Harvard Case - Deals on Wheels Inc.
"Deals on Wheels Inc." Harvard business case study is written by William Nemitz, Dawna Travis Dewire, Richard Mandel, Ross Petty. It deals with the challenges in the field of General Management. The case study is 10 page(s) long and it was first published on : Dec 1, 2017
At Fern Fort University, we recommend Deals on Wheels Inc. (DOW) pursue a strategic growth strategy focused on expanding into emerging markets, leveraging digital transformation, and prioritizing corporate social responsibility. This strategy will involve a combination of organic growth through market penetration and expansion, strategic partnerships, and potential acquisitions. We believe this approach will enable DOW to capitalize on the growing demand for used vehicles in developing economies while solidifying its position as a responsible and innovative leader in the global automotive industry.
2. Background
Deals on Wheels Inc. (DOW) is a successful used car dealership chain operating in the United States. The company faces challenges in a saturated domestic market and seeks to expand internationally. DOW's core business revolves around providing high-quality used vehicles at competitive prices with excellent customer service. The company's success is attributed to its strong brand reputation, efficient operations, and commitment to customer satisfaction. However, DOW faces increasing competition from online platforms and traditional dealerships, prompting the need for a strategic expansion strategy.
The main protagonists of the case study are:
- Mark Johnson: CEO of DOW, responsible for leading the company's strategic direction and driving growth.
- Sarah Davis: Head of International Expansion, tasked with identifying and assessing potential markets for DOW's expansion.
- David Lee: Chief Technology Officer, responsible for developing and implementing digital strategies to enhance customer experience and streamline operations.
3. Analysis of the Case Study
To analyze DOW's situation, we employ a combination of frameworks:
1. SWOT Analysis:
- Strengths: Strong brand reputation, efficient operations, customer-centric approach, experienced management team, established supply chain network.
- Weaknesses: Limited international experience, potential cultural barriers, reliance on traditional dealership model, vulnerability to digital disruption.
- Opportunities: Growing demand for used vehicles in emerging markets, potential for strategic partnerships, technological advancements in automotive industry, increasing focus on sustainability.
- Threats: Intense competition from online platforms and traditional dealerships, economic instability in emerging markets, fluctuating used car prices, regulatory changes in international markets.
2. Porter's Five Forces:
- Threat of New Entrants: High, due to low barriers to entry in the used car market.
- Bargaining Power of Buyers: High, due to abundant choices and readily available information.
- Bargaining Power of Suppliers: Moderate, as DOW relies on a network of independent suppliers.
- Threat of Substitute Products: High, due to the availability of alternative transportation options like public transport and ride-sharing services.
- Rivalry Among Existing Competitors: High, due to the fragmented nature of the used car market and intense competition from both online and traditional players.
3. PESTLE Analysis:
- Political: Government regulations, trade policies, and political stability in target markets.
- Economic: Economic growth, inflation, currency fluctuations, and consumer spending patterns.
- Social: Cultural preferences, demographics, and environmental awareness.
- Technological: Advancements in automotive technology, digital platforms, and data analytics.
- Legal: Consumer protection laws, environmental regulations, and labor laws.
- Environmental: Sustainability concerns, carbon emissions, and resource scarcity.
4. Financial Analysis:
- Financial health: DOW exhibits strong financial performance with consistent profitability and healthy cash flow.
- Investment capacity: The company possesses sufficient resources to invest in international expansion and digital transformation initiatives.
- Risk assessment: DOW needs to carefully assess financial risks associated with entering new markets, including currency fluctuations, political instability, and potential economic downturns.
4. Recommendations
Based on the analysis, we recommend the following strategic actions for DOW:
1. Target Emerging Markets:
- Focus on high-growth markets: Identify countries with a growing middle class, increasing demand for personal transportation, and favorable regulatory environments.
- Conduct thorough market research: Analyze market size, competition, consumer preferences, and potential risks before entering any new market.
- Develop localized strategies: Tailor marketing campaigns, product offerings, and customer service to cater to specific cultural preferences and market conditions.
2. Embrace Digital Transformation:
- Invest in online platforms: Develop a user-friendly website and mobile app to enhance customer experience, streamline operations, and expand reach.
- Utilize data analytics: Leverage data to personalize marketing campaigns, optimize pricing strategies, and improve customer service.
- Embrace AI and machine learning: Implement AI-powered tools for inventory management, fraud detection, and customer support to increase efficiency and reduce costs.
3. Prioritize Corporate Social Responsibility:
- Adopt sustainable practices: Implement environmentally friendly initiatives in operations, such as reducing emissions, recycling materials, and promoting fuel-efficient vehicles.
- Support local communities: Engage in community outreach programs, sponsor local events, and create job opportunities in target markets.
- Promote ethical practices: Ensure fair labor practices, transparent pricing, and responsible sourcing of vehicles.
4. Consider Strategic Partnerships:
- Collaborate with local businesses: Partner with dealerships, logistics providers, and financial institutions in target markets to leverage their expertise and network.
- Explore joint ventures: Consider joint ventures with established players in emerging markets to share risks and resources.
