Q.1. (a) SWOT analysis for Carvana
SWOT analysis is a tool used in strategic planning. It is an approach that evaluates the current strength, weaknesses, opportunities, and threats that Carvana is experiencing. Consequently, the SWOT analysis of the company is shown below;
Strengths
As one of the major players in the industry, Carvana co. has various strengths that drive the firm in the market. Firstly, the company has highly skilled personnel who have been developed through training. The company invests in the development of the workers leading to the production of a skilled and motivated workforce. Secondly, Carvana boosts of a strong dealer community. This emerges from the extensive network of distributors and dealers where the dealers promote products and also train sales teams who provide value to the clients. Additionally, the firm has a record of successfully establishing new products. Other strengths of Carvana include successful expansion strategies through mergers, excellent performance in the market, automation of processes, and high levels of customer satisfaction.
Weaknesses
Weaknesses present areas of improvement by the company. Accordingly, Carvana is not efficient in financial planning. The firm’s current asset ratio and liquid asset ratio depicts that the company can perform better than currently. Secondly, there exist gaps in the product range distributed by Carvana. This lack of choice implies that a rival firm may exploit the gap. Furthermore, the firm has not been able to handle the challenges presented by new players in the market, implying that it has lost a small portion of the market share. The need for more investment in technology is another weakness. Other weaknesses in the firm are inefficient marketing of the products, compatibility of the organization structure to the current business model only, and a high attrition rate in the workforce.
Opportunities
Opportunities are the areas that can be exploited by the company to improve performance. Firstly, there exist new technologies that offer an opportunity for Carvana to differentiate pricing in new markets. This will be instrumental in maintaining customer loyalty. Secondly, there is a low inflation rate, which enhances the market’s stability through the provision of credit at a lower rate. Thirdly, the company’s core competencies can be utilized in other products to be successful. Additionally, the company also has a stable free cash flow providing a chance for investment in adjacent product segments. New patterns in consumer behavior also offer an opportunity for the company to capitalize on new markets. New clients from online channels and market development, which will dilute competition are other opportunities available to the company.
Threats
Threats are the factors that could harm the organization and jeopardize performance. Notably, Carvana is also facing various threats. Firstly, there is intense competition in the industry, which has emerged from stable profits that accrue to businesses operating in this industry. Secondly, there is a variation in the liability laws in various nations, implying that Carvana will be exposed to new liability claims due to policy changes in those countries. Thirdly, a shift in consumer purchasing behavior from online channels is a threat to the current physical infrastructure. Moreover, there is a lack of a constant supply of innovative products due to dependence on the model produced by other players. There is also an upward trend in the isolationism in the USA economy, which can result in a similar reaction from the state affecting international sales. Copying of counterfeit and inferior quality products, shortage of skilled human resources, and lawsuits the company faces in other markets are threats to Carvana.
(b) sustainability of the company’s strength in the next 1-2 years
The company’s highly skilled human resource will be sustainable in 12 to 24 months. The workforce has been developed through training and learning programs with the firm investing a considerable amount of resources. Accordingly, this has not only established an efficient workforce, but it has also enhanced motivation.
Furthermore, employees are the greatest assets of an organization. Training them leads to the economy in operations due to the efficiency developed through the programs, leading to less waste of materials and equipment. Moreover, Carvana’s trained employees will be more productive because there is a tendency of a trained person to produce high-quality products compared to the untrained worker. Continuous delivery of quality products by the company will enhance customer retention in loyalty, which is critical for sustainability in the foreseeable future.
The highly skilled workforce also implies consistency in the application of procedures. With the incorporation of training, there can be standardization of the available production techniques to all the employees. Ideally, this will translate into high levels of performance rule rather than the exception. Eventually, Carvana will be producing high-quality products that are uniform to all the markets, increasing the confidence of the clients in the company’s products. Expanded customer confidence implies that the clients will make repeated purchases or make referrals to colleagues, increasing the sales made by the company.
Highly skilled employees also exhibit high morale at work. Training has been found to increase the morale of workers. An efficient training program also incorporates molding the attitudes of employees to support organizations’ objectives. Motivated employees will stay in the company for longer periods implying that this strength will be sustainable for 12 to 24 months.
Q.2. (a) criteria a consumer may use when deciding which outlet to purchase a vehicle from
Before purchasing a car, there is a need for the buyer to consider various factors. Firstly, Payment options offered by the dealer is a critical factor. There exist two payment choices: the full repayment and finance overtime method. The cost of financing is higher compared to full payment because of the element of paying for credit. Dealers and lenders provide various loan terms and schedules for payment. Hence, the client needs to evaluate various dealers and compares the offers given before negotiating for the best offer. there is a need for one to be careful about the adverts that provide financing for first-time buyers or individuals with a poor credit score. These offers are usually exploitative due to a high APR. additionally, the loan agreement for the financing option needs to be understood before deciding on the option.
Warranty is another criterion to be considered before deciding on a dealer. When a dealer provides a car a “as is,” the box next to the “As-Is – No Warranty” revelation on the Consumer’s guide needs to be checked. Upon checking and the dealer promises to repair the vehicle, there is a need to ensure that the promise is documented on the buyer’s guide. This is because it may be difficult to make the dealer fulfill the promise that is made verbally. When the dealer does not provide proper disclosures, the buyer should cancel the purchase. Additionally, a comparison of the disclosures offered by dealers needs to be done before making a purchase decision.
