Automotive Industry Tour

By Robert Humphreys, Anthony Leong, Daniel Low, Jennifer Noronha, Grace Wong-Lim


The author of the framework used here is Tom Vassos. Details of this framework can be found in the book Strategic Internet Marketing by Que Books (ISBN#0-7897-0827-2)

Internet Exploitation Phase

The Communications Stage

This is the most common stage of exploitation when companies become interested in the Internet technology. If a company already has an internal e-mail system or even an Intranet, connecting to the Internet provides instant access to outside contacts, suppliers, and customers. For companies without an existing electronic communication system, the Internet can easily serve the function of communication (sending and receiving e-mail) one of the easiest and most cost-effective inter-office communication alternatives, especially if spread out over large geographical areas.

Some automotive manufacturer web sites have exploited this stage. Subaru ( asks customers to get in touch with the webmaster or send in comments and questions to its customer service department. The BMW Canada site ( lists its dealer locations as well as web site hot links and e-mail addresses where available. Although most manufacturer sites have an e-mail address, it is unfortunate that the majority of their dealers do not, Saturn ( is a good example of this. There may be an opportunity for automotive manufacturers to offer e-mail services to all of their dealers to help direct business to the appropriate dealer location. An added benefit would also be that this can be another communication channel to all of the dealers so that information can be transmitted quickly and efficiently. The set up cost would seem to be minimal when compared to the benefits that can be derived. Thus, ensuring that all associated dealers are on the Internet and can be contacted via an e-mail should be an important consideration when an automotive manufacturer plans its Internet strategy.

The Competitive Research Stage

One of the benefits of the Internet is the ability for a company to do research on the competitors or the competitive environment with ease at little cost. Competitive intelligence can be discovered in a matter of seconds. When an automotive manufacturer wants to know what the competitors are doing, it can easily browse through their web sites and obtain information. One way to connect to competitors' web site is by using jump station such as Autopedia (, which has one of the most comprehensive listing of automotive manufacturer Internet sites worldwide, to speed up the search. Also, an automotive company exploring the Internet alternative may want to use this opportunity to research what strategies the competitors are using on their web sites and learn from what they do well or what to avoid. The Internet is an accessible medium that allows an automotive manufacturer to keep current with both the existing and potential competitors.

The Market Research Stage

The Internet contains a vast array of information. For automotive companies researching market trends and customer requirements, the Internet provides an avenue to access information cheaply and effectively. Companies can access the most up-to-date automotive news on Yahoo's Today's News: Automotive ( or go to Newspage ( to browse through articles on the state of the automotive industry, the activities of the big automotive manufacturers, and other automotive news. In addition to accessing existing information, automotive manufacturers can use the Internet to conduct market research. Cadillac ( has a survey that asks browsers for input for developing new Cadillac vehicles. Other manufacturer sites, such as Toyota (, ask visitors for feedback on the site itself and how it can be improved.

One thing that automotive companies have to recognize is the audience that the Internet reaches. To conduct meaningful market research through the Internet, the company has to properly ensure that their target market overlaps with the demographics found among Internet users. Furthermore, they have to ask pertinent questions. A gift economy in which the participants receive enticements can sometimes help to ensure a higher response rate.

The Education Stage

Many companies associated with the automotive industry do fully exploit the Internet as a medium to provide free education to the public. Any companies or anyone interested in finding educational information such as how-tos, financing, buyers' guides, car care, and so on can browse through numerous sites. Popular Mechanics Magazine ( focuses on car care, owners' reports, and other educational tidbits. Car and Driver Magazine ( contains new articles from the current magazine issue, reports on car shows worldwide and more. The Society of Automotive Engineers ( maintains a database on automotive technology on the World Wide Web. Motortrend Magazine ( provides the consumer with product information through features such as multimedia for test drives, and hot links to other sites by category such as after-market, buying & leasing, etc. Carprices ( offers car prices of any model and any make. These sites provide information free of charge, so companies interested in exploring the Education Stage should keep this in mind. By providing education, companies gain brand recognition and awareness. At the same time, these activities may lead a way to future business transaction with the user.

