Task 1

A) Assess how business mission, visions, objectives, goal and core competencies
inform the strategic planning of your chosen company. (1.1)

The term strategic planning can be defined as a management activity of an organization

which is used to set priorities, focus energy and resources, strengthen operations, ensure
that employees and other stakeholders are working toward common goals, establish
agreement around intended outcomes/results, and assess and adjust the organization's
direction in response to a changing environment. A mission statement of any company
talks about how a company will get to where it wants to be whereas a vision statement
outlines where the business wants to be. The term objective and goal refer to a precise
and general aim (respectively) of a business which is in line with mission of the company,
objective is likely to be quantative and goal is likely to qualitative in nature. Last but not
the least core competency is combination of multiple resources and skills that distinguish
a firm in the marketplace, now talking about the company in focus which is Carmax ranked
191 on the fortune 500 list which is a used car retailing business with both a physical and
internet presence, the company states that it aims to provide a positive experience
customers, rewarding career for associates, superior return to stakeholder and ultimately
being Americas best run, most profitable automotive retailer. The core competency of this
business is that it provides services to customer form the ease of their homes or through
its stores where customers can get each any everything related to cars while maintaining
a competitive pricing strategy, product specialization and quality. By analyzing and
assessing all the factors above reflect that the strategic planning of Carmax seems like the
business wants to capture the highest possible market share through pricing and service
while keeping a well-motivated workforce through a good salary and promotion system, in
terms of finances the company is registered in the stock exchange which lowers the cost
of raising finance all these aspects ultimately lead to an important part of the companys
strategy which is profit maximization.
B) Analyze the factors that have to be considered when formulating its strategic
plan. (1.2)

The strategic plan of an organization plays an anchor role in its success. This is because a
strategic plan designs the direction of the organization but while formulating a strategic
plan there are various factors which have to be considered and it is very important for the
strategic managers to consider those factors if not the company will devote from its path.
The factors which have to be considered are mentioned below.

1. Internal Factors.
These factors belong to the inside of the organization which contains the organizational
culture, core of ethics, policies and strategies for e.g. when Carmax is deciding about what
leadership strategy should be used it has to consider the culture and policy of the
organization because if it decides to use a democratic style and the culture and policy
reflect towards an autocratic style then of course it is very less likely that a democratic
leadership style would function properly and ensure smooth operations.

2. Stakeholders.
Stakeholders are the people who have direct or indirect interest in the business, major
stakeholders of Carmax are employees, investors, customers, suppliers, creditors, debtors,
community and government now when formulating a strategic plan Carmax would have to
consider the demands and expectations of these stakeholder for e.g. if the investors want
the company to make a strategy which maximizes profit.

3. Economic Factors.
These factors relate to the wealth of the country and to the customer ability to buy goods
and services. There is a link with political and government factors, which affect to the
selling of products, currently, the economic condition of America are stable thus strategy
is made according to it. This economic factors impact on unemployment levels, interest
rates, consumer debt levels, availability of credit and many other factors can influence
customers spending decisions. Another factor is currency exchange rate which may affect
either exported or imported and goods can seem expensive or inexpensive, depend upon
currency exchange rates. This can play a vital role when the company is deciding whether
to source imported car parts or buy the locally assembled ones.

4. Technological Factors:
Technology factor affected very much, for Carmax progressing and strategic planning, it is
doing its business by online mainly giving discount and offer, which saves customers time
and cost. It includes all vehicles by brands and price; we can find all information by
internet. Nowadays, the use of technology has been increased, so it is very important that
one business should have some new ideas, which can attract to the customers to see and
cars etc. and incorporate them in their product line to be up to date with latest technology.

5. Competitors:
Competitors are another factor which affects the strategic plan of an organization. The
main competitors of Carmax are Autonation, Hendrick automotive and Penske automotive.
To win the battle of market share the organization should aware of the competitor's policy
so that it can shape its strategic plan accordingly.

C) Evaluate the effectiveness of techniques used when developing this

companys strategic business plans. (1.3)

SWOT analysis is one of the techniques used when business plans are developed for
Carmax, SWOT analysis stands for strengths, weaknesses, opportunities and threats. This
involves a brainstorming process whereby planning participants identify all of the relevant
factors that they are facing internally (strengths and opportunities) and externally
(weaknesses and threats). The final list is then reviewed and prioritized to identify the top
items under each category. While discussing the effectiveness of SWOT analysis it might
be argued that all of the four components are based upon assumption about the future
and it is very much likely that due to the ever changing economic conditions the
assumption might not be accurate but on the other hand some expert also disagree with
this and state that although these assumption are not accurate but they provide a
somewhat blur picture of what the company might have to face in the future so a
somewhat plan can be made beforehand. These then became inputs to the development
of goals, objectives, strategies and tactics. A sample of SWOT analysis for Carmax is as
follows:

The first step of SWOT analysis would be to identify the Strengths of Carmax through
which the company can benefit from in the future as well:
1. Full range of service: Carmax offers extended service plans, auto finance,
service/repair, and wholesale auction for vehicles that do not meet requirements.
2. Customer confidence: The Companys focus on four core customer benefits (low, no-
haggle prices; a broad selection; high-quality vehicles; and a customer-friendly sales
process) results in high customer satisfaction and word-of-mouth promotion.
3. Appraisal strategy and sophisticated technology allow the company to provide
inventory that reflects the taste of each market.

