Executive Summary
An in-depth analysis of the New Zealand’s auto industry reflects that establishment of an auto parts business focusing on the import and supply of all parts of Japanese made cars will be successful in the country. New Zealand greatly relies on used car imports from Japan to meet the local need for higher ownership levels. The planned venture will be located in Auckland, New Zealand. It proposes to import auto parts of Toyota and Nissan in the initial phase of market positioning. In the entry phase, the organization will particularly try to meet the needs of Toyota and Nissan customers. This auto parts business plans to emphasize primarily on You Tube videos and social networking websites such as Facebook and Twitter to deal with its branding and market positioning. In addition, the planned business venture will adopt a high value market position. In addition to traditional advertising techniques, the organization will also rely on modern promotional tactics like YouTube videos, e-mail marketing, and newsletters. In order to support its knowledge management operations, the firm will adopt techniques such as intranet creation, environmental scanning, business simulation, and content analysis.
Introduction
The global automobile industry is growing rapidly. It is one of the major pillars for economies like China, United States, and Japan. Despite its small size, the New Zealand’s automobile industry is also growing fast and it focuses significantly on used car import to meet its local needs. It is identified that New Zealand’s auto customers are reluctant to scrap their older cars, and therefore, the average age of a car is increasing in the country. A car is generally composed of nearly 20,000-30,000 parts, and even a large auto corporation cannot produce them all. Hence, it appears that there is a potential scope for auto parts business in New Zealand. This paper will critically evaluate the scope of an auto parts shop importing and selling auto parts of Toyota and Nissan in Auckland paying due attention to several key aspects of the auto industry including competition, technology, and workforce.
Business Description
The vision of the proposed auto parts business is “to grow to be a dominant power in the New Zealand automobile industry giving specific attention to the prospects of sustainable development and community welfare’. Since the company is committed to promote passenger safety, it will never compromise auto parts quality simply to cut down costs. In addition, the company will be always dedicated to ensuring on time supply of auto parts to clients in order to avoid supply chain interruptions. Finally, the organization will take every possible effort to protect environment and communities in which it operates. The planned business (auto parts shop) is not a niche because auto parts industry already exists in New Zealand. In addition, the needs for auto parts in the New Zealand automobile industry are well addressed by the existing players although there are only a limited number of firms focusing on the production and supply of different auto parts. Hence, the proposed business venture is an industry sector that attempts to meet the needs of auto manufacturers in the New Zealand market in a more efficient manner. The business venture proposed will be headquartered in Auckland, New Zealand. The business plans to import different auto parts of Toyota and Nissan from Japan and sell in the New Zealand auto market. The firm’s product line and business scope would be expanded once it is positioned well in the industry sector. In addition, the organization would mainly target second-hand Toyota and Nissan cars that are widely imported and used in New Zealand. The company is also planning to import and distribute goods in the manner prescribed by automobile dealers.
This particular industry sector was chosen for the study because auto parts business has a growing scope in the New Zealand market as the country has set favorable tariffs on auto-related imports. It is vital to note that New Zealand has been a country with world’s highest car ownership ratio though the country no longer assembles passenger cars. In addition, New Zealand depends heavily on used car imports so as to meet the local need for improved ownership levels. To illustrate, imports of used cars in New Zealand increased from less than 3,000 cars a year in 1985 to 85,000 in 1990 and subsequently to 150,000 by the end of 2004 (World Heritage Encyclopedia. (n.d.). Japanese used cars represented majority of these used car imports.
While analyzing the major source of competitive advantage for the business proposed, it seems that New Zealand’s imported car market is growing at a tremendous rate, and this favorable market scenario can add to the future scope of the venture in the country. To illustrate, New Zealand’s imported vehicle market achieved a 15% rise in the sales of both passenger and commercial vehicles in February 2015 compared to the same month of previous year; and hence, there will be a growing need for auto parts in the country in the coming years (Scoop Business, 2016).
Market analysis
The New Zealand’s automobile industry is growing fast, and market analysts think that this trend is likely to continue over the coming years. Statistical data show that new and used imported sales in New Zealand represented a new high of 286,722 vehicles in 2015, and these record sales assisted the country’s auto industry to grow by 4 percent in 2015. Similarly, it is identified that people in New Zealand are still hesitant to scrap their older cars, and consequently the current average age of a car has become 14 years. Notably, 20 percent of the total cars in the country are now over 20 years old. This reluctance of New Zealand people contributes to the market competitiveness of the auto parts shop. The Fig.1 reflects the proportion of used cars sold in New Zealand during the period 2007-2013. The chart makes it clear that New Zealand people tend to purchase medium-sized used cars.
(Source: Statistics New Zealand, 2013).
