EXECUTIVE SUMMARY.
The motor vehicle and Parts Dealers subsector is a registered industry under the North American Industry Classification System (NAICS). The subsector deals with retailing motor vehicles and spare part merchandise. These are done at fixed point of sales, showrooms and open display lots. The industry has hit recent news in America as a result of impacts on oil prices which has led to increased prices on its products. The industry is also on the spotlight after reporting the highest number of layoffs in the last five years. This paper provides an overview of the industry, its strategy, management and a personal opinion on it overall performance and outlook.
Industry overview.
The motor vehicle and Parts Dealers subsector comprise of establishments primarily aimed at retailing motor vehicles, motor vehicle accessories and parts and providing motor vehicle complimentary services. It is engaged in retailing new and second hand automobiles and lights trucks like sports utility, cargo and passenger vans. The industry merchandises its products and services from fixed locations or points of sale (Crandall, 2001). The establishments operate from an open lot or a showroom where the vehicles are put on display. Industries have been put under this subsector for identification of retailed vehicles. This includes wholesale and retail trade. Sales of durable consumer products which include heavy-duty trucks or capital are defined under the wholesale trade while light trucks, sport utility mobiles and cargo and passenger vans are classified under retail trade.
The history of Motor Vehicle and Parts Dealers Subsector can be traced from 1967 with the enactment of the Standard Industrial Classification (SIC) system (Zeisset, 1998). The system was later updated in 1972 and again in 1987. With each update came an introduction of new industries into the framework. The 1997 economic consensus in the country provided a shift from the SIC system to a new North American Industry Classification System (NAICS). As a result of the shift, data could be updated in the two systems. By the end of the year 1997, almost half of the industries registered under SIC, were in the NAICS data update. The NAICS data provided a solution to the challenges that occurred in the previous system and its time series can only be traced from 1997.
Under the NAICS system, industry reviews are conducted in a series of five years. In 2002, industries were renumbered and redefined within Construction and Wholesale Trade. This is the year that the Motor Vehicle and parts Dealers Subsector was classified as NAICS 441. The new NAICS system also integrated some industries, which operated under the same category and by the year 2012 the number of industries within the manufacturing sector had reduced significantly from 473 to 364 (United States, 2008). The parts dealership section was among the sectors that were integrated. This subsector associated with motor vehicle manufacturing and on its integration the Motor Vehicle and Parts Dealers Subsector was established (Zeisset, 1998).
Industry size.
The subsector has made a significant comeback after experiencing the recession periods that made its performance decline. In the second quarter of 2007, the industry declined by over 60% of its sales (Economics and Statistics Administration, 2012). However, by the first quarter of 2009, the output of the assemblies had grown by more than a double. In early 2012, the motor vehicle assemblies had an average of over 9.9 million units. The increased output implies that most of the employees, who had been denied jobs due to the recession, are being reinstated back to work. Currently the industry has over 1.7 million employees, which is a decline in number from 2007 when the industry had hired more that 1.9 million employees (United States, 2008). The motor vehicle and parts manufacturing industry added over 139000 jobs while the motor vehicle and spares dealers added a total of 92000 jobs, from June 2009 to March 2012. These are just conservative estimates since indirect jobs like supply services have not been included.
The sales of the industry have also been on a significant rising trend. The highest level of sales since 2002 was recorded this year with over 14.5 million units being sold (Economics and Statistics Administration, 2012). This contributes to $88.6 billion capital turnover of the industry recorded in the first quarter of 2012. This can be credited to the outstanding marketing strategy adopted in the industry. The vehicles are placed on fixed points of sales with the spares on showrooms. This minimizes the space occupied by the displayed products thereby cutting down on the storage costs. The management has also classified the products to enhance proper breakdown on the product and services that enhance research. This ensures that the products are up to date with the requirements of customers and meet the needs of customers (Crandall, 2001). This has enabled the growth of the industry’s sales over the last five years.
In addition, the industry recruits qualified personnel who run the marketing segment in the promotion of the products. The marketing team ensures that customers are updated on any changes in technological systems, deliveries and prices. Statistics indicate that, in 2010, the operating revenues reached$ 98.4 from $93.7 incurred in the previous year. Sales represented 95.6% of the total operating revenues in 2010 (Economics and Statistics Administration, 2012). Currently, the industry is at 74.89 Billion in terms of assets and capital turnover. This is a representation of an annual growth rate of -17.66% in comparison to 4.48%, which is the long term averaged annual growth rate.
The industry’s annual growth rate has been on a rising trend over the period of the last five years. The operational trend is determined by economical factors such as recession and inflation. For instance before 2002, the industry was tremendously impacted by the global economic recession that affected its manufacturing and supply sizes. In addition, the operations of the industry are influenced by prices of oil. If the prices of oil increase, the manufacturing sector is faced by increased operational and running costs, thereby reducing production which is later sold at a relative high price (Crandall, 2001).
