Team A2 Draft

docx

School

University of Washington *

*We aren’t endorsed by this school

Course

475

Subject

Business

Date

Feb 20, 2024

Type

docx

Pages

Uploaded by DukePantherPerson793

1 02/13/23 BBUS 475 Team A2: Ceyhan Ozturgut, Roy Sitruk, Andrew Adenny, Ronaldo Carrada U-Car: The Service that Kills Dealerships The service that we will be killing is car dealerships and their service department. When examining the cost structure of dealerships, new car sales are the largest percentage of income, being around 55%, according to NADA, the National Automobile Dealers Association. To further boost profit margins, dealerships gain commission by providing debt and insurance to captive lenders, utilizing the automaker’s branded financing. This can include an arrangement of car loans to vehicle protections such as extended warranties. Furthermore, a secondary moneymaker for dealerships is parts and services. In fact, vehicle repairs produce significant profits in regard to other areas of income. For AutoNation alone, repairs represented 34% of the company’s gross profit in 2021. If a consumer is not particularly observant or knowledgeable in this area, expensive hourly rates for unnecessary services that are not covered under warranty labor can be quite damaging. Through the process of killing dealerships, we aim to replace the historic approach with one that utilizes technology to transcend the consumer's experience. The primary weakness faced by dealerships is the costs incurred by retaining a physical presence. With 59% of new cars sold being built to order, in contrast to 19% in 2019, it has become increasingly clear that consumers demanding accessibility have moved the industry online to meet their bespoke needs. With this system in place, consumers have the ability to order exactly what they want rather than being forced into the position of having to choose the car on the lot or overpay for unnecessary features. Furthermore, the substantial costs associated to operate a dealership, such as staffing, advertising, taxes, accountants, and lawyers, is not

2 nearly enough to break even. If the buying process can be entirely automated, there is no need for any additional expenses. Clearly, the dealership business model is on the verge of becoming obsolete. Another major weakness in the industry is pushy sales tactics by car dealerships. These tactics involve upselling additional products or services, such as a protection package or extended warranties. For example, a sales representative may try to convince a customer to purchase an extended warranty, despite the fact that it may not be necessary. Additionally, dealerships may use aggressive pricing strategies, such as making a low initial offer and then gradually raising the price to make it seem like a better deal. For a consumer that has properly researched the package they want, this type of behavior is frustrating and can lead to a negative experience, eroding their perception of the dealership and even the brand. Limited transparency is another weakness that can be found in car servicing centers. This lack of transparency often involves unclear pricing and repair processes, making it difficult for customers to understand the costs of repairs. In fact, some dealerships may not provide a clear breakdown of labor and parts costs, creating a challenging atmosphere for customers to compare prices to determine if they are getting a fair deal. In another form, this could include presenting a long list of goods and services that are recommended to the customer without proper explanation of pricing or why these improvements are necessary. The lack of transparency in pricing and repair, especially if the consumer is uneducated in this industry, leading to a distasteful experience. Our plan of attack is to implement an app, U-Car, which acts as a broker for vehicle sales and repairs. Given that many competent mechanics will work under the table for family and friends, we would like to capture this portion of the market segment. With this development, we

3 will require basic qualifications for mechanics to use the app, specifically, certified mechanics need to have at least two years of experience working as a mechanic or technician. Most people fixing cars at dealerships and shops are usually required to have their own tools. If a mechanic needs a specific tool, they will be able to order a tool through our platform at our cost plus 10%. Part of implementing family values is family pricing. We only want our customers to get the service they need. Pricing for services will be very transparent. Although we are acting as a broker for mechanics and consumers, we will recommend the range for labor costs. Consumers will also be able to get their parts at our cost plus 10%. How does a customer know what kind of service they need? Our platform plans to offer free 10–15-minute consultations. With the power of cell phones and the internet, you are able to take photos, videos, and even face time explaining what issues your car may have. Once the issue is diagnosed or if the consumer wants general or preventive maintenance performed, our app will connect you with an available mechanic or have one scheduled to come work on your vehicle. Another service we intend to add helps assist with the car buying process. Have you ever wanted to purchase a new to you vehicle? One of the dilemmas is knowing exactly what you are getting. Sure, you could spend a few hundred dollars on an inspection, but what if there was someone you could call to come help look at a car with you? We plan to offer an inspection service that will connect a respective automotive appraiser. Their intent is to also help guide you during the automotive purchase, making recommendations as to what a fair value would be given the condition of the prospective vehicle. The service could also be performed for purchasing vehicles across state lines. Furthermore, we would rely on influencers and endorsements by other high-profile disruptors to accelerate the adoption rate for the app.

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

4 We also plan to implement, which has proven successful by other companies, the purchasing of cars online. In this process, you are able to fully purchase a vehicle online and have it shipped to your house. Paperwork is done digitally, and oftentimes you are able to get the most competitive interest rates for your car loan because all the banks are on the same playing field. Upon delivery of your vehicle, we will have one of our mechanics there to inspect the vehicle at our cost and allow you a week to return the vehicle. We intend to generate brand recognition through our car purchasing platform but want to utilize our service brokerage center to steal market share away from dealerships. The effective management practice used to kill off dealerships and services revolved around activating the seven brainsets. Specifically, relying on the evaluate brainset will provide us with the ability to judge errors made by competitors to best position our service for success. According to “Your Creative Brain,” this brainset focuses on “how we make judgments and eliminate options.” To enable this, I will form a team tasked with honing in on underperforming operations by examining negative customer reviews, Better Business Bureau complaints, and low quarterly earnings to understand exactly how we can set competitive pricing for a significantly improved customer experience. Furthermore, using the reason brainset to apply knowledge and logic will provide us with the opportunity to recognize and take advantage of market demands. To do this, we will contact dealerships nationwide in addition to conducting market research to determine exactly how many consumers have switched from buying cars in person to making online orders. Additionally, this could also involve analyzing market conditions internationally to see how our service would be best placed to meet global customer needs.

