Harvard Case - AMAG: Creating its own future in a disrupted automotive industry
"AMAG: Creating its own future in a disrupted automotive industry" Harvard business case study is written by Stefan Michel, Daniel Gerber, Vikas Munjal, David Riviere, Stephan Thalmann. It deals with the challenges in the field of Strategy. The case study is 16 page(s) long and it was first published on : Jan 11, 2024
At Fern Fort University, we recommend AMAG pursue a multi-pronged strategy to navigate the disrupted automotive industry and secure a sustainable future. This strategy involves embracing digital transformation, leveraging strategic alliances, and expanding into new market segments while maintaining a strong focus on core competencies and customer-centricity.
2. Background
This case study focuses on AMAG, a leading automotive retailer in Austria, facing the challenges of a rapidly changing automotive industry. The rise of electric vehicles (EVs), autonomous driving, and digitalization is disrupting traditional business models, forcing companies like AMAG to adapt and innovate.
The main protagonists are:
- AMAG Management: Concerned about maintaining market leadership and profitability in the face of industry disruption.
- Customers: Evolving needs and preferences, increasingly demanding digital experiences and sustainable solutions.
- Competitors: New entrants with disruptive business models and established players adapting to the changing landscape.
3. Analysis of the Case Study
Industry Analysis:
- Porter's Five Forces: The automotive industry is characterized by high competitive rivalry due to the presence of numerous established players. Bargaining power of buyers is moderate, with consumers having access to a wide range of options. Bargaining power of suppliers is also moderate, with key components like batteries becoming increasingly crucial. Threat of new entrants is high, driven by technology advancements and the emergence of startups. Threat of substitutes is moderate, with alternative transportation options like ride-sharing and public transport gaining traction.
SWOT Analysis:
- Strengths: Strong brand reputation, established customer base, extensive dealer network, strong financial position, experienced workforce.
- Weaknesses: Limited experience in EV sales and maintenance, reliance on traditional business model, potential vulnerability to digital disruption.
- Opportunities: Growing EV market, potential for new revenue streams through digital services, expansion into emerging markets.
- Threats: Increased competition from EV-focused players, technological advancements requiring rapid adaptation, changing customer preferences.
Value Chain Analysis:
AMAG's value chain needs to be re-evaluated to incorporate the evolving needs of the automotive industry. This includes:
- Inbound Logistics: Optimizing supply chain for EVs and related technologies.
- Operations: Adapting service infrastructure and training for EV maintenance.
- Outbound Logistics: Developing efficient delivery models for EVs and digital services.
- Marketing & Sales: Targeting new customer segments and leveraging digital marketing channels.
- Customer Service: Providing seamless digital experiences and personalized support.
Business Model Innovation:
AMAG needs to explore business model innovation to remain competitive. This could include:
- Subscription-based services: Offering maintenance packages and digital services on a subscription basis.
- Data-driven insights: Leveraging customer data to personalize offers and enhance service.
- Partnerships: Collaborating with technology companies and EV manufacturers to develop new solutions.
Digital Transformation:
AMAG must embrace digital transformation to enhance customer experience and streamline operations. This involves:
- E-commerce platform: Developing an online platform for vehicle sales, service booking, and digital services.
- Data analytics: Utilizing data analytics to understand customer preferences and optimize operations.
- Cybersecurity: Implementing robust cybersecurity measures to protect sensitive customer data.
4. Recommendations
1. Embrace Digital Transformation:
- Develop a comprehensive digital transformation strategy: This should encompass all aspects of the business, from customer interaction to internal processes.
- Invest in technology and infrastructure: Upgrade IT systems, develop a robust e-commerce platform, and implement data analytics tools.
- Train employees on digital skills: Develop a workforce capable of navigating the digital landscape.
2. Leverage Strategic Alliances:
- Partner with EV manufacturers: Secure partnerships with leading EV manufacturers to gain access to technology, expertise, and supply chains.
- Collaborate with technology companies: Partner with tech companies to develop innovative solutions for digital services, autonomous driving, and data analytics.
- Explore joint ventures: Consider joint ventures with other automotive retailers or service providers to expand reach and share resources.
