Carmax Swot Analysis

CARMAX SWOT ANALYSIS

Strengths

CarMax has built a strong brand image by seeking to deliver an unrivaled customer experience. By offering a large, broad selection of quality certified vehicles, CarMax maximizes customer choice and satisfaction. An integral part of CarMax is the reconditioning process, which each vehicles undergoes to ensure it meets their high standards of a quality certified vehicle. Also, CarMax’s protection programs continue to enhance the customers experience by providing an extended service plan (ESP) and a guaranteed asset plan (GAP) that help to promote customer loyalty. In fiscal 2015, more than 60% of the customers who purchased a retail vehicle also purchased an ESP and more than 25% purchased GAP (CarMax, 2015).

In addition to the Sales Operations segment, CarMax has their own finance operation segment. CarMax Auto Finance (CAF) provides vehicle financing in store, which is solely available for CarMax customers. The ability to provide on the spot financing expands opportunities and allows CarMax to mitigate risk and capture additional profits. The Auto Finance segment differentiates CarMax and gives the company a strong competitive advantage within the auto industry, and allows CarMax to operate and compete in finance market. For loans originated during the calendar quarter ended December 31, 2014, industry sources ranked CAF 7th in market share for used vehicle loans and 14th in market share for all vehicle loans (CarMax, 2015).

CarMax has developed an advanced information system that supports the management of all their operating functions. The system provides management with access to real time information regarding inventory, pricing, transfers, auctions, productivity, repairs, and tracks each vehicle throughout the sales process. Also, the system gives customers the ability to search the entire inventory through the CarMax website. The design of the system helps to maximize profitability and optimize processes by increasing quality, reducing cost, and enhancing customer service.

Weaknesses

CarMax only operates in the United States, and the majority of the stores are located in the Southeastern region. The company’s performance is dependent on the local competition and conditions prevailing in the geographical areas where they operate. As of February 28, 2015, we operated 144 used car stores in 73 U.S. markets, which covered approximately 61% of the U.S. population (CarMax, 2015). Downturn in consumer spending habits within these markets could have an adverse impact on sales and operational results.

CarMax’s success depends on growth, therefore any changes in availability or cost of capital needed to support that growth would negatively affect operating strategies, store expansion, and the ability to maintain appropriate inventory levels. Obstacles affecting CarMax’s ability to acquire large amounts of inventory, such as competition from new and used car dealers, not effectively adjusting their appraisal process, or decreases in supply would force them to purchase greater percentages of vehicles from less profitable sources. In addition, CarMax is sensitive to fluctuations in retail prices for new and used vehicles, and any changes could have a material adverse effect resulting in reduced margins.

Opportunities

With the opportunities in the auto industry end list CarMax has several large opportunities to grow from its geographic expansion, improving its customer service and the growing market for used and new vehicles. CarMax opening its first superstore in 1993, it has grown exponentially. As of early 2014 the CarMax Company was operating 131 used CarMax superstores in 64 markets. In 2015 CarMax planned to open 13 new superstores. Also planes to grow another 20 to 30 new store in the upcoming two years. CarMax believes that optimizing it geographic expansion will still enable continued operating efficiencies, also beefing up existing markets will provide foundations for future sales. With the location CarMax has set a training program for all of the position all store to continue there customer service the same. CarMax has improves their customer service by setting their core values around customer service. CarMax put it a lot of effort into it new employees driving its core values in place before putting them on to the floor. Also CarMax has improves it technology that allows to improve its customers service with ease. They have always been very up front with their customers. A big part of the brand is allowing customers to sale there car to CarMax without have to buy from them. Giving the customer the ease of selling their car without being hounded by salesman. But if they do end up buying from CarMax they have there no