Question regarding HBR Case Study Carmax Disrupting the Used

Question regarding HBR Case Study:

Carmax- Disrupting the Used Car Market

1. From the standpoint of a local dealership, how attractive is the U.S. used car industry?

2. What is the potential for consolidating this industry?

3. What growth opportunities should CarMax prioritize?

Solution

Solution :

The US used car industry consists of dealers who sell a variety of vehicles that have been previously owned or formerly rented and leased . Improvements in technology have increased the longevity and durability of used cars , raising the number of high quality used cars that are available for sale . In recent years, the sale of used cars has become a major source of profits for many new car dealers in the wake of shrinking margins on new cars . Some dealers promote \" certified pre-owned \" vehicles to customers who want a warranty on their used vehicles . This rises the price , but in return provides customers with peace of mind .

Nationwide used automobile dealer chains have increased in popularity over the last decade. They capitalize on the relatively large profits on the sales of previously owned cars . Some of the larger dealers offer low hassle sales on large inventories of these used vehicles. Used car dealers put emphasis on after market services such as financing and maintenance . These services typically provide large profit margins for dealers and remain less susceptible to business cycle downturns . They are also part of an effort to enhance customer loyalty & overall customer service .

The increasing use of internet to market used cars helps consumers easily access vehicle reviews , view pictures of vehicles and compare models , features and prices . Thus from the standpoint of a local dealership, the U.S. used car industry is an attractive & profitable business .

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2) Independent used car dealers will continue to experience growth as increases in vehicle leasing and rental company fleets continue to provide quality vehicles to the used car market . The used car dealers also provide repair services for their vehicles and they will demand more service technicians to perform maintenance work . Thus used car industry has a good potential for consolidating .

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3) The growth opportunities Car Max should prioritize are the following :