Write an essay of a minimum of 1200 words, addressing the questions and prompts below. Your essay should demonstrate a clear understanding of the key terms and concepts from the READ and ATTEND assignments for this unit. You must organize your work using headings formatted in APA style.
QUESTION
Write an essay of a minimum of 1200 words, addressing the questions and prompts below. Your essay should demonstrate a clear understanding of the key terms and concepts from the READ and ATTEND assignments for this unit. You must organize your work using headings formatted in APA style. The research requirement is at least two scholarly journal articles, and the course textbook. Indicate your research through in-text citations and a list of references.
- Conduct an online search, and write a brief summary of two to three issues of strategic significance that AutoZone has encountered within the past 12 months. Sources used to respond to this prompt should be credible, but not necessarily scholarly.
- Analyze how AutoZone has responded to changes in each of the four categories of macroenvironmental forces. In your analysis, use a separate paragraph for each macroenvironmental force.
- In which one of the four macroenvironmental forces does AutoZone have the greatest opportunity? In which one of the four macroenvironmental forces does AutoZone face the greatest threat?
- What can AutoZone do to counteract commoditization in its industry?
SAMPLE STUDENT ANSWER
AutoZone remains one of the most significant retailers and leading distributors of automobile parts in the Americas. The firm’s stores have an extensive product line for cars, light trucks, vans, and SUVs. The company has been performing exemplary in revenue, gross profits, and net profit. This paper examines strategic events in the business in the last 12 months. The report also looks into the business’s response to the categories of macro-environmental forces. Furthermore, there will focus on the macro-environmental strengths the business could have the most incredible opportunity and threat. Lastly, the paper will provide recommendations on how the company could counteract communization in its industry.
Major Strategic Changes
AutoZone experienced critical issues in 2021 that were of strategic significance. The first primary strategic issue was the expansion of more outlets in Mexico, the United States, and Brazil. During the quarter that ended November 20, 2021, fifteen stores opened in the U.S, one in Brazil, and two in Mexico. The additions brought the number of stores of the company to 6,785 (AutoZone, Inc., 2021). The most significant percentage of stores were in the U.S. (6,066) stores, 53 in Brazil and 666 in Mexico. Consequently, the strategic move cemented the company’s position as one of the leading retailers and distributors in the Americas region.
Expanding the number of stores is vital to strategic growth and competitive advantage. Primarily, companies develop their outlets as part of their strategy to reach a broader market. The move to open stores in Mexico and Brazil means AutoZone is keen on reducing reliance on the U.S. market. Currently, the business has over 6,000 concentrated in America only. Diversification means the company will have a chance of increasing its customer base (Parnell, 2021). The other strategic intention of the company is to boost its competitive advantage. The company’s rivals have stores in the U.S. and other countries. The move by AutoZone to concentrate on the Brazil and Mexico markets is to increase its presence in the Americas. AutoZone identifies the region as significant to its growth ambition and coverage of the broader market. The calculated expansion of stores means the business is aware of its important market and the less substantial zone (Parnell, 2021). The expansion trend shows that the U.S. is the company’s primary market (additional 15 stores) while Brazil is a significant market (one outlet in 2021).
The other strategic change experienced by the company in the financial year 2021 was share repurchase. In the first quarter that ended November 20, 2021, it repurchased five hundred and fifteen thousand (515,000) shares of its common stock for $ 900 million. The average price per share was $ 1,749. The company still had a remaining amount of $ 1,018 billion for its share repurchase program. The move to repurchase shares is to increase the value of shareholders. Primarily, a company would purchase back its stocks if it believes they are undervalued. The strategic move aimed at boosting the share price of the business (Trainer, 2020). The company is one of the most significant stores in the vehicle components industry. The management noticed that the firm is worth more than its current price. The good financial performance help investors understand disconnect between the strong growth potential and undervalued stock price.
Response of AutoZone to Macro Environmental Forces
The primary macro-environmental factors that affected the business in the last 12 months included political, demographic, economic, and technological forces.