Generally, an automobile is composed of approximately 20,000 to 30,000 parts and even the world’s largest vehicle auto manufacturer cannot produce all those parts itself (Japan Automobile Manufactures’ Association Inc., 2015). Hence, local auto manufacturers are likely to depend on auto parts businesses to meet their production needs timely and adequately. Furthermore, increased reliance on used car market in New Zealand is another major trend that provides the planned business with an opportunity to position itself in the country’s auto market. In 2015, the Japanese car maker Toyota was the top selling brand in New Zealand for the 28thconsecutive year, with the company holding 20% share of the country’s automobile market (nzherald.com, 2016).
The size of the auto parts industry in New Zealand is small despite a high car ownership ratio in the country. When it comes to the New Zealand’s automobile sector, which is the market for the chosen business, it is identified that the industry has been performing successfully over the years in spite of its small size. The Table 1 indicates the country’s new vehicle sales report for the period 2015-16. It points that sale of new vehicles is notably growing in New Zealand. It is also recognized that New Zealand’s auto industry contributes significantly to the country’s GDP though there are no New Zealand-based auto manufacturers.
(Source: Statistics New Zealand, 2013).
Since the planned firm is an importer of auto parts of Toyota and Nissan, the business will particularly focus on cars manufactured by these Japanese automobile companies. As discussed already, New Zealand imports second-hand cars mainly from Japan, and Toyota is the top-selling automobile brand in the country. Considering the New Zealand people’s reluctance to scrap their old cars, there would be a higher demand for auto parts in the country’s auto market. As the business is newly established in the New Zealand market, it will operate to meet the demand for auto parts in Auckland only at the initial stage of market development. This auto parts shop will focus specifically on auto service centers in Auckland because direct sales to end consumers are less likely.
While analyzing the competitive landscape of the auto parts company, it seems that the organization faces potential competition threats from existing auto parts dealers in Auckland. Auto Parts Industrial NZ Limited (API), an Auckland based importer of auto parts, appears to be one of the major competitors of the business venture proposed. The major auto parts firms in Auckland are the members of Automotive Parts Industry Association New Zealand (APIA). However, it is identified that majority of these companies do not focus on the auto parts of any specific automobile company.
Sales and Marketing
It is advisable for the planned auto parts business to adopt high value market position. Such a market position is essential to overcome the ‘cheap’ perception of consumers about the products of the company. This does not mean that the products should be priced higher so as to achieve consumer trust. Here, it is important to note that there is significant difference between cheap and affordable price. Hence, the auto parts business should offer high value products to customers at affordable costs. The key sales message of the company is ‘to deliver high quality auto parts that can add value to passenger experience at affordable costs’. Since the planned venture is supposed to be a business-to-business selling organization, a direct-to-consumer marketing strategy would be better to brand the business. In addition, the company is advised to rely on e-mail marketing and newsletters to keep clients informed of the company’s product lines and services. In addition, creating a social media presence also appears to be a potential strategy to create an image of the business in the minds of auto customers. The company plans to offer discounted rates to auto service centers that purchase 100 or more auto parts from the business. In the start-up phase, the auto parts shop will establish its warehouses in Auckland and sell extensively to auto service centers in the region. Considering the nature of the business, the company does not want to turn to online business immediately because auto parts are less likely to be sold online. In addition to traditional promotion techniques such as TV ads, the firm will also depend on modern promotion tactics like social media marketing, You Tube videos, e-mail marketing, and newsletters.
Business Operations
As an auto parts business, it is vital for the firm to achieve a greater level supply chain performance and operational efficiency so as to gain customer trust. Therefore, it is essential for the organization to develop and maintain a highly skilled workforce that is well-informed of the latest technologies and supply chain activities. It is recommendable for the business to assign departmental managers with the task of recruiting talented personnel because they would be aware of the actual requirements of the department than anyone else. Though it is an expensive approach, hiring brilliant and experienced professionals can be a key policy for the auto parts shop to achieve a greater level of market competitiveness. While establishing the business in a growing auto market like Auckland, the firm may be required to depend on sub-contractors and allies. To illustrate, sometimes, the auto parts shop cannot directly manage the whole activities associated with the importing process, and under such circumstances it may be forced to outsource a part of the work to outside concerns or sub-contractors. In addition, the shop is needed to form business relationships with allies in order to take advantages of the synergies of combined operation.