The next step would be to identify the weaknesses of the company so that a strategic plan
can overcome this:
1. Limitations: Because CarMax does not negotiate on prices (for either the trade-ins
or purchases), it has limited levers to pull to affect customer behavior.

The second last step would to identify the opportunities which are available to Carmax so
that a new strategic plan may have to a strategy to grasp them:
1. New markets: The company plans to grow 15% to 20% per year
Last but not the least SWOT analysis also involves the identification of the possible threats
to the company which it would have to overcome with the new strategic plan:
1. Economic conditions: The Company is vulnerable to consumer credit availability and
delinquency, interest rates, gas prices, and discretionary spending.
2. Capital: Changes in the availability or cost of capital and working capital financing is
a threat to CarMax.
3. Competition: Competition includes publicly and privately owned new- and used-car
dealers, as well as millions of private individuals.
4. Retail prices: Any significant changes in retail prices for used and new vehicles
could reduce sales and profits.
Another common technique which is used by this company is the in definition terms its a
corporate planning tool, which evaluates the strategic position of the business brand
portfolio and its potential. It classifies business portfolio into four categories based on
industry attractiveness (growth rate of that industry) and competitive position (relative
market share). These two dimensions reveal likely profitability of the business portfolio in
terms of cash needed to support that unit and cash generated by it. The general purpose
of the analysis is to help understand, which brands the firm should invest in and which
ones should be divested. The four quadrants in which the company classifies its product
are:
1. Dogs: This involves products which have low market share compared to competitors
and operate in a slowly growing market. In general, they are not worth investing in
because they generate low or negative cash returns.
2. Cash Cows: Cash cows are the most profitable brands and should be milked to
provide as much cash as possible. The cash gained from cows should be invested
into stars to support their further growth.
3. Stars: Stars operate in high growth industries and maintain high market share. Stars
are both cash generators and cash users. They are the primary units in which the
company should invest its money, because stars are expected to become cash cows
and generate positive cash flows.
4. Question marks. Question marks are the brands that require much closer
consideration. They hold low market share in fast growing markets consuming large
amount of cash and incurring losses. It has potential to gain market share and
become a star, which would later become cash cow.

Just like the SWOT analysis method, arguments of the effectiveness of the method exist as
well because there are certain advantages and disadvantages associated with this method
like, the advantages could be that this method is easy to perform and helps to understand
the strategic positions of business portfolio. The disadvantages or limitation of this
analysis could be that it is confusing while classifying the product in categories and
sometimes a dog can be as important as a cash cow because it might help the business
achieve competitive advantage or market share.
D) Environmental and organizational audit occupies an important place in
strategy formulation. Attempt an environmental and organization audit for the
company. (2.1 & 2.2)

A business audit for Carmax can be conducted by SWOT analysis. SWOT analysis helps to
recognize companys internal strengths and weakness and companys exterior
opportunities and threats. It helps to figure out a companys strategic positioning. A
sample SWOT analysis on Carmax is conducted in the previous question and by its results
it can be concluded that Carmax benefits from full range of service, customer confidence,
appraisal strategy and sophisticated technology but on the opposite end Carmax has a
clear threat from the changing economic condition, retail prices and the competition in the
market. The opportunity which Carmax can currently avail is expanding into new market
like other countries etc. These results from the SWOT analysis can be considered as an
organizational audit for the company because it evaluates the current situation which the
company is in and when forming a new strategy these things identified in the
analysis/organizational audit can be considered as well.

In order to carry out an environment audit of Carmax, here Political, Economic, Social,
Technological, Legal and Environmental (PESTLE) Analysis is carried out.

Political factors:
The current political instability in America due to the elections and the aggressive policies
of the new government post a threat to Carmax because the new government aims to give
less working/residential visas to the citizens of other countries which means the rate at
which the car industry was growing might slow down due to less number of customers
then expected secondly it is considered that the current governments policy regarding the
campaign be American buy American might mean that all the products which Carmax
sources from other nations might face quotas and taxes resulting in an increase in cost for
Carmax.

Economic factors:
The political and economic factors are of course interrelated which means that if the
political factors are not good then the economy would be effected as well and currently
due to the ever changing policies of the new government investors are not investing in the
economy and people are tending to save rather then spent which clearly indicates that
economic condition are not so ideal for Carmax.

