Assignment: Environmental Scan Paper
Create a 1,050- to 1,400-word paper in which you complete the following:
Research and describe the internal and external environments of 2 to 3 real-world companies using an environmental scan.
Determine what competitive advantages each company has and what strategies each company is using.
How does each company create value and sustain competitive advantage through business strategy?
What measurement guidelines is each company using to verify its strategic effectiveness?
How effective are the measurement guidelines that each company is using?
You must Format your paper according to APA standards.
Environmental Scan Mgt 498
Environmental Scan: AAMCO Transmissions, Inc.
Thomas Scotti
Dr. Chris Mendoza
Environmental Scan: AAMCO Transmissions, Inc.
Aamco Transmissions, Inc. (ATI) is a national company that has a majority of its store open and operating through a franchise network of individual owners and operators. Currently the franchise chain has approximately 750 open and operating stores, with about 5% (37) of those being company run stores. Aamco Transmissions, Inc. offers a wide variety of automotive services for retail sale, as well as a robust
National Fleet program for fleet management companies as well as extended warranty organizations.
While ATI does offer a wide variety of automotive services, they are better known for their expertise in the automatic transmission repair segment. Over the course of 50+ years of operating in the United States and Canada, ATI has established themselves as the largest transmission repair chain as well as an innovator with both advertising and manner in which customers are handled.
Over the past 10 years, ATI has experienced a decline in transmission repair services performed in their centers, nationwide. On average, the average repair order size (dollar amount) has increase by 3% year over year during that time, but the volume of transmission services performed has continued to decline at a rate of 2% per year, on average. The challenge for the franchise is to maintain the core business model that has sustained the chain for over five decades while continuing to provide the same type of profit margins that the franchisee network has come to expect.
The current model that ATI has is to employ, in each center, a transmission rebuilder who is capable of diagnosing and rebuilding transmissions. However, with the continuing decline in transmission revenue, year over year, the cost of employing such a specialized technician has, or is, become too costly and is having a detrimental effect on the bottom line for the lower volume centers. The reasonable solution is to remove the high priced technician that is capable of only a limited set of skills and replace it with a "universal" type of technician. The problem then lies in the fact the centers would then be unable to accommodate the transmission business and be forced to abandon that high margin work.
Senior management has considered offering, to the franchisees, a remanufactured transmission to help offset the cost and liability of having an in house rebuilder. These transmissions would be produced in a rebuilding facility that ATI would purchase and ship the units directly to the franchisees on an as needed basis. These units would be sold at cost to the franchisees (plus a small amount to cover cost of possible warranty issues). While the overall cost of unit (including the parts and labor) would be similar to the current process, it removes the variable expense of the rebuilder's salary and allows the cost of unit to become a fixed cost.
What has to be considered is what competition exists in the wholesale market that the franchisees may consider as an alternative.
Currently, there are several players in the national market that could and do compete in that field. The first competitor is Jasper Engines and Transmissions (Jasper) based out of Indiana. Jasper has been in business for several decades and is renowned for their quality and warranty offerings. A second company is Engine and Transmission Exchange (ETE) based out of Wisconsin. ETE is a family owned business who is relatively new to the industry and is known for lower that Jasper prices with similar warranty, but slightly lesser quality.
Both organizations utilize similar strategies to market their products. With the type of products that are offered from these companies, there is a limited retail market for them to compete in and neither has any retail locations that deal directly with the public. The public is capable of purchasing directly from these companies at a retail price, however they need to purchase online and then have the units shipped to them directly. With the complexity of installing your own transmission in a vehicle, this is a small percentage of business and not a market that these organizations spend much time or money marketing to.
The two organizations, Jasper and ETE, understanding the product and market they must compete in, do spend a significant amount of resources in marketing to repair facilities, nationally. They view these facilities as their best avenue of selling merchandise as repair facilities are typically where a consumer with a transmission problem will ultimately wind up. They both offer these facilities solid warranties with competitive pricing; however Jasper is typically more expensive because of the perceived quality they offer.
In this environment ATI will compete in several different ways. Firstly, ATI will only be marketing to their franchisee network. This gives ATI an advantage over Jasper or ETE as they already have an established relationship with their network. In comparison, Jasper or ETE would have to establish relationships in that network, which would cost not only money, but significant time to establish. Secondly ATI would have free access to pertinent data, such as regional data as to which types of transmission units are typical in certain regions of the country and be able to stock pile particular units, warranty information, diagnostic training, amongst other types of critical data points the competition would not have ready access to. These points should give ATI the competitive edge when marketing to the franchisee network of ATI.
Finally, ATI will be able to utilize the individual franchisee locations as marketing tools to distribute more units through outside sales to retail repair shops within each individual market.
The outside sales program will help ATI keep pricing in check through being able to move more units per location. This will enable ATI to drive down the sales price per unit for franchisees and obtain market share from the two major competitors already in market.
Ultimately, the plan ATI is set to implement will build value on the business model for the franchisees by allowing the individual owner/operators to obtain a fixed cost product that will deliver consistent performance. In addition, through this program, ATI is now able to offer a base warranty of three years and 50,000 miles in comparison to the standard twelve month, 12,000 mile warranty the current model provides for. In essence, ATI is building more value into the service the franchise locations offer through better, more consistent product as well as backing it with a more robust warranty for the end user.