The Business Networking Stage

The Business Networking Stage involves establishing business relationship worldwide. By networking with partners around the world, efforts can be made to share information such as new technological breakthroughs, design ideas, market research information and so on to help reduce cost and speed the introduction of new products. It is unclear as to how many of the automotive companies are utilizing this opportunity. If not, they should consider it because many partners are usually scattered around the world. This stage also allows companies to establish new relationships by reaching out to potential business partners. This can be achieved through e-mail, discussion groups, business classifieds on the Internet, or existing business network such as General Electric Trading Process Network ( Textron Automotive ( is an example of such company exploiting this stage through the GE Network.

The Purchasing Stage

The Internet can have an effect on the bottom line when companies can utilize it to find the lowest cost item for all purchases. The Internet allows companies to broadcast messages to anywhere in the world, making it as close to a perfectly competitive environment as possible. It is therefore an opportunity for automotive companies to use the Internet to source its input. Bidding can be quickly and efficiently executed and orders can be placed on-line. Currently, it seems that only Textron Automotive subscribes to the General Electric Trading Process Network ( to source its raw materials. As Internet technology improves and automotive companies become more comfortable with the Internet, this is certainly an avenue that they should explore more fully to reap the benefits of the virtual global village.

Content Foundation Phase

This phase marks the company's first foray into establishing a web presence. It is here that the objectives, basic structure, and content for the web site are established.

The Launch Stage

The Launch Stage is the foundation for any successful web site and Internet marketing strategy. However, only a few companies actually meet the requirements of their customers at their web sites. An effective launch stage is hallmarked by several steps. Concept testing research is done to understand how the firm's customers are using the World Wide Web, what sort of applications they need, and the information they expect from the company's web site (Toyota ( seems to have done this, judging from its all-encompassing web site that not only offers information about their products and services, but also offers entertainment features, such as Jay Leno's Garage-- Then a multi-discipline team should craft the implementation of the web site, instead of abdicating the process to one group, such as the information technology department, and then receive feedback on the choices made before the formal launch of the web site. A domain name must also be chosen, and this domain name should be intuitive, to increase the chance of potential customers finding the web site (for example, Honda uses the intuitive domain name of Finally, a reliable Internet service provider (ISP) must be found, with the capabilities to handle the chosen web site strategies.

A survey of several automotive web sites shows that this stage has often been neglected by the automotive industry. There are sites that merely provide product information, without a means by which the potential customer can find the nearest dealership or place further inquiries. In the future, as the World Wide Web becomes more crowded with more choices for Internet surfers, it will be the web sites of the companies which have planned their web site strategy that will attract and keep the attention of potential customers.

The Repository Stage

The Repository Stage involves the conversion of the company's existing documents and data into a Web format, such as product brochures, press releases, annual reports, and other corporate publications. Not only does this new repository readily provide potential customers with information on the firm's product and services at a lower cost (without the need for faxes or postage), but it also can assist in creating freer flows of information within the firm itself.

All the automotive web sites have exploited this stage in one form or another, with the majority of information related to creating product awareness. However, there are some automotive manufacturers that have gone further in implementing this stage, using this stage as a media relations tool. For example, the BMW Canada web site ( contains a library which contains all their press releases, free software, a museum, and articles from their magazine. Also, Chrysler ( also has a media relations repository of their press releases and product information.

This is perhaps the easiest and most commonly-implemented stage in the Automotive Industry. However, relating this back to the Launch Stage, it is important for an automotive manufacturer to determine what content is relevant to the needs of potential customers, repeat customers, and its own internal staff. For example, should prices be listed on the web site? What about promotional activities? Is it important to list the company's dealerships? Should technical information be available for 'do-it-yourselfers'? Should ancillary services, such as trip-planning information, be provided? A survey conducted by the Gartner Group in 1996 suggested that 90% of business web sites were not delivering the content and services that met their customers' requirements. For a company to drive traffic to its site and keep it there, not only must the potential customer be able to find it, but to be able to retrieve the information that they are looking for.

The Link Stage

The Link Stage involves choosing the quantity and quality of hypertext links from the firm's own web site to other web sites. The firm must balance the need to build traffic through its web site and the potential for losing customers to other web sites. In terms of effectiveness, research has shown that the two most effective link strategies are the Extensive Link Strategy and the Infrequent, Directed Link Strategy. The Extensive Link Strategy can help build a firm's reputation in a particular field, generate advertising dollars, and ultimately help the site gain both new and repeat traffic. The Infrequent, Directed Link Strategy allows visitors to see content relevant to the firm at other web sites, such as accolades bestowed on the company's products, or the web sites of the firm's distributors, thereby moving the potential customer further along the sales cycle.