5 The next management practice that will be implemented is to recruit then maintain a diverse workforce. According to “Diverse Teams Feel Less Comfortable — and That’s Why They Perform Better” by Rock, Grant, and Grey, “working on diverse teams produces better outcomes precisely because it’s harder”. With this in mind, my goal is to highlight the value of multiculturalism by destroying homogenous teams and replacing them with diverse individuals who can find ways to work together productively. The first step in this process will be to evaluating our current team through factors such as age, gender, and work experience to identify where the team lacks diversity and how this gap can be addressed. To achieve this, I will conduct a company-wide survey to identify emerging trends. I will also focus on hiring diverse candidates by implementing blind hiring practices to reduce bias in addition to using a recruiting source that will target underrepresented groups. The final stage in this process will involve fostering inclusivity. To create a safe environment where members feel encouraged to share ideas without judgment, weekly group meetings will be established to ensure employees can express ideas and address any tension. By creating a space built on trust and belonging, members will further value the organization and therefore want to see our company achieve success. Once our service has successfully become established, importance will be placed on avoiding the innovator’s dilemma, whereby priority will no longer be on past successes, but rather on disrupting our company to avoid a reason for failure. The first step in this process will involve networking and connecting with competitors. According to “How to Build Your Network” by Uzzi and Dunlap, “Networks determine which ideas become breakthroughs”. Therefore, I will attend trade shows, reach out to competitors such as Carvana, as well as industry players to streamline the process of sales and repairs. The second step would be to disrupt ourselves. This will involve allocating resources away from success, creating and

6 protecting teams working on disruptive ideas, and fighting company veterans politically. To enable this, I will establish a virtual strategy team consisting of subject matter experts on digital marketing, accessibility for ease of use, supply chain, and technological experts. A group of knowledgeable experts outside of the company will guide the promotion of innovative ideas to avoid being blinded by prior successes. The third step in this process would be to search for new markets rather than asking existing customers what they desire. To develop this approach, I would look into expanding our business in various industries, such as car rentals, boats, or even private aviation. With this approach, we can target our next market segment, with the learnings from prior successes. There are several competing products and services that may threaten the success of replacing traditional car dealerships with a technology-driven approach. One such example is competition on online marketplaces such as Carvana, Vroom, and Shift, which allow customers to buy and sell cars entirely online. These marketplaces offer convenience and competitive pricing, which is also a key feature of our approach. Another competitor is the automakers themselves, who may choose to cut out the middleman and sell their cars directly to customers. For example, Tesla has already adopted this approach with their direct-to-consumer model, which eliminates the need for a traditional dealership. Despite these potential threats, these competitors primarily offer used car options, but none have the proposed service feature, giving our approach an advantage over the competition. For example, the technology-driven approach can offer a personalized, bespoke experience that meets the customer's exact needs, something that the online marketplace and automakers may struggle to match. Additionally, by eliminating the physical dealership, the proposed approach will reduce costs, making it more competitive in

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

7 terms of pricing. Finally, U-Car will offer greater transparency and honesty as the customer will be able to see the exact cost of repairs and services without any healing fees or pushy sale tactics. Another potential threat could be the emergence of new disruptive technologies such as blockchain and artificial intelligence (AI), which can transform the car buying and servicing experience. For example, blockchain technology can be used to create the cure, tamper-proof records of car ownership and maintenance history, while AI can be used to personalize the car buying experience and offer proactive maintenance services. However, U-Car would be well- positioned to integrate these technologies into its platform and offer a more comprehensive and advanced service that meets the involving needs of customers. Finally, there may be regulatory and legal barriers that could limit the success of U-Car. At present, some states have laws that prohibit automakers from selling their cars directly to customers, which could limit the potential market. Additionally, there may be concerns around data privacy and security as well as potential liability issues related to autonomous vehicles and advanced technologies. However, these barriers can be addressed through effective communication and collaboration with industry stakeholders as well as ongoing research and development to ensure compliance with evolving regulations and standards. Overall while there may be potential competitors and challengers in the technology- driven approach, U-Car will still offer a unique and innovative solution to the weakness of traditional car dealerships and servicing centers. By leveraging advanced technologies, offering greater transparency, and reducing costs, U-Car will provide a more personalized and satisfying experience for customers that address the key challenges and limitations of the current industry model.

8 There are many benefits that customers of U-Car and the society at large will have from the destruction of dealerships. The first is convenience. Customers can book appointments, schedule repairs, and order parts from the comfort of their own homes or offices, without having to physically visit a dealership. Additionally, dealerships servicing online can offer customers greater flexibility in terms of when and where they access services. The next benefit is time- saving. By going online, wait times will be reduced, enabling customers to easily search for and compare different models or services, without having to visit multiple locations and rely on existing inventory. Another advantage is improved transparency. This switch will provide customers greater transparency into their operations to track their vehicle's maintenance history, parts inventory, and service records, which can further build trust and strengthen customer relationships. Another is cost savings. Departments save on overhead costs associated with physical locations, such as rent, payroll, utilities, as well as the cost of maintaining the inventory, which can then be passed on to customers.

Team A2 Draft

Related Documents