Summary: Carmax

In early 1990s, CarMax was founded as an experiment by Circuit City to grow its business using. The first CarMax store was opened in 1993 and the business went well. After Circuit City spun off CarMax as an independent company, Circuit City went bankrupt while CarMax was still growing. Meanwhile, despite the growth of business, CarMax is constantly facing challenges specifically on how to maintain its business and compete the competitors. This is the key problem of CarMax that I am trying to resolve for its future growth. There were and are many opportunities for CarMax to continue to grow its business. According to the case, CarMax has been already planned for next few years; entering 50 to 100 smaller markets with a ‘next-generation store’

CarMax practices several services including extended service plans, wholesale auction, service and repair, and auto finance. CarMax also attracts the customers through wide-range of selections, low price, and high quality. These activities result the high customer satisfaction which is the most important aspect for its growth. According the case, Austin Ligon, who was the CEO of CarMax until the year of 2006, said that the information system of CarMax is the one of their biggest competitive advantages. The information system provides the inventory demands and helps to keep track on the customer needs and wants through the customers’ online searches. This allows the company to understand the customers’ demands. Even though CarMax has potential to continue its growth, there is a weakness which could be an obstacle for growing. CarMax offers no haggling prices so depends on the customers’ behavior about negotiating, the customers who wants to negotiate will return to other

One of them that I suggest for CarMax is only focusing on used cars, not new-cars. As it shows in Exhibit2, selling new cars does not affect that much to CarMax. Used cars and wholesale cars are what customers usually looking for in CarMax. So I recommend CarMax to eliminate the new car selling but more focus on used cars business. The competitor, AutoNation, is focusing on new-car franchises after they closed other businesses, rental business and the used car. As AutoNation decided to focus its strategy only on the new-car franchises and have been succeeded, CarMax could only focus its strategy on used car selling which possibly help to save the money from purchasing the new-cars and get more profits from used-cars and wholesale cars. Another alternative is adding more stores. In Exhibit 9b, it demonstrated that CarMax has the smallest number of stores among the other competitors. However, the Sales per Store of CarMax, 95 million, is higher than the rest of the competitors. Thus, if CarMax decide to build more stores nationwide as they thought they should, the profit of CarMax will increase in several