3. Expand into New Market Segments:
- Target EV-focused customers: Develop marketing campaigns and offerings specifically tailored to EV enthusiasts.
- Explore new geographic markets: Consider expanding into emerging markets with high EV growth potential.
- Offer digital services: Develop a suite of digital services, including online vehicle maintenance scheduling, remote diagnostics, and connected car features.
4. Reinforce Core Competencies:
- Maintain a strong focus on customer service: Provide exceptional service experiences across all channels, both physical and digital.
- Develop expertise in EV technology: Invest in training and development to ensure employees are equipped to handle EV sales and maintenance.
- Strengthen brand reputation: Maintain a strong brand image associated with reliability, innovation, and customer satisfaction.
5. Basis of Recommendations
These recommendations align with AMAG's core competencies, including its strong brand reputation, established customer base, and experienced workforce. They are also consistent with the evolving needs of external customers and internal clients, who increasingly demand digital experiences and sustainable solutions. By embracing digital transformation, leveraging strategic alliances, and expanding into new market segments, AMAG can position itself for sustainable growth in the disrupted automotive industry.
The recommendations are also supported by quantitative measures, such as market research data indicating the growth of the EV market and the increasing demand for digital services.
6. Conclusion
AMAG faces a critical juncture in its history. By embracing digital transformation, leveraging strategic alliances, and expanding into new market segments, AMAG can navigate the disrupted automotive industry and create a sustainable future for itself. This strategy will require a significant investment in technology, talent, and partnerships, but it will ultimately position AMAG as a leader in the evolving automotive landscape.
7. Discussion
Alternative strategies could include focusing solely on traditional vehicles or pursuing a purely digital approach. However, these options carry significant risks.
- Focusing on traditional vehicles: This strategy would likely lead to declining market share as the EV market grows.
- Pursuing a purely digital approach: This strategy could alienate existing customers who prefer traditional service models.
Key assumptions underlying these recommendations include:
- Continued growth of the EV market: This assumption is supported by government policies, technological advancements, and consumer demand.
- Availability of strategic partners: AMAG must be able to secure partnerships with EV manufacturers and technology companies.
- Successful implementation of digital transformation: AMAG must be able to effectively implement its digital transformation strategy.
8. Next Steps
- Develop a detailed implementation plan: This plan should outline specific actions, timelines, and resource allocation.
- Secure necessary funding: AMAG will need to invest in technology, training, and partnerships.
- Communicate the strategy to stakeholders: Ensure all stakeholders, including employees, customers, and partners, are informed about the strategic direction.
- Monitor progress and adjust as needed: Continuously monitor the effectiveness of the strategy and make adjustments as needed.
By taking these steps, AMAG can position itself to thrive in the rapidly changing automotive industry and create a sustainable future for itself.
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Case Description
AMAG is Switzerland's premier automotive retail and service company, holding exclusive rights to import Volkswagen Group car brands such as Audi, Volkswagen, Skoda, Cupra and Seat. In 2022 AMAG had 7,300 employees and a revenue of CHF 4.4 billion. The electrification of the automotive industry and the introduction of the agency model by the Volkswagen Group are major challenges for the traditional Swiss company. The case describes AMAG's traditional business model, including recent changes, its vision and ambitions. Follow Frank Boemerle, the head of strategy at AMAG retail, as he develops new business models and captures insights about the company's transformation journey. New business models like Mobility as a Service (MaaS) and Retail as a Service (RaaS) are elaborated and described. Existing and future profit pools are analyzed, and new business opportunities and threats are discussed. The EV transformation and digitalization require up to 50% fewer employees in the after-sales service business, and the impending agency model questions the current infrastructure and capital employed. Therefore, AMAG is searching for new mid-term revenue streams and new employment for the workforce. Change management and up-skilling of the employees are additional challenges after the changes in the financial transactions of future business models on a subscription base. Shall AMAG invest in renewable energy to offer electrification packages to customers next to EVs? Shall AMAG expand to Italy and France? Shall AMAG expand the EV portfolio with new brands from China and potentially risk its exclusivity with Volkswagen? Support Frank in the analysis and make your conclusions on how AMAG can stay in business in Switzerland beyond 2030, given that the electrification of mobility and the new agency model disrupt the main revenue streams of AMAG's current business model.
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