To: New Car dealers in the US
From: Powertrain Consultants
Date: August 2, 2020
Subject: Grand Strategy Selection
The car dealership or automotive industry within the United States of America is a prospective business to invest in. Acclimatized by the size of the market within the USA, and mass production tactics, the industry is rapidly growing to a point of becoming the largest in the whole world. Currently, the car business industry is the second largest in the globe, by an account of volume of production. Nevertheless, current conditions in the socio-economic and political standing have since seen a drop in demand of produced vehicles in the country. Below is a further insight borrowing findings from recent statistics, and various models in the need of noting the grand strategy that your car dealer business may take, relevant to business and whether to pursue a hold or grow strategy under current economic challenges in the automotive industry.
Opportunities and Threats of the Car Dealers in the US Industry
Opportunities
Despite a sharp drop in the demand of auto vehicles in the past four months, where March alone foresaw a drop in sales by about 38 per cent, there is likelihood that the industry might rebound (Statista, 2020). The recent drop has been articulated by the impact of the coronavirus pandemic.
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One of the factors that will cushion the industry is the buying ability of customers. Despite the closure of showrooms, CNN has reported that customers could be able to buy cars online. Additionally, most of the dealers have equally been able to deliver the cars to the homes of their clients, despite the shutdowns. Digital disruption will aid during these hard times to enable car dealers to still make sales (Dapena, 2020). Furthermore, shoppers and clients have been attracted to the 0 percentage financing, and the rather long terms loans on automotive. The combination has thereof foreseen rather low monthly payments on loans for autos that are being lend by lenders. Henceforth, this has helped the car dealers in making sales, and may further extenuate as the pandemic goes on.
In addition, factories have now started opening up for operations. Therefore, this will oversee the growth in the industry that has been lagging since last year. Additionally, it will necessitate the ability of availing products to customers, and hence fulfil the demand.
Threats
Despite factories opening up, there are equally a number of threats borne out of the initial closure due to the corona virus pandemic. With the drop in sales, the idle time in which manufacturers were not producing anything foresaw them failing to make profits. As such, the factories may need an extra injection of capital to re-open, and start opening (Ewing, 2020). Therefore, there is likelihood that there will be shortages in the supply of new vehicles for car dealers.
Equally, there are chances that there will be political resistance and labour strife. The industrial workers may lose their jobs due to uncertainty of the potential market. Likewise, other returning workers may demand payments for the months not paid, as well as other associated costs which may further deepen the threat to car dealers in the US (Dapena, 2020).Globalization is also another crisis at stake for car dealers in the US. Despite the fact that US has manufacturers who can satisfy the car dealers industry, there are people who will opt for vehicles made in other parts of the world such as Mercedes Benz from Germany (Ewing, 2020). This may foresee the domestic car dealer industry in the US further fluctuating.
The GE/McKinsey Matrix Applied to the Car Dealers in the US Industry
While utilizing the GE/McKinsey matrix, the best strategic selection for you as a dealer is to hold. This means the market is consolidated and you should make careful investments. Generally this matrix is made up of two axes (Mulder, 2014). The market attractiveness is usually symbolized on the y-axis, whereas competence and competitiveness of the unit under scope is represented on the x-axis.
The illustration above shows the GE matrix under scope. From the investigation herein, the attractiveness of the market is at all-time low or unpredictable. On the other hand, the business unit strength is high (Mulder, 2014). Therein, the two link at the bottom which asserts on the need to hold as the market demand low and unpredictable.
Model of Grand Strategy Clusters Applied to the Car Dealers in the US Industry
With respect to the grand strategy clusters method in the automotive industry, you should be more vexed in utilizing the product development, and the stability strategies. Beginning with product development, you should focus on exploring more opportunities within the market. Cognizant to this, you may for example think about dealing with electric cars which are expected to gain even more traction in the future (Ewing, 2020). Furthermore, you may thrust research into some of the cars that are more likely to be bought within the US market context. Additionally, you should be focussed in maintaining status quo in relation to operations, market position, and market size.
Conclusion
From the research carried out here, as a car dealer, you should use strategic action of holding growth, as based on the McKinsey Matrix. The aim here is to give time for the market to stabilize or the get back to normal. Further, you can utilize product development and stability strategies cognizant to the grand strategy clusters. This will oversee a revamp in operations, as well as expedition of solutions that will ensure survival of the business under these hard economic times.
References
Dapena, P. V. (2020). Dealerships are opening up again. But good luck finding the car you want. CNN Business . Retrieved from https://edition.cnn.com/2020/06/05/cars/car-dealerships-low-inventories/index.html
Ewing, J. (2020). The Pandemic Will Permanently Change the Auto Industry. The New York Times . Retrieved from https://www.nytimes.com/2020/05/13/business/auto-industry-pandemic.html
Mulder, P. (2014). GE McKinsey Matrix. toolshero . Retrieved from https://www.toolshero.com/strategy/ge-mckinsey-matrix/
Statista. (2020). Projected light vehicle sales in the United States in 2020, by COVID-19 scenario. Retrieved from https://www.statista.com/statistics/605157/projected-car-sales-in-united-states/