The industry relies heavily on technological input for its manufacturing, operations, supply chain management and marketing. The manufacturing sub sector implements fast producing machines that enhance fast production and differentiation. These machines are capital intensive and require expertise for running and maintenance. The supply chain process uses fast systems in communication and delivery. The system allows coordination between manufacturing and production in relation to the market requirements. The industry relies on systems in the accounting and financial procedures to maintain proper and accurate records. Research findings on marketing are systematized in production of relevant findings that accrue to the market. The industry relies on Information, Communication and Technology to maintain its policies and procedures and for overall control of its operations.
Among the interaction, and integration policies that enhance the growth of the industry is globalization (Clark and Fujimoto, 2006). The industry interacts locally, regionally and internationally to its competitors as well as its branches. Globalization enhances interchange of cultures of production, ideas and products which enhance product differentiation in the industry. Among the global interactions are the integration of the industry’s policies with the Qatar Motor vehicle manufacturing industry which has enhanced product growth and differentiation.
Industry’s Developments, News, Innovations and Government Regulations.
The recent news on changes in oil prices has triggered a reaction in the manufacturing sector of the industry. As a result of the adversity brought upon by increased oil prices, the industry intends to focus on increasing its wholesale and retail prices. The industry is also in the process of implementing a strategy on cutting down on the production of heavy vehicles that require a lot of time and resource in production (Clark and Fujimoto, 2006). Dramatic growths in India, China and other Asian economies have also led to the reduction in raw materials availability, in the industry. The management intends to lay a focus on production of auto mobiles, light trucks and vans. This, however, will be subject to the research findings of a survey that is being conducted recently on the consumption trends of the heavy weight trucks and vans in the wholesale and retail segments.
The review of salaries and wages by the trade union may also affect the running of the industry. The union intends to have an increase in salary to all its members. This might influence its future prospects since the running costs will be increased. In reaction to this, the management intends to increase its lay off number to reduce on the costs.
Customer market data.
The Motor Vehicle and Parts Dealers industry has a diverse market target. The industry is divided into a wholesale and retail segment. The wholesale segment targets international markets and mobile businesses in the regions. The retail section targets retail market in the area as well as globally. The customers are not differentiated by their origins rather than their tastes and preferences. The production is varied to suit every customer’s lifestyle and consumption habit. However, in some retail outlets, the industry focuses more on the lifestyle that determines the consumption habits of the buyers. For example, consumption in New York is much of a lifestyle as compared to Canada which is income determined.
Competitor information.
The industry has various firms that compete amongst each other in product differentiation and quality standards. Competition has also grown as a result of growth in foreign suppliers, in North America. An estimate of 1000 foreign suppliers has built plants towards the north, and this has created a mass global localization of the supplies. Some European companies have expanded to North America to supply their Detroit 3 customers. The suppliers in North America face competition from high costs of material and demanding customers. Businesses such as Ford, has thereby attempted to design global policies that allow a common manufacturing platform in Asia, North America and Europe. This is in an attempt to improve on quality and reduce engineering costs while minimizing unnecessary competition (Clark and Fujimoto, 2006).
Concluding thoughts.
The Motor Vehicle and parts Dealers industry is among the potential industries in US which has large prospects of growth both in the sector and economically (Crandall, 2001). The industry employs a large part of population meeting the government’s requirement on labor law. In addition, the industry is environmental cautious and emphasizes on promotion of a sustainable environment. The industry is placed in a strategic position of more growth despite the hard conditions and challenges imposed by its competitors. In connection to this, industry and firms associated with it, require to improve on their marketing strategy and finance. This is in order t aim higher in meeting the international demands and to avoid impacts on economic factors such as recession. The industry is still better situated in terms of competitiveness, and an increase in technological input would impact on its competitiveness and growth.
Reference.
Clark, K. B., & Fujimoto, T. (2006). Product development performance: Strategy, organization, and management in the world auto industry. Boston, Mass: Harvard Business School Press.
Crandall, R. (2001). Vertical Integration and the Market for Repair Parts in the United States Automobile Industry. The Journal of Industrial Economics, Vol. 16(3).
Economics & Statistics Administration. (April, 10 2012). The U.S Motor Vehicle Industry: Roaring Back in 2012. United States Department of Commerce.
United States. (2008). Career guide to industries. Washington, D.C: U.S. Dept. of Labor, Bureau of Labor Statistics.
Zeisset, P. T. (1998). Disseminating economic census data. Government Information Quarterly, Vol. 15(3).