In the Automotive Industry, it would be more advantageous for a company to use the Infrequent, Directed Link Strategy as a means for providing a sense of community to the potential car owner (Volkswagen Online ( contains directed links to the home pages of Volkswagen enthusiasts, a sort of 'club' for VW drivers), providing ancillary services (Chevrolet's Web Site ( contains directed links for customers for vacation planning with links to mapping, weather, and sightseeing utilities), and providing supporting evidence for the uniqueness of the company's offering (the Volvo web site ( links up to Information Strategy magazine to provide credence to its superior web site).

The Content Reach Stage

A firm mapping out its Internet strategy should also determine the reach of the content in their databases. For example, if the primary purpose of the web site is to serve as a link between the firm and its partners in the value chain, such as suppliers, manufacturers, distributors, and preferred customers, then setting up an Extranet may be prudent, especially if the transactions may be of a sensitive nature. For example, Ford is scheduled to have set up an Extranet by June of 1997 to provide support for sales and servicing of Ford vehicles, from showroom to junkyard, which can be accessed by service providers and dealers. However, if a the primary use of the web site is more for the firm's internal coordination between its employees, then an Intranet could be set up. Another alternative, especially if it is important for customers and potential customers to have access to the company's database, would be to still have a web site on the Internet, only to have certain areas blocked off with a 'firewall' to only allow access to authorized individuals, thereby protecting the firm's more sensitive information.

The Cool Stage

The Cool Stage involves the use of leading-edge Internet technologies on the company's web site, such as RealAudio (for sound), Shockwave (for animation), Java (for allowing the customer to use small applications on their computer), and VRML (to allow for three-dimensional 'virtual-reality' interaction with the web site). Though the use of these cool technologies would make a company's web site a more attractive piece of eye candy, there is also the risk of turning off potential customers. Graphically-intense web sites suffer from long load-times, and the visitor may not have the patience to sit through a marathon load session. Furthermore, if the web site relies entirely upon the use of graphics, even for the purposes of navigation, there is the danger that visitors without graphics capability to see nothing. Finally, the issue of reach is also relevant to the use of cool technologies. As the technological requirements for viewing the company's content escalates (such as from e-mail to web browser to Shockwave-equipped browser), the potential market size diminishes. A balance between having an attractive web site and having the greatest reach must be found.

Both Volkswagen Online ( and General Motors ( use Shockwave technology for animation on their home pages. While cool technologies can be used to convey the aesthetic qualities of the automotive manufacturer's offerings, the penetration rate of these technologies is low and so the benefits of their use would be limited. A colour graphic image of the automotive manufacturer's product is still the most accessible Internet technology that allows the customer to 'see' the product. As modem speeds and bandwidth increases in the future, the use of cool technologies may be more prevalent, and the firm may choose to implement them as the penetration of these technologies reaches an adequate level.

The Personality Stage

The look and feel of a corporate web site can convey the positioning of the company and its products. For example, the Saturn Web Site ( conveys the friendly, feel-good sentiments of their mission statement and advertising, with the use of soft colours, cartoon characters, and a nice at-home feel to it. Pontiac (, a General Motors division that markets towards the younger and sporty driver, uses cartoons, illustrations, and terminology that appeal to this age group. Cadillac ( creates an opulent atmosphere at its web site, with its use of elegant script fonts.

An automotive manufacturer must ensure that the character of their web site is consistent with the positioning and image that is presented in the real world.

Business Extension Phase

In the Business Extension Phase, the utility of the firm's web site is extended by allowing the customer to take a more active role in their interaction with the web site (such as providing feedback), presenting the company's vast stores of information in a readily accessible form, updating the information presented on the web site automatically, and automating all customer interactions. Not only do these initiatives increase customer service and turnaround time, they can also reduce the administrative costs to the company.