Political Forces
AutoZone has been grappling with diverse political factors affecting its business operations. The most significant issue is the politics of the adoption of electric vehicles in the place of the current fossil-fueled vehicles (Aaradhya & Thomson, 2019; Haddadian et al., 2015). The majority of vehicle components sold by AutoZone are for fossil-fueled automobiles. Accordingly, the new policies’ risk is likely to impact the firm negatively. This assertion is because the electric vehicle is a low maintenance unit compared to the fossil-fueled car. Naturally, the demand for current parts will decline. The business is re-inventing by producing components for electric vehicles. For instance, it has supplied brake pads, rotors, headlights, cabin air filters, and mirror replacement glass to Tesla. The move aims at navigating the potential switch to electric vehicles in the future.
Demographic Forces
The presence of COVID-19 has contributed to decreases in miles travelled. Consequently, the company has been making few sales of vehicle components. The business has no control over the spread of the virus. However, it has been keen to advocate for vaccination of its workers as part of the limitation of the spread. Besides, the firm has been investing heavily in its store to make it safe for any person visiting the store. The move is to protect customers when they visit its stores.
Economic Forces
The global economies, including America, Mexico, and Brazil, were significantly affected during the COVID-19 pandemic. The poor performances of the economy affected sales because of the decrease in demands. The firm engaged in cost-cutting measures during the pandemic, such as reducing its workforce as part of survival.
Technology Forces
The company has been affected by technology changes. The current vehicle parts are suitable for fossil-fueled vehicles. However, with the emergence of electric vehicles, these vehicle parts are changing considerably. Most vehicle components will be phased out, thus forcing the business to re-invent to prevent loss of business.
Opportunity and Threat
AutoZone has an opportunity and threat arising from the macro-environment factors. The business has the most significant opportunity with the economic factors. The economy’s recovery means that the company will likely post good performances. For instance, with the economy’s comeback in 2021, the firm registered growth in operating profit and net income in the first quarter ending November 20, 2021, by 22.6% and 25.5%, respectively, from 2020 performances. The massive growth means that the economy continued growth presents an opportunity for AutoZone to bounce back.
Conversely, the ever-changing technological environment will hurt the performance of the firm. These changes would mean the business must adapt quickly, which is impossible with the slow-moving vehicle components. Consequently, these changes in technology are likely to impact the firm’s performance. Tesla has been coming up with new technologies daily so that AutoZone will experience problems with the current vehicle components.
What AutoZone do to Counteract Commoditization in its Industry
The industry faces the risk of commoditization, which AutoZone is handling diligently. However, big companies such as AutoZone have introduced services that other partners and new entrants will fail to match. The business could prevent commoditization by enhancing positivity in its customer services. The firm should concentrate on being unique when handling customers to increase the chances of positive outcomes. Despite commoditization affecting all industry members, the business could only improve its status through improving customer services.
References
Aaradhya, C., & Thomson, C. S. (2019, June). The prospects of delivering the electric vehicle charging infrastructure to support Scotland’s 2032 transport electrification targets. In CIB World Building Congress 2019: International Council for Research and Innovation in Building and Construction (CIB) World Congress 2019 (p. Ab0518). CIB.
AutoZone, Inc. (2021). AutoZone 1st Quarter Same Store Sales Increase 13.6%; EPS Increases to $25.69. https://www.globenewswire.com/news-release/2021/12/07/2347236/3935/en/AutoZone-1st-Quarter-Same-Store-Sales-Increase-13-6-EPS-Increases-to-25-69.html
Haddadian, G., Khodayar, M., & Shahidehpour, M. (2015). Accelerating the global adoption of electric vehicles: barriers and drivers. The Electricity Journal, 28(10), 53-68.
