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Carmax Strategy Paper

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Submitted By sMPA421
Words 1807
Pages 8
Shaun Palm
MBA 652 - Independent Study
CarMax: Disrupting the Used Car Market - Strategy Paper The industry of automotive retail has potential for expansion as the recovery of economic conditions progresses, increase of population, urbanization, and developing overseas markets creates a rise in demand for new and used cars. Yet, the industry is unsafe, due to the social and cultural change toward environmental factors, which have increased gas prices, and generated a rise in demand for different sources of transportation. Although, advancements in technology may become a burden. Online automobile sales could deteriorate while CarMax grows to become a major player in the industry. For example, customers will purchase books for cheaper on Amazon after they view the price at Barnes & Noble. A wide range of vehicles can be taken for a test drive at CarMax and then bought online at a lower price, due to the lower overhead costs which is associated with dealerships having to buy and rent their lots. CarMax is capable of earning substantial returns which are considered above average in a depressed industry, and the only company to make profits in the automotive industry during the economic decline of 2008. This fact paints the company an image by showing they possess several competitive advantages. Although, these advantages are questionable as to whether the company will be able to sustain this kind of success, due to the accessibility of substitutes, and the cultural and social change which favors economical modes of transportation. CarMax can remove the danger of substitutes by revealing possible compromises which companies have made in the industry. Also, the automotive industry can unite by lobbying for supportive legislation which prevents creation of substitutes. While companies like Tesla attempt to sell straight to consumers, CarMax and other

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