The Interactive Stage

We were surprised that more companies did not take advantage of this opportunity to understand and build relationships with their customers. Very few automotive sites had e-mail addresses, requested feedback, answered questions, recruited, or conducted any marketing research. The two that were trying the most were Saturn and BMW. Their sites are discussed elsewhere in this report. Two additional examples are:

Caterpillar ( who allows you to get detailed actual specifications on the vehicle you are planning to buy. You can perform a search for the model type, and you register your information to get it sent to you. They also have FAQs and job advertisements.

The BMW Car Club of Great Britain (, is a web site for those stakeholders interested in BMW cars. There is a social events noticeboard, links to dealers and insurers and you can sign up to join the club on line. There is a lot of information being traded back and forth.

We recommend that the automotive industry actively seek out feedback through their web sites. (One honest piece of feedback was that the sites were all generally too slow due to unnecessary graphics.) In order to accomplish this they must staff themselves to respond to queries and track comments and improvement possibilities.

The Advanced Interactive Stage

The Vauxhall ( car company provides live and constantly updated traffic information in the U.K. The information includes road maps, congestion point identifiers and flow patterns. Caterpillar ( provides a utility to search for the dealers in your area (by postal code) and it provides you with directions, hours of business, and their toll free numbers.

This stage deals with automating the process of responding to queries. This means 24 hour service, increased sales, decreased costs and improved communications. We found no examples of infobots or chat areas, however there were phone numbers, FAQs, key contact names etc. provided. It is recommended that companies look at this stage more, due to the benefits described earlier.

The Database Stage

Edmunds ( has a large database which includes manuals and prices for every make and model of car. This includes maintenance manuals. The Society of Automotive Engineers ( maintains an on-line retrieval database on technical issues and engineering standards (, and a method for ordering the relevant documents on-line. ITT Automotive ( has a listing of all its suppliers, associations and related automotive reports.

This stage can give companies a strategic advantage over other companies both in value added and cost reduction. If customers have access to company information, they can make very specific queries, whenever they want and quickly, this results in better service. From the cost reduction perspective, there is a reduction in administrative costs, efficiency gains in managing changes(change the data once), etc. However companies must keep in mind that they need good search tools and user friendly front end applications. These have upfront costs.

The Application Stage

Autoweb offers a free loan calculator at its web site ( Vauxhall ( provides a utility for calculating the tax implications from owning a company car in the U.K.. Vauxhall ( also has another utility that allows you to do on line financing applications.

There were not many examples where companies made their real corporate applications accessible to Web browsers. We noted the financing and insurance application examples. An extension might be mass customization of orders. These orders could be collated electronically and sent to assembly locations specializing in a specific type of custom order. The true cost savings are when Web interfaces are fully integrated into the company's applications. This improves quality and reduces administrative costs. Applications are also useful to build in switching costs-- customers learn your system and perhaps build theirs around yours, making it harder for them to leave.

The Work Flow Stage

Edmunds ( does your comparison shopping for you, linking models together with prices for each of them. They have taken the most popular purchases for the comparisons, unfortunately the prices are all in U.S. dollars only. NOTE: it is difficult to see work flow improvements internally to the company so we picked an example of efficiency in work flow for the consumer.

Under the hottest cars in the Edmunds web site (, you will find a listing of all cars. You select what you want and they allow you to find a dealer near to you. This is done by you filling out the questionnaire on this page and the nearest dealer will phone you within 2 days. This link is accomplished by a strategic alliance with AutoByTel.

It is recommended that companies could make more efficiency and cost improvements by paying more attention to this stage. Invoices and billing for example could be managed on-line.

The Advanced Repository Stage

Autobytel ( provides a jumpstation of auto information for new cars, used cars, maintenance, dealers, prices, phone numbers parts dealers, and insurance. (The problem is that it is restricted to those companies in the United States even though they have Canadian flag on the home page). The information is extensive and is constantly being updated.

Companies can use this stage internally to manage inventories with suppliers, handle processing of orders with dealers, i.e. any information stream that has a lot of traffic with external, and sometimes internal, groups to the company.

Business Transformation Phase

In the Business Transformation Phase, the Internet is used to augment the firm's existing business through the use of free services to entice prospective customers, proactive marketing programs to keep the firm's services at the customer's 'top of mind', the tailoring of the web sites content to the needs of each customer, the conduct of commercial transactions to generate revenue, and an ongoing monitoring program to ensure that the web site meets the needs of the customers.