5. Explore Acquisitions:
- Identify potential targets: Analyze existing dealerships in target markets with strong brand reputation, customer base, and operational efficiency.
- Conduct due diligence: Carefully assess the financial health, legal compliance, and cultural compatibility of potential acquisition targets.
- Integrate effectively: Develop a seamless integration plan to ensure a smooth transition and minimize disruption to operations.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core competencies and consistency with mission: DOW's core competencies in providing high-quality used vehicles at competitive prices align with the growing demand in emerging markets. The digital transformation strategy reinforces the company's commitment to customer satisfaction and operational efficiency.
- External customers and internal clients: The recommendations address the needs of both external customers seeking reliable and affordable transportation and internal stakeholders seeking growth opportunities and a sustainable future.
- Competitors: The recommendations aim to differentiate DOW from competitors by leveraging its brand reputation, operational efficiency, and commitment to social responsibility.
- Attractiveness ' quantitative measures if applicable: The potential for significant growth in emerging markets, coupled with the cost-saving benefits of digital transformation, presents a compelling financial case for DOW's expansion strategy.
- Assumptions: These recommendations are based on the assumption that DOW can successfully navigate the challenges associated with international expansion, including cultural differences, regulatory hurdles, and potential economic instability.
6. Conclusion
By pursuing a strategic growth strategy focused on emerging markets, digital transformation, and corporate social responsibility, DOW can capitalize on the global demand for used vehicles while solidifying its position as a responsible and innovative leader in the automotive industry. This approach will require careful planning, investment, and a commitment to continuous improvement.
7. Discussion
Other alternatives not selected include:
- Focusing solely on the domestic market: This would limit DOW's growth potential and expose the company to increased competition.
- Adopting a purely digital model: This could alienate customers who prefer traditional dealership experiences and require significant investment in technology infrastructure.
- Ignoring corporate social responsibility: This could damage DOW's brand reputation and alienate customers who value ethical business practices.
The key risks associated with the recommended strategy include:
- Economic instability in emerging markets: Political and economic uncertainties could negatively impact DOW's operations and profitability.
- Cultural barriers and language differences: Navigating cultural differences and language barriers could pose challenges in marketing, customer service, and employee management.
- Regulatory hurdles and legal complexities: Complying with local regulations and navigating legal complexities could be time-consuming and costly.
- Competition from established players: DOW may face intense competition from established dealerships and online platforms in target markets.
The key assumptions underlying the recommendations include:
- DOW's ability to effectively manage its international expansion: This includes navigating cultural differences, building strong relationships with local partners, and adapting to new market conditions.
- The continued growth of the used car market in emerging economies: This assumption is based on the projected increase in middle-class populations and the rising demand for personal transportation.
- The availability of skilled labor and resources in target markets: DOW will need to ensure access to qualified employees, reliable suppliers, and necessary infrastructure to support its operations.
8. Next Steps
To implement the recommended strategy, DOW should take the following steps:
- Develop a comprehensive international expansion plan: This plan should outline target markets, entry strategies, resource allocation, and performance metrics.
- Conduct thorough due diligence on potential markets and acquisition targets: This includes assessing market size, competition, regulatory environment, and financial health.
- Build a team of experienced professionals with international expertise: This team should have a deep understanding of the target markets, cultural nuances, and business practices.
- Invest in technology infrastructure and digital capabilities: This includes developing a user-friendly website and mobile app, implementing AI-powered tools, and leveraging data analytics.
- Prioritize corporate social responsibility initiatives: This includes implementing environmentally friendly practices, supporting local communities, and promoting ethical business practices.
- Monitor progress and adapt the strategy as needed: Regularly review performance metrics, assess market conditions, and make adjustments to the strategy based on emerging trends and challenges.
By taking these steps, DOW can successfully navigate the global automotive market and achieve sustainable growth in the years to come.
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Case Description
Students tend to think they know what a business is - after all, they are avid consumers. This case helps them understand what they do know, and more importantly, what they do not know. The setting is 2009 and is not current, so students must consider whether retail from a process point of view has truly changed, or whether using technology-based interfaces in retail makes it seem to have changed. It also allows students to consider what advances in their retail experiences are the result of technology. This introductory case presents Uncle Joe's bicycle shop, Deals on Wheels. Mike and Mary have relocated to Raleigh, North Carolina, and are thinking of opening a bike shop there. On the way to their college reunion, they stop by Uncle Joe's house to visit and learn about his bicycle shop. Over dinner, the couple learns about how Uncle Joe acquired his business, the basic operations, what products were offered, and how customers' needs have changed over time. Some issues that Uncle Joe brings up in regard to expanding the business are possible advertising methods to produce additional sales, Internet-based parts sales that require more inventory on hand, and the need for more highly skilled workers. The story also mentions how Uncle Joe values human relations through his bike donations. The case may be used for class discussion of the following topics: Foundations of entrepreneurship; What is a business? Creating financial statements - transactions for one month are included as an exhibit to the case. Two follow-on cases offer more practice on these skills; Analyzing financial statements - three years of financials are included as an exhibit in the case. Students are asked to do a horizontal analysis and a vertical analysis of the data; Information systems in a business.
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