Parnell, J.A. (2021). Strategic management: Theory and practice (6th ed). Academic Media Solutions
Trainer, D. (2020, November 17). A Long Road of Growth for AutoZone. https://www.forbes.com/sites/greatspeculations/2020/11/17/a-long-road-of-growth-for-autozone/?sh=65b85d5263bb
SAMPLE STUDENT ANSWER 2
AutoZone is one of the largest aftermarket automotive parts and accessories retailers in North and South America. The company was founded in 1979 and has seen steady growth since then. From 2017 to 2020, the company’s revenues have been steadily growing from slightly over $10.6 billion to almost $12 billion (Fortune, 2021). The company operates in an oligopolistic market structure which is characterized by a small number of firms with significant influence in the market, and has high barriers of entry (Arnold, 2019). This paper will analyze macroenvironmental forces that affect AutoZone and its operations.
Issues of Strategic Significance
Within the past 12 months, AutoZone has faced several issues that are of strategic significance, one of them being an increased purchase of electric vehicles supported by policies such as the zero-emission requirement (Long et al., 2020). With increased preference or requirement to purchase electric vehicles, the aftermarket retail industry may likely have a challenge in the long run. Most electric vehicles don’t have as many spare parts compared to vehicles with gasoline transmission. It is expected that by 2030, over 50% of the vehicles in the United States (US) will be electric vehicles, which may significantly affect the revenues for the aftermarket retail industry to which AutoZone belongs. This change may require some innovation from AutoZone in terms of strategy to retain high levels of revenue and performance, as it has done in recent days.
The second issue of strategic significance is reduced sales of vehicles due to the COVID-19 pandemic. The pandemic led to significant challenges economically and in terms of mobility, with one of the mitigation guidelines being to restrict mobility (Kim, 2020). This change was expected to have an adverse impact on the revenue generated by AutoZone. However, based on the financial and growth indicators, the company seems to have navigated the turbulent period quite well. For example, the company opened new branches in Mexico, US, and Brazil, and at the same time showed an increase in revenue and profit during the pandemic period, a trend that is opposite compared to other large multinational corporations in different industries (Trainer, 2021).
Analysis of Four Categories of Macroenvironmental Forces
Organizations work within a set of complex external macroenvironmental forces. These forces can be categorized into four major categories, namely political-legal, economic, social, and technological, which can be acronymized as PEST (Parnell, 2021). The first macroenvironmental force is political-legal forces. Political-legal forces emerge from different perspectives, for example, through policies or legislation, regulations, judicial announcements, elections, to list a few (Parnell, 2021). In the case of AutoZone, one of the political forces has been regulation, specifically the zero-emission regulation that requires a transition to electric vehicles. In response to this force, AutoZone has retained its strategy, given that the policy does not pose a significant challenge currently. In fact, the company has increased its branches in other South American countries that are yet to implement a similar policy which further cements its performance in terms of profitability and revenue (Trainer, 2021).
The second external force is economic forces. Economic forces include growth or drop in gross domestic product, inflation rates, exchange rates, to list a few (Parnell, 2021). In the case of AutoZone, several economic forces have come into play in the past 12 months. An example is the price of labor, which has, to some extent, gone down after the significant layoffs that occurred due to the pandemic. The company has increased its outlet stores, potentially gaining from cheaper labor capitalizing on the layoffs during the pandemic (OECD, 2020). The company has also managed to navigate the economic downturns by investing and advertising DIY activities resulting in a positive impact on sales. Its growth and diversity in other countries have also cushioned the company from inherent adverse economic factors prevalent in a specific country. The restriction by COVID-19 has also acted in favor of the organization since many people have opted to retain their used cars instead of buying new ones.
The third factor is social factors. AutoZone is a multinational corporation serving in different countries with different norms. As such, it needs to manage different cultural contexts to match the market in those countries. To deal with this, the company has employed workers from different cultural backgrounds to enhance diversity within the organization, helping it navigate through most societal issues. When selecting the appropriate staff, banking on cultural diversity can provide significant benefits, including better services to different customer bases and more ideas for innovation that addresses various issues targeting different sociocultural groups (Cherian et al., 2020).