The Community Stage

The community stage occurs when a company provides something of value to the public as a goodwill gesture. This could be a service, product, or information, and is usually provided for free.

The Autopedia ( site gives visitors access to a significant amount of vehicle-related information and services for free. It offers tips on how to negotiate a car purchase, get the best financing rate, and evaluate if leasing is a better option. It has links to every major auto manufacturer (as well their 1-800 phone numbers), and provides reviews of virtually every consumer vehicle in the market. Users can find prices on new and used vehicles. For those serious about buying a vehicle, Autopedia will contact dealers in that person's area to get the best price for the vehicle that he/she is looking for, together with leasing and financing rates. This service is provided to the user for free. These are examples of Autopedia's contribution to the "gift economy".

AutoByTel ( does something very similar. Through its links to other sites and utilities, the visitor can also get free information on new and used vehicles, such as prices, reviews, specifications, consumer ratings, hints and tips, etc. The links include: Kelley's Blue Book (, Microsoft Carpoint (, Edmund's Buyer's Guide (, Autosite (, and Intellichoice (

Automall USA ( and Autosource USA ( also offer free services at their web sites.

With thousands of companies and people putting up web sites daily, it is becoming very difficult to draw the attention of Internet users to a particular site. One effective way is to be in the Community stage. A site that offers useful information, products or services for free will attract users, who in turn will tell others. "Word of mouth" publicity is especially effective in the Internet because a recommended website often gets mentioned in relevant forums and chat groups that reach many people. In fact, with so many websites contributing to the gift economy, it is almost mandatory to be in the Community stage if you want to generate traffic through yours. We found that most automotive manufacturers do not fare well in this stage, and feel that they should do more if their strategy is to generate traffic.

The Outbound Stage

Most websites today rely on users and customers to visit them. They may even employ strategies such as developing "cool sites", providing multiple links, or giving away free information, services, and products to attract visitors. This is a "pull" or "inbound" approach. In the Outbound Stage, a company finds proactive ways to develop an ongoing relationship with current or potential customers where the customers agree to let the the companies contact them to maintain the relationship. When customers fill out the on-line Autopedia form ( to locate the dealer in the area with the best price for a specific vehicle, the form asks the user if they would be interested in receiving auto-related information on an ongoing basis. If the user agrees, Autopedia has the permission to maintain an Internet-based marketing relationship with that customer. This may allow Autopedia to "softsell" products, services, and advertising in the future.

It often helps to offer customers an incentive to let you contact them. In Autopedia's case, the incentive was to provide customers (presumably auto enthusiasts) updates about the latest vehicles and reviews. Thus, the Community and Outbound stages are often closely linked.

The beauty about "outbound" marketing in the Internet is that the company no longer has to wait and hope for the customer to return to its site, an increasingly difficult thing to do as the Internet gets increasingly cluttered. Instead, it can take the initiative to contact the customer when appropriate. Of course, companies must be careful to not abuse the customer's trust and inundate them with advertising or self-serving, "hard-sell" information.

We did not find many auto manufacturers or dealers engaged in the Outbound Stage. Businesses whose products/services and target market fit well with marketing through the Internet should think of creative ways to exploit the Outbound stage. For instance, the demographics of luxury luxury car (BMW, Volvo, Acura, etc) buyers fit well with the profile of the typical Internet user, so these companies should look at ways to form an ongoing relationship with their current and potential customers.

The Mass Customization Stage

In this stage, the company customizes its content to fit the wants and needs of the user. When requesting information at the AutoByTel ( web site, the user is asked to provide specific details about the enquiry (e.g. new or used vehicle, which manufacturer, what price range, etc.) Data that matches the search descriptions is then given by the sites on-line. The result is thus tailored to the specific request. Autopedia ( also provides this.

The Commerce Stage

The Commerce Stage occurs when business is actually transacted through the Internet. The AutoByTel ( web site enables visitors to order a used or new vehicle via on-line. It also offers on-line financing and insurance application (through AIG at

BMW ( provides opportunities for users to purchase BMW-branded clothing, personal items, and even bicycles at its web site.

