or styles are especially vulnerable to evolving consumer preferences. During a recent recessionary period, the number of autos sold declined, despite large financial incentives from car makers. As gas prices spiked between 2004 and 2007, sales volume for light duty trucks (which include low mileage SUVs) declined 10 percent.
Interest Rates Affect Sales and Inventory Costs - Significant increases in interest rates can reduce consumer ability to buy cars and increase floor plan financing costs. Most customers buy vehicles with loans or leases. Dealer inventories are typically financed through variable interest rate loans. Increasing interest rates can reduce profits by affecting both sales volume and dealer costs.
Industries Where Buchanan Automotive Competes
- Retail
- Automobile Dealers
