Driving Profitable Growth at US Auto Parts Harvard Case Solution & Analysis

Introduction

The paper attempts to provide internal and the external analysis for US Auto Parts (USAP) through the application of SWOT and PEST analysis. The paper also attempts to provide the strategy that should be implemented by Shane Evangelist, the newly appointed CEO of USAP. Lastly, the paper attempts to provide the justification for how likely the strategy will succeed for USAP.

SWOT Analysis

Strengths

  • US Auto Parts is the leading aftermarket parts provider through online sales.
  • The company is known for its great values and services in the country
  • Targets a large customer base due to easy access to the internet
  • 13 million visitors per month in the company’s website against 3 million visitors per month for USAP’s competitor AutoZone.

Weaknesses

  • The company faces problems in legal battles for refunds in returned parts which aroused the shares to decline
  • Due to the lack of sophisticated equipment, the company did not fully satisfy its third customer profile of devoted parts enthusiasts.
  • Only 3% sales of auto parts were online, while the remaining 97% were from storefront, till the company closed its storefront operations.
  • Potential Sales were lost due to the doubts prevailed about the compatibility of parts.

Opportunities

  • Since consumers were overpaying for the service of the vehicles, therefore, it is an opportunity for the company to provide great service at a lower cost.
  • The increase in gas prices tempts to increase the transportation charges which decrease the purchase of new vehicles due to high prices. This trend tends to increase the demand for aftermarket parts.

Threats

  • The company does not only faces intense competition from Auto Part companies, but also from online retailers such as Amazon.com
  • Depressed financial performance from 2008 till 2011 could lead to bankruptcy as the automotive industry has been the largest manufacture industry to suffer greatly from recession.

PEST Analysis

Political

  • The increase in the prices of gas also tends to increase the cost for the auto parts as the manufacturing of private label products is mainly carried out in China.

Economical

  • The sales of new vehicles in the year 2011 is projected the same as in 2010 by 11.5 million which has improved from 10.4 million sales in 2010 after recession.
  • Increased pressure on income allows the increased use of old cars which tends to raise the demand for aftermarket parts.

Social

  • Increase in the trend of unique visitors visiting USAP’s website but with percentage sales of 15%
  • Before purchasing, 80% of customers would view three websites, whereas, 50% of customers would view six websites before making purchases.

Technological

  • Information Technology is critical for the success of USAP because the company monitors the behavioral patterns of its consumers and provides online features accordingly.
  • The websites were developed according to the interest of users.

What should Evangelist do?

Evangelist should stick with its strategy of stock-shipping and drop-shipping through which it acquired Whitney Automotive. This particular strategy is based on focusing the online customers, while increasing customer experience and enhancing customer interest. The supply chain strategy implemented by the company includes stock-shipping and drop-shipping. Stock-shipping strategy is implemented for locally present customers with zero inventory level, while drop-shipping strategy is based for overseas customers.

How likely is this to Succeed?

The particular strategy should earn the company greater revenues and profits in the longer run while exceeding the industry average because as discussed in the case, the customer traffic is increasing by 70% annual rate. Moreover, the net margin of the company is set to rise in the future after the completion of the strategy. The major problem faced by customers in the particular auto industry included overpayment for repairs and providing higher cost of auto parts. The particular strategy adopted by USAP involves providing lower priced products along with providing channels where technicians and customers could join and make contracts. The company has simplified the process of auto repairing through training videos, while allowing customers to choose from the best technician at lower price. The strategy is likely to succeed in future once the particular strategy is implemented completely.....................

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