The last aspect is technology. The retail sector has significantly transformed thanks to e-e-commerce platforms. The company comes under the backdrop of competing with e-commerce giants like Amazon. While many companies in different industries have embraced e-commerce, the aftermarket industry is slightly different since most companies, including AutoZone, opting for brick-and-mortar shops instead, without significantly impacting their sales (Trainer, 2021). One of the reasons that has given AutoZone an advantage over e-commerce retailers is that it offers premier services to its clients giving the company a solid competitive edge. Nonetheless, the company still has an e-commerce platform for its clients who prefer to buy their auto parts online (Trainer, 2021). Technology is one of the features that can strengthen a company’s attributes allowing it to achieve a competitive lead (Parnell, 2021), which can be seen in AutoZone. For example, AutoZone is founded on efficient and quality services to its customers. Using its two websites, AutoZone can reach out to its customers, providing comprehensive information for its DIY enthusiasts, and at the same time offer the same client base with free next-day shipping within the US.
Analysis of Opportunities and Threats Based o the Macroenvironmental Forces
AutoZone has the greatest opportunity in employing technology as a strategic feature. Currently, the organization has obtained great rewards from its two websites by providing superior services matching and maintaining a solid lead to retail giants like Amazon and Walmart. With the increased use of e-commerce platforms, the company can reach out to more of its global clients, providing effective services, translating to increased sales and customer loyalty (Thaichon et al., 2020). The macroenvironmental force that provides the greatest threat is political-legal forces. Changes in policies in countries that the company has operations in could significantly impact its operations. For example, depending on the execution of the zero-emissions requirement in the US, the company’s sales could be affected. Similarly, the volatile political environment in some South American countries could also pose a threat to stability in terms of operations for AutoZone.
What can AutoZone do to Counteract Commoditization in its Industry?
Some of the strategies that the company can use to counteract commoditization include providing superior services. This is an area that AutoZone has managed to maintain a solid lead on. Focusing on superior services gives a company distinctness that separates it from other competitors in the market. Providing superior services necessitates the company to be innovative in its products and activities. Market segmentation is another strategy that AutoZone can utilize to counteract commoditization. Market segmentation gives the company room to adjust prices and a different set of expertise that match different market segments, and similarly, more room for innovation (Bauman et al., 2018).
References
Arnold, R. A. (2019). Economics (13th ed.). Cengage Learning.
Bauman, A., McFadden, D. T., & Jablonski, B. B. (2018). The financial performance implications of differential marketing strategies: Exploring farms that pursue local markets as a core competitive advantage. Agricultural and Resource Economics Review, 47(3), 477-504.
Cherian, J., Gaikar, V., & Raj P, P. (2020). The role of cultural diversity and how they impact work team performance. International Journal of Mechanical Engineering and Technology (IJMET), 11(9), 11-22.
Fortune. (2021). AutoZone: 2021 Fortune 500. Fortune. https://fortune.com/company/autozone/fortune500/
Kim, R. Y. (2020). The impact of COVID-19 on consumers: Preparing for digital sales. IEEE Engineering Management Review, 48(3), 212-218.
Long, Z., Axsen, J., & Kitt, S. (2020). Public support for supply-focused transport policies: Vehicle emissions, low-carbon fuels, and ZEV sales standards in Canada and California. Transportation Research Part A: Policy and Practice, 141, 98-115.
OECD. (2020). The impact of the COVID-19 pandemic on jobs and incomes in G20 economies. https://www.ilo.org/wcmsp5/groups/public/—dgreports/—cabinet/documents/publication/wcms_756331.pdf
Parnell, J.A. (2021). Strategic Management: Theory and practice (6th ed). Academic Media Solutions
Thaichon, P., Surachartkumtonkun, J., Quach, S., Weaven, S., & Palmatier, R. W. (2018). Hybrid sales structures in the age of e-commerce. Journal of Personal Selling & Sales Management, 38(3), 277-302.
Trainer, D. (2021). A long road of growth for AutoZone. Forbes. https://www.forbes.com/sites/greatspeculations/2020/11/17/a-long-road-of-growth-for-autozone/?sh=1ed66c1f63bb
Jermaine Byrant
Nicole Johnson
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