Many users are still uneasy about doing business and paying through the Internet. Security, credibility, and guarantees go a long way to ease these fears. As encryption technology improves and the psychological barriers of consumers disappear with time, Internet commerce is expected to explode. Some industry watchers are predicting that the Internet will be part of a trillion-dollar (US$) industry by the year 2000. Much of this will involve transactions between companies (business-to-business) rather than consumer-related transactions. Companies in many industries are already using intranets and extranets to work with strategic partners, suppliers, dealers, and customers to transact business. The Internet promises to enable businesses to save money, increase productivity, improve cycle time, and increase customer satisfaction.

Many automakers already have close links with their suppliers and dealers, having installed just-in-time manufacturing and delivery processes, integrated product development, and joint manufacturing. The Internet can further enhance productivity improvements and cost savings.

The Process Re-engineering Stage

The Process Re-engineering Stage occurs when companies change their business processes to take advantage of the Internet. With AutoByTel (, participating car dealerships, financing (Chase Auto Finance) and insurance (AIG) companies have to change their business processes to receive and fulfill business through the Internet. When automakers and their business partners use the Internet, intranets and extranets to link their businesses (see the discussion in the Commerce Stage above), they will not receive the full benefits unless they change the way information flows and organizations work together.

When a business changes its processes to exploit the benefits of the Internet, it can develop new competitive advantages. For example, a customer wanting to buy a new car can order it through the Internet. As this order is sent to the automaker, it can be directed simultaneously to its plant and the appropriate suppliers. The suppliers ship the plant for assembly. At the same time, the information gets sent to the transportation company to arrange for shipping, and the administrative group prepares the billing. If a dealer is involved, they can look up scheduled delivery information electronically, print the invoice, and transmit payment to the automaker through the Internet. This scenario would result in the shortening of assembly and delivery time, allowing the automaker to "build-to-order" its cars i.e. it does not undergo final assembly until an order is received. This eliminates the need to build up huge inventories of cars and parts, cutting costs and improving cash flow. At the same time, customer satisfaction increases because they get the car exactly as they specified soon after they place the order, and the dealer has electronic access to all the information it would require.

Not all re-engineering opportunities have to be as complex and involved as the above. For instance, companies can realize significant savings by making long-distance phone calls and faxes through the Internet. What they would need to do, apart from getting the required technology, is to train people to use it.

The Closed Loop Stage

This stage involves having mechanisms to collect as much customer feedback about the website and the business experience (where appropriate) as possible. The AutoByTel web site and all its links have customer feedback mechanisms that attempt to cover the Closed Loop Stage. Some are more effective than others.

Strategic Transformation Phase

This is the phase an organization must enter to merge all Internet activities into one cohesive Internet strategy. To do so effectively, one must evaluate the overall corporate strategy of the organization as well as the applicability of the Internet as an additional means to market a product or service. From a strategic standpoint, any use of the Internet must help the company achieve its goals and objectives. In a macro sense, the company strategy begins after understanding how the issues and trends of the world help to shape the industry (e.g. energy crisis) and the industry's trends and issues help to mold a company's overall strategy. The Internet as a medium then fits in by helping to attain the overall corporate strategy. The key to the Internet, therefore, is to develop a strategy that is complimentary of the overall strategy of the firm (or even the primary strategy of the firm).

The Corporate Leverage Stage

The purpose of this stage is to attempt to bring the entire corporation, including its operations, company communication and all other aspects onto the Net. Perhaps the best example of this is found at the Volvo site ( This company uses the leverage of its web site to provide information on all its different business units, from Trucks, Marine Engines, Autos, Aircraft parts etc. The entire corporate product line is highlighted with financial reports, specific product lines highlighted, new product initiatives highlighted and manufacturing abilities showcased. The feeling one gets from this web site is an impressive confidence in the ability of this company to deliver a quality product because of HOW the message is created. The images are a of a big successful organization committed to quality and safety - these are excellent attributes to have associated with your web site.

For other organizations, the same principles apply here to create the feeling of corporate success. Photos of corporate offices, the President, customer service, products, events or even business allies/partners. The intent here is to ensure tat the visitor understands that your organization is successful and able to deliver you what you want and when you need it. Your confidence in the firm, as a customer, must never falter. The pictures will be worth a thousand words.

