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Leonardo Buzzavo - Moscow - 27.8.2008 1
Business Scenarios for Automotive Dealers in
Europe
Leonardo Buzzavo, University of Venice - Quintegia /
ItalyROAD Conference - Moscow, 27.8.2008
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Leonardo Buzzavo - Moscow - 27.8.2008 2
Studying the automotive industry
Research team at the University of Venice
International research network
Since 1994
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Leonardo Buzzavo - Moscow - 27.8.2008 3
Projects developed
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Leonardo Buzzavo - Moscow - 27.8.2008 4
Automotive Dealer Day
Verona, 6th year, in May Information, strategies and tools for players
of automotive distribution
25 workshops (Italian + English) Area expo with 50 businesses 2,000 participants
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Leonardo Buzzavo - Moscow - 27.8.2008 5
Now 100 years old in Europe and USA
USA: homogeneity and relative strength Japan: ‘original’ approach Europe: high internal differentiation
Other countries evolving– Brazil, and then Russia, India and China
Dealer networksworldwide
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Leonardo Buzzavo - Moscow - 27.8.2008 66
Trend in dealers and sales Trend in dealers and sales outletsoutlets
0
20000
40000
60000
80000
100000
120000
Dealers Sales outlets Dealers Sales outlets
1997 2002 2007
-29%
-6%
-30%
-10%
= Change 1997-2007
Source: European Car Distribution Handbook / NADA
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Growing importance of Dealer Satisfaction
Total automotive performance is a combination of– Manufacturer performance– Dealer network performance
Dealer satisfaction has become as important as customer satisfaction
Manufacturers paying more attention
Monitoring activity developed by Quintegia in Italy since 2004
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2004 2005 2006 2007 2008
Dealers participating (questionnaires): now
>30%
20052004 2006 2007
Manufacturers purchasing report
(Italy)
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Overall ranking2008 - Top10
Italy
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Regulation for Dealer-Manufacturer Franchise
Contracts in EU Block Exemption Regulation (BER) created
in 1985– To discipline contracts and limit anti-competitive
practices to stimulate free market competition Renewed in 1995
– Small changes, mainly to favour multi-branding and opening of parts markets
Renewed in 2002– Greater changes, to stimulate more competition
E.g. freedom of additional outlets anywhere in Europe
Expiring in 2010
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Leonardo Buzzavo - Moscow - 27.8.2008 11
Prospects for 2010
Industry situation:– Intra-brand and inter-brand competition is high– Price differentials have reduced over time
So, there is less need for Competition authority to adopt a “strong medicine”
We are likely to see– General regulation (common for all industries)– More delegation to authorities of national states– More different choices by individual manufacturers
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Market share of Top25 DealersMarket share of Top25 Dealers
Source: ICDP (2007), Quintegia
0
5
10
15
20
25
30
35
USA UK FRA GER SPA ITA NED
Mark
et
share
(%
)
2001 2003 2006
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Performance indicators:example of best practices
Vehicles sold with finance 50% Gross profit from sources other
than new+used cars 50% Ratio of used/new cars sold 1:1 Used car stock turn 10x Customer follow-up 100%
Dealers becoming more concerned with KPI (Key Performance Indicators) and benchmarks
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Automotive Dealers
Which main trends areinfluencing dealer evolution?
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Structural standards Operational standards Business Management
Variablemargins
- Conflicts between dealers and manufacturers- Development of businesses outside new cars
Dealer response / focus:
1. More manufacturer control
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Extended services Used cars Finance and insurance (F&I)
2. Broader business mix
- Find the right providers and establish business relationships- Develop competences and processes
Dealer response / focus:
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3. Multi-branding
To complete the portfolio of offering– Model mix
To reduce the overall risk of the company
- Exploit synergies across different brands
Dealer response / focus:
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4. Business management
Managing by numbers– Fast– Accurate– Relevant for decisions
- Develop adequate decision-support systems- Develop competences
Dealer response / focus:
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5. Customer focus
More attention to customer needs and segments
Greater focus on customer satisfaction and loyalty
- Develop appropriate databases- Develop customer research and information technology
Dealer response / focus:
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Leonardo Buzzavo - Moscow - 27.8.2008 20
6. Organization / human resources
Managing larger and more complex organizations– multi-brand– multi-business– multi-site
- Human resource focus (selection / training / incentives)- Focus on lean processes (reducing waste)
Dealer response / focus:
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Leonardo Buzzavo - Moscow - 27.8.2008 21
Key points and perspectives
When markets become saturated dealer-manufacturer conflicts become critical– Particularly when dealer density is high
Dealer business highly entrepreneurial– Manufacturer-owned dealers not a solution
Scale economies are lower than other industries– Limited advantages in buying power
Distribution is a capital-intensive industry– Importance of lean processes
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Change over time
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Leonardo Buzzavo - Moscow - 27.8.2008 23
Leonardo Buzzavo, University of Venice - Quintegia /
ItalyROAD Conference - Moscow, 27.8.2008
Business Scenarios for Automotive Dealers in
Europe