Year: 2022

Political:

· The Albanese Government is elected with a commitment to maintain expansionary economic policies in the aftermath of the pandemic, providing businesses with a stable environment for conducting their affairs (O)

· War breaks out with Russia in the Ukraine, impacting business by disrupting global supply chains (T)

Economic:

· The Reserve Bank of Australia lifts interest rates six times between July and December, bringing the official cash rate to 3.1% and increasing the costs of borrowing for businesses (T)

· Australia’s unemployment rate remains in the band of 3.4-4.1% over the course of the year, providing business with access to consumers enjoying disposable levels of income (O)

Sociocultural:

· The Albanese Government proposes a referendum on a Voice to Parliament for Indigenous peoples, providing businesses the chance to engage in reconciliation efforts (O)

· For the first time since the outbreak of the COVID pandemic, net migration to Australia increases by 171,000 people, meaning business can tap into new sources of skill and expertise (O)

Technological:

· Immunotherapy trials to reduce build up of tau and amyloid proteins in the brain promises to reduce the incidence of Alzheimer’s and create a more active consumer segment for organisations providing goods and services to the elderly (O)

· The launch of Chat GPT and DALL-E generative AI technology promises efficiencies for businesses in areas such as decision making and visual perception (O)

Environmental:

· Presence of a range of climate-minded Independent and Greens politicians provides a greater emphasis on Australia making its climate change commitments and giving impetus for organisations looking to reduce their carbon footprint (O)

· COP27 agrees to set up a 340 billion euro fund to provide aid in climate disasters, creating risk mitigation options for businesses operating in developing countries (O)

Legal:

· Australia passes the Anti-discrimination and Human Rights Legislation Amendment (Respect at Work) bill, eliminating as far as possible work environments that are hostile on the ground of sex, providing a more inclusive work environment for all (O)

· Australia passes the Secure Jobs, Better pay bill, providing employees with greater pay equity and greater rights to industrial action, increasing potential costs of doing business (T)

Overall Summary:

The trends in the general environment are overall positive for Eagers. Unemployment remains low providing disposable income for consumers, and overseas migration is at high levels for providing workplace skills and potential new customers. The organisation should keep an eye on rising interest rates, which will potentially make funding operational growth more difficult.

Industry: Motor Vehicle Dealers Industry

Threat of New Entrants:

· Capital requirements: A significant amount of capital is required to enter the Motor

Vehicle Dealers industry, with requirements for a skilled labour force, ability to finance stock acquisition, and dealership operational locations that are capable of providing services and repairs.

• Brand equity: Brand name and equity is a key factor within the industry as consumers favour automotive products and vehicles sourced from trusted retailers.

• Uniqueness of existing competitors: Motor vehicle dealers offer relatively similar

brands and products that are known and accepted by the market.

• Economies of scale: Market consolidation between main companies in the industry

has been strong over the past five years, providing a barrier to entry for new dealers unable to sustain profitability at the rate of larger companies.

• Switching costs for buyers: Consumers are generally not locked into contracts, though financing options and the stock of vehicle brands may create stickiness for some customers.

• Access to distribution channels: Motor Vehicle Dealers are the distribution outlets.

• Government regulations: The motor vehicle dealers’ industry is regulated and

monitored by Australian governments.

With high capital requirements, the need for brand equity, high economies of scale and high levels of government regulations, the threat of new entrants is low.

Bargaining Power of Buyers: Buyers = Vehicle Consumers

· Buyer demand volume: A single buyer or household is unlikely to be capable of purchasing a large volume of the industry’s total output.

· Buyer concentration versus firm concentration: There is a large number of possible buyers  and only a limited number of Motor Vehicle Dealers.

· Switching costs: There are multiple vehicle dealers within the industry; both public and private. Buyers have the ability to shop around.

· Information for buyers: information on vehicles is readily available to buyers through websites and advertisements, and therefore buyers are able to make informed decisions on their purchases.

· Buyer price sensitivity: Buyers are price sensitive due to the high cost of vehicles.

With buyers only purchasing a small amount of the industry’s total output and in low concentration compared to Motor Vehicle dealers, the bargaining power of buyers at first seems low. However, low switching costs and high levels of information and buyer price sensitivity balance these factors to create a bargaining power of buyers which is moderate.

Bargaining Power of Suppliers: Suppliers = Car Manufacturers

· Supplier concentration v buyer concentration: Concentration of car manufacturers (suppliers) is relatively low within this industry compared to Motor Vehicle Dealers (three major companies), thus making it difficult for manufacturers to switch to other dealerships

• The threat of forward integration by suppliers relative to the threat of backward

Integration: Car manufacturers are unlikely to want to establish their own dealerships.

• The availability and presence of substitute inputs: Motor Vehicle Dealers are unable to source substitute inputs which might replace the vehicle.

