CarMax Inc.: Disrupting the Used-Car Market Harvard Case Solution & Analysis


CarMax initiated its business in 1993 with an aim to offer used cars to the consumers, afteridentifying the strong market gap. The parentcompany of CarMax operated in retail business in US. However, after analyzing the market saturation in theretail sector, the companyinitiated to tap the market through the diversified offering,making it start the used car business in the US.

Since its inception, the business offered greatprofits and augmented the position of the company from covering 2% market share to 25% market share.

In fact, it has been the only company to sustain in the financial crisis due to cost undercutting strategy and planning to sustain their market share in the industry. In the later years, the companyopened multiple stores in different locations and hired individuals to drivesales.Thoughthemodel proved to be profitable, however, the threat ofimitationandincreased market pressure made the company rethink on the strategic position and longterm planning of the company in order to sustainits competitive edge in the market.

The later report illustrates the competitivepositioning of the company under the analysis through SWOT, PEST and VRIO to outline the positioningand suggest a long term strategy in order to sustain the market share in long term.









SWOT Analysis


  • The company has strong brand image and positioning for offering the used car servicesin the market, making it a market leader.
  • The company offers a great detailed service plan to the customers including car finance, wholesale auction, buying,and reselling and repair services.
  • In addition, the companyhas strong brand positioning in the mind of the customer for offering the swift services and sales closure, reducing hurdles and hence, improving the overall customer experience.
  • Moreover, the strong hand on technology allows it to grasp the knowledge of different markets,making the decision making andinventory handling more effective.


  • Since the company already operates on costleadership, it does not cater negotiation, leading to limited levers to pull customer behavior.
  • The handlingof cost and the inventory at different locations is also exposed to highcost and mishandling due to unstablecustomerbehavior and market dynamics.


  • The company has a strong opportunity toenter into the New Yorkmarket or other market other than US,since the other market also has high affinity towardsused cars sales.
  • Sincethe demand for used cars is increasing in the US market, it has the opportunity to expand its operationswithin US, pursuing themarketpenetration strategy.
  • Moreover, it has the opportunity to enter into the emerging markets,where the market for used cars is increasing based on the strong economic activities.


  • The highavailability of the credit loans and the customerdefault rate positsstrong threat to the company in obtaining and coveringthe cost.
  • The increasing competitionin themarket also posits strong threat to the company‚Äôs value proposition.
  • Lastly, the changes in the retail pricing sector may greatly affect thepricing strategy oftheused car sales, reducing the profits and overall revenues of the company.

PEST Analysis

Political Factors

The political factors play an important role in maintainingthe stability of the automotive industry.............

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CarMax Inc.: Disrupting the Used-Car Market

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