Furthermore, the residual value is also a critical factor. The resale value of various vehicles depreciates over time. Some dealers provide dealer rebates for clients after purchasing a car. Similarly, some buyers may buy a car on sale or utilize the rebates provided by dealers. Nonetheless, these incentives lead to faster depreciation of the car. Some vehicles also depreciate quickly when they are many in the market. Therefore, the buyer needs to conduct thorough research to ascertain which dealers provide cars with strong resale value. This is essential in potentially saving the buyer from huge losses in the long run. This implies that a buyer should compare the dealers that provide a variety of cars compared to those selling a specific type of vehicle.
It is also critical for the buyer to get a vehicle history report for the specific model of the car that he or she has decided to buy. The dealers ought to have the vehicle history report. Trusting the salesperson of the physical appearance of the car may be detrimental. In some incidences, the visual signs show the car’s true shape may not be available. Some dealership provides the history reports while others do not. the reports have information regarding previous accidents, liens, and other critical information. This information is required implying that the buyer needs to work with dealers that provide historical information of the car. Similarly, the buyer needs to disregard the dealers that fail to provide car history.
Finally, the incentives and trade-ins are other factors to consider when purchasing a used car. The ideal time to purchase a car is when the dealers are clearing stock at the end of the year. Moreover, potential buyers should look for low interest and other incentives that are provided. Dealers that provide trade-in would save the buyer time and energy of selling the car before replacing. There is a need for the buyer to collect different deals regarding tread-in and the best prices before deciding on the best dealer to buy from.
(b) Carvana rank according to the criteria
Regarding payment options, Carvana ranks as excellent. This is because of the easy and safe way to buy a car. The company provides a window of 90 days before payment of the first installment and provides an extension of payment. On the contrary, the firm’s rank is poor on the issue of warranty. The firm offers a limited warranty for 100 days only or 4189 miles, whoever comes first. Carvana ranks as excellent in the provision of vehicle history on all its cars. There is a thorough inspection of all the cars and professionally documented before selling any car. Additionally, the company does not accept cars that have experienced accidents. For trade-in, the rank of the trade-in is also excellent. The firm accepts trade-in regardless if the client purchases one of its cars or not. The trade-in is acceptable upon the provision of the vehicle identification number and a brief description of the car. Finally, the rank for residual value consideration is good for the company because it offers a variety of cars with different residence values for clients to choose from.
Q.3. (a) the strategy currently applied by the company
The company has adopted a market development strategy. Notably, the company has gone beyond the traditional dealership infrastructure and is implementing astonishing marketing approaches to lure clients. Some of the platforms the company has incorporated in its marketing include car vending machines, youtube advertising campaigns, and 360 patented technologies, among others. The company’s main market is the US, where the company distributed over forty million cars in 2018. This translates to one car purchased for every 6.3 million Americans during the year. Nonetheless, the market is still fragmented and ineffective, with approximately 43,000 dealers present in the market, making the purchasing experience a hassle.
The experience entails encountering nagging salespersons, the limited selection at the dealership, uncertainty entailing the quality and history, and lack of extensive financing option. The majority of people do not enjoy the car buying process implying the need for modernization. This is where Carvana has exploited and currently considers itself as a direct-to-direct consumer used-car-only retailer. The primary aim is to navigate the traditional dealership infrastructure and establish a business model that reduces the overall costs and ensures that consumers save through the provision of lower prices. Additionally, there are no hidden costs that enhance the customer experience.
Consequently, the drive to enhance customer experience accounts for the reason of the company incorporating innovation into the industry. The introduction of innovations has tremendously improved the company’s performance. The firm utilizes new technologies both in enhancing its online platform and operational network. Some of the company’s primary differentiation elements include car acquisition, car availability and expert network, patented 360-degree digital tour, e-commerce, financing platform, pick-up and delivery, and marketing through social media.
(b) the best strategy going forward
Going forward, the company should consider market penetration strategies to new areas. This strategy will be important or the company in several ways. Firstly, it will enable the firm to sell to other countries to prevent reliance on the US market, which has many players and will soon be saturated. Penetrating other markets may also trigger business expansion because new global markets imply getting new clients. Additionally, exportation provides a wide and diverse customer base which are willing to contribute to the growth of the business and propel it to the next level. Besides increasing the customer base, the company will also increase revenues that are critical for growth.
Furthermore, penetrating new markets implies that the company will be an able to hedge against unsystematic risks and economic slowdowns. For instance, when the US economy hinders the firm from attaining its financial goals, the international segments can cover up for the difference. Notably, investing in other nations also provides the company with new sources of profits and business growth.
Penetrating to other markets helps the business avoid risks of doing business and eliminate the probability of one product or one poor decision from harming the business. presence in many countries will enable the company to spread the cost of doing business across more markets. This leads to less cost pf conducting business when analyzed as per customer basis. It also provides an avenue of utilizing the economies of scale advantage to the company.