While supplier concentration of car manufacturers is lower than for motor vehicle dealers, and the threat of forward integration is unlikely, the fact motor vehicle dealers are reliant on cars (as there are no substitute products) means the bargaining power of suppliers is moderate.

Threat of Substitute Products: Substitute = public transport

• Substitutes have the potential to satisfy a similar need: while affordable and available to consumers, public transport has low potential to fully satisfy the needs of customers due to limited flexibility, more costly in terms of time, and more effort required to utilise the product.

• Buyers in the industry face few switching costs: Whilst the cost of switching costs may be high in terms of the substitute being significantly cheaper, quality factors such as loss of time, effort required, and lack of flexibility must be considered.

Overall, the threat of substitute products is low to moderate, as while consumers may face high

switching costs, intangible elements such as flexibility, time efficiency and effort must be considered.

Intensity of Rivalry:

· Number of industry players: the motor vehicle dealers industry contains only three major players.

· Market share of existing players: is relatively high, with market concentration increasing due to existing competitors taking advantage of acquisition strategies.

· High fixed costs: The motor vehicle dealer industry has high fixed costs in terms of product (asset) acquisition and product maintenance, as well as insurance and generalised dealership operations.

· High strategic stakes: Due to public transport systems, and particularly with the increase of encouragement

toward low emissions transportation options, stakes are considered low to moderate for the motor vehicle dealer industry.

Overall, the intensity of rivalry is moderate, with strategic stakes being low to moderate, the number of players within the industry being few, and the market share of existing players

being high.

Overall Summary:

Overall, Eagers competes in a moderately competitive industry. Bargaining power of buyers and suppliers is moderate, while the threat of substitute products is low and the threat of new entrants is low. This makes the industry a relatively attractive one in which to compete for Eagers.

Tangible Resources:

· strong financial position with $733.1 billion available liquidity

· revenue of $8.6 million,

· dividend of 70.9cents per share

· shares in other corporations

· 7,965 employees

· large customer base

· 10676 shareholders

· formal reporting structures and guidelines

· subsidiary companies (Precision Automotive Technology)

· expansion into Northern Territory and Southern Australia

· investment in new Automotive retail formats

· dealership locations across Australia and New Zealand

· investment and acquisitions portfolio

· motor vehicles

· car care products

· point of sale systems

· Easyauto123 integrating online buying

· Selling and financing options for customers

· installation of Solar Power at 34 sites as well as LED and light sensors at all other locations

Intangible Resources:

· a diverse range of employees able to provide skills and knowledge

· resources for innovation

· strong reputation as Australia’s leading motor vehicle dealer

· built trust and rapport with customers through 109 years of experience

· commitment to changing the automotive retail experience

· nationally recognised brand name

· committed to providing a safe work environment where staff feel valued

Capabilities:

Capability 1: Provide buyers with a range of retail options and make the motor vehicle buying

experience more convenient and innovative = Revenue of $8.6 billion + strong financial position + 7695 employees + large customer base + formal reporting structures and guidelines + investment in new automotive retail formats + expansion into Northern territory and Southern Australia +  Easyauto123 integration of online buying, selling and financing options for customers + employee skills and knowledge

Capability 2: Showcasing a strong corporate social responsibility commitment by consciously

investing in sustainable and eco-friendly practices = resources for innovation + committing to providing a safe work environment + solar power at 34 sites as well as LED and light sensors at other locations + nationally recognised brand name + strong financial position

Valuable

Rare

Costly-to-imitate

Nonsubstitutable

Competitive Implications

Capability #1

☒

Yes

☐

No

☐

Yes

☒

No

☒

Yes

☐

No

☒

Yes

☐

No

Competitive parity

Allows consumers to interact with Eagers in a manner that is convenient for them

The other big players in the industry possess the same capability

The ability to provide so many service locations is based on historical conditions of Eager’s long running operations

No other capability would allow other Motor Vehicle Dealers to provide the same strategic outcome

Capability #2

☒

Yes

☐

No

☐

Yes

☒

No

☒

Yes

☐

No

☒

Yes

☐

No

Comparative parity

Consumers are increasingly finding environmentally sensitive products to be a valuable proposition

Corporate social responsibility is a prominent initiative with major competitors

The corporate social responsibility of Eagers is based on the causal ambiguity of the knowledge inherent to their innovation practice

There is no strategic equivalent to meeting the needs of consumers

Capability #3

☐

Yes

☐

No

☐

Yes

☐

No

☐

Yes

☐

No

☐

Yes

☐

No

[Explain]

[Explain]

[Explain]

[Explain]

Overall Summary:

While Eagers has two important capabilities, these are also maintained by major competitors and therefore only represent a source of competitive parity for the organisation.