Social factors:
With improving living conditions, people are increasingly emphasizing high quality in
service. This social condition presents an opportunity for Carmax. To improve its service
quality standards to satisfy and retain clients who pay for the companys product and
services. In addition, increasing online buying behaviors worldwide create opportunities for
Carmax to develop additional services to profit from retail sales generated through its
website and related mobile apps. The company also has the opportunity to enhance its
corporate social responsibility programs as a way of satisfying corresponding expectations
of users. Based on the external factors in this element of the (PESTEL) analysis of Carmax,
there are major opportunities to improve the companys services to optimize competitive
advantage.

Technological factors:
With the increasing improvements
user experience in using its mobile
of the trend of increasing mobile
threat of increasing competition,
desktop websites to attract users.
in technology Carmax has the opportunity to improve
apps. This opportunity is important, especially because
device usage worldwide. However, Carmax faces the
as more competitors are improving their apps and

Legal factors:
These factors have both external and internal sides. There are certain laws that affect the
business environment of Carmax in America, while there are certain policies that Carmax
maintains for themselves. Legal analysis takes into account both of these angles and then
charts out the strategies in light of these legislations. For example, consumer laws, safety
standards, labor laws etc.

Environmental factors:
The current environmental factors indicated that now the people have started to consider
climate change as a problem thus they are switching towards electronic cars thus the
company needs to sell more electric cars through its forum secondly the services which
car max offer include changing the liquids of vehicles such as engine oil and break oil so
that company should implement better waste disposal policies and standards for its
corporate social responsibility policies.
E) Explain the meaning and importance of stakeholders analysis in relation to
the company? (2.3)

The term stakeholder may refer to a person, group or organization that has direct or
indirect interest or concern in an organization so it is obvious that stakeholders can affect
and be affected by the organizations actions, objectives and policies now in case of
Carmax an example of key stakeholders can be the customers, employees/workers,
shareholders, suppliers (vehicle and part suppliers) and the community as a whole in
which it operates in. The literal meaning of the term stakeholder analysis is its an
important technique for identifying stakeholders and analyzing their needs. The main aim
for carrying out a stakeholder analysis process is to develop a strategic view of the human
and institutional landscape of the business and the relationship between the different
stakeholders and the issue they care about the most. To carryout stakeholder analysis a
stakeholder analysis matrix is used an example is shown below:

The reason why stakeholder analysis is important to Carmax is because companies need
to understand the interest of each stakeholder and strategize on how to address them in
business practices like when Carmax would analysis the customer stakeholder group in
detail then it is very much likely that the company would be able to develop accurate and
more effective marketing strategies or products in general similarly when the employees
stakeholder group would be analyzed Carmax would be able to make more effective
human resource decision like what leadership style should be used? Or what motivating
technique would be more effective?, last but not the least supply chain management has
emerged as a significant business component having analyzed the suppliers group or the
logistics group would mean that the company could improve its relations with these
groups which would obviously result in improved inventory and distribution system.
F) Present a new strategy for this company. (2.4)

As mentioned previously business strategy can be defined as the plan which helps an
organization achieve its set goals and objectives over the long term, if the strategy is
designed correctly it strengths the performance of the business. The new strategic plan
can be developed using four steps which are mentioned below:

1. Gather the facts:

First of all Carmax will have to gather information through which it will analyze its
current position in the market and its past performance, currently Carmax holds the
highest percentage of market share and has been performing quite well. Techniques
like SWOT and PEST are also used for this process which have been conducted and
mentioned in previous questions.

2. Developing a mission and vision statement:

By Developing a new mission and vision statement which identifies the strategic
objectives will benefit the company because Carmax will make all the employees clear
of what it is trying to achieve for example the new mission and vision statement can
have aims like expanding into new markets like Europe etc., offering new products and
giving customers a chance to negotiate prices while buying or selling a product to the
organization combined with the companys previous mission and vision statement
which aims to provide positive experience customers, rewarding career for associates,
superior return to stakeholder and ultimately being Americas best run, most profitable
automotive retailer.

3. Plan to achieve the new objectives:

This second last step is when Carmax will decide how it will achieve the objective that
it has set while developing the mission and vision statement the new objective of
expanding into new markets can be achieved through hiring locals from the area or
country which have knowledge about the Geographics and Culture of the particular
place, the locals can them be teamed with the operation managers to develop a
detailed plan of how the business will expand and what will be the cost associated with
it, secondly another objective which is to allow customers to negotiate could be
achieve through adding a new code on the website which allows them to register their
offers and in the case of physical dealing the sales staff should be trained as well and
last but not the least the company can strength its relations which existing and new
automotive brands so that it can offer new product earlier then the competitors.

4. Monitor the performance of the new plan:

When the new strategic plan is put into action Carmax needs to make sure that the
person in charge should be able to monitor how the new changes are affecting the
business and what modifications the business strategic plan would need in order to
carry out operations smoothly, this may involve the use of KPI (key performance
indicators) such as total sales etc.