It is good for the company to maintain its own warehouses in Auckland so as to avoid unexpected but unwanted interruptions in product delivery and to achieve a high degree of control over the business. However, the management may also consider depending on rented or leased warehouses to cut operating expenses at the initial stage if the business is badly in needs of funds. In the current world, it is not a challenging task for the firm to procure computing and communication systems and tools. With the assistance of an experienced IT professional, the auto parts shop can easily procure all IT systems and tools necessary for running the business smoothly. In the modern IT era, the organization may also think of outsourcing some of its computing and communication activities to outside agencies so as to cut down operating expenses and to reduce managerial complexity notably. The outsourcing strategy can also assist the company to focus on its core business activities better and thereby generate improved revenues. In order to procure production equipment, the firm is suggested to prepare a list of potential suppliers globally and to shortlist them on the basis of quality and price. Then the company may require eligible suppliers to submit bids on the proposal so that it can choose apt suppliers. If the firm’s top management has some form of influence over any potential supplier, the firm may depend on that particular supplier to obtain production equipment at a discounted rate. However, the company has to give first priority to quality rather than initial cost while procuring production equipment.
Knowledge Management
Knowledge management can be defined as a process of gathering, developing, sharing, and effectively utilizing information and resources within an organization. It is good for the auto parts business to use the company intranet as the primary channel of communication. An intranet is a personal computer network of an organization, which can be accessed only by the organization’s employees and members. This facility can assist the business to facilitate closed sharing of information and to keep data/information inaccessible to unauthorized persons. Likewise, environmental scanning is an important technique of knowledge management. Environmental scanning is the process of acquiring and using information about major trends, events, and relationships relating to the organization’s external environment. This knowledge management tool is beneficial for the organizational management to form proactive strategies to address future business situations anticipated. In addition, data mining is also a key tool of knowledge management that assists the organization to convert raw data into meaningful information. Today numerous software are available to support the data mining process. With the support of such software, the organization can identify patterns in large batches of data thus leading to a deep understanding of their customers’ buying behavior and trends. Based on this information, the organization is able to develop effective marketing strategies capable of increasing sales and decreasing operating costs. In addition, the knowledge management may also rely on business simulation approaches to support business training, education, or analysis within the organizational environment. This practice can aid the workforce to keep informed of the latest trends and practices and to deliver enhanced process/project outcomes. Finally, content analysis can also be an integral part of knowledge management. Content analysis can be simply referred to a practice of summarizing any form of content by actually counting various aspects of the content (Lee, Dinis, Lowe & Anders, 2016, p.na).
Summary and Reflection
In total, the proposed auto parts business will be launched in Auckland, New Zealand and it will sell imported Japanese auto parts to car users in the region. As the organization imports auto parts of Toyota and Nissan, the proposed venture will focus particularly on the used car market of Auckland that is composed of a large number of Japan-made cars, particularly Toyota cars. Currently, the intensity of competitive rivalry in the Auckland’s auto parts industry is considerably high, and this unfavorable market scenario poses potential threats to the planned venture. However, unlike majority of the existing auto parts companies in Auckland/New Zealand that focus on the production and distribution of only a limited number of auto parts, the proposed business will deal with the import and supply of all auto parts of Toyota and Nissan. Hence, there is a likely demand for the products offered by the company. Furthermore, the New Zealand’s automobile market is a potentially growing market despite its small size, and this strength also adds to the future scope of the business. Though auto customers in New Zealand are reluctant to scrap their older cars, this trend can add to the operational scope of the planned venture in the country because older cars may require new parts more frequently. It is important to note that New Zealand government has set favorable tax rates on used car imports and this type of a friendly legal landscape can drive the firm’s rapid business expansion in the country’s automobile market. Being an importer of the auto parts of Toyota, the top-selling car status of Toyota in New Zealand adds to the competitive advantages of the planned business. Hence, the planned business venture has the potential to establish and maintain a competitive business spectrum in the Auckland automobile industry.
References
Japan Automobile Manufactures Association Inc. (2015). The Motor Industry of Japan 2015. Retrieved fromhttp://www.jama-english.jp/publications/MIJ2015.pdf
Lee, S. C., Dinis, M. S. N., Lowe, L & Anders, K. L. (2016). Statistics for International social work and other behavioral sciences. US: Oxford University Press.
nzherald.com. (2016). NZ new vehicle sales soar to record. retrieved from http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11570429
Scoop Business. (2016). The rise and rise of New Zealand’s used imported car market. Retrieved from 2016, http://www.scoop.co.nz/stories/BU1503/S00349/the-rise-and-rise-of-new-zealands-used-imported-car-market.htm
Statistics New Zealand. (2013). The dealer-to-household used-car market. Retrieved from http://www.stats.govt.nz/tools_and_services/newsletters/price-index-news/oct-13-used-car-market.aspx
World Heritage Encyclopedia. (n.d.). Automotive industry in New Zealand. Retrieved from http://central.gutenberg.org/article/WHEBN0034570831/Automotive%20industry%20in%20New%20Zealand