The Micro-Market Stage

The micro marketing stage is the targeting of micro market segments of the industry within the Internet. The purpose of this segment is to reach to specific small market segments within the automotive business. The micro marketing of specific products can be found in examples such as Hummer ( who target industrial, military, and consumer markets at its web site. Depending on your profile as a customer, you can shop for a vehicle to whatever customer segment you belong. Each customer segment has a product line that , hopefully, can meet the customer's needs. Another example, Kovatch ( specifically targets the micro-market for fire engines. Again, this highlights the customer segment which needs a specific product for a specific purpose.

Since the automotive industry includes such a broad base of customers (segmented by income or age or lifestyle or any demographic measure), the ability of a firm to micro market to the customer segment is somewhat limited. The opportunities for companies to succeed here is if the product offering matches the demographic profile of the user group, or if the user group (i.e. a business) is a business that uses the Internet already, or on a regional basis, if the product matches a specific region's demands. It is this point that micro marketing is an opportunity for automotive companies. Can a product be developed for a specific region that caters to that region's tastes? The costs for such a vehicle may be high, but the rewards may be equally so. The size of the micro market and the size of the investment necessary to reach the micro market must be compared to effectively evaluate the opportunity. From a dealer standpoint, this may be easier to execute. The dealer will probably only have a small regional business (as opposed to the world). The dealer can create local market events and promote them on the Internet as means of driving traffic to the dealership. Again, like the manufacturer, the intent of micro marketing is to satisfy local demands and tastes. The dealer is in the best position to micro market from a geographic perspective (as opposed to a product perspective)

The Global Stage

The purpose of the Global Stage is to marry the international capabilities of your business to the capabilities of the World Wide Web. The business community has been progressively embracing the concept of globalization and the Internet makes this transition for businesses very attainable. as in other stages, there are a number of different criteria to satisfy in order for a site to be an effective global web site. First, the organization's site should state up front what are the global abilities of the business. Through the Volvo ( and the Hummer web sites (, a listing of local dealers can be found for any country As this is the World Wide Web, these companies have ensured that all interested visitors can access the firm's products and/or services. If the firm is only a regional business, the site will not be applicable, nor of any interest, to visitors from outside the specific region's scope of business. This is precisely the case for Rolls Royce ( as they offer only an England-centric dealer locator. Any prospective purchaser of these ultra luxury cars will not know where to find a dealer outside of the UK.

Second, since the world operates with many different languages, the site should be able to offer a language translation mechanism that allows visitors to communicate in the visitor's own language. Volkswagen Online ( was able to offer this translator for English and German only.

The third criteria applies the same conversion principles to currencies. These conversions of language and currencies enable the visitor to better understand the product's features and benefits and also enable the site to have a more refined customer focus that can only help in capturing the interest of the non-English-speaking and non-US dollar world. Lastly, a automotive manufacturer should try to regionalize the information to suit the various regional differences within the world. Customized content to suit, for example, Hispanic speaking buyers of automobiles may help the export of a manufacturers cars to the Latin America region of the world. This is where the industry as a whole was the weakest. Very little regional specific was made available by those who had a world wide scope of business (i.e. country specific events were not apparent as opportunities for promotion) .

The Channel Stage

This stage of Strategic transformation is about exploiting the Internet as a distribution channel. In fact, there has NOT been any advances of the Internet as a distribution channel by the manufacturers at all. The manufacturers appear to be using the Internet as a means of growing awareness of their products as opposed to truly selling products. In this industry, a manufacturer's web site would steer interested visitors to a dealership address that is reasonably close, and the dealer would conduct business in the traditional customer visit method. The manufacturers have not strayed from this traditional mode of distribution because they evidently feel that they cannot afford to alienate their dealers, thus no disintermediation has taken place. The dealers, on the other hand, have not implemented the Internet to its greatest use by not using it as a proactive and effective means of trying to reach out to their specific target groups. The end result here is that the manufacturers and the dealers have gained another promotional and advertising medium, not another distribution channel.

Clearly, adopting the Internet as a distribution channel is probably one of the most difficult stages for any organization if the Internet is viewed as an untried medium. In an increasingly competitive environment like the automotive industry, the effective use of the Internet as a cost effective distribution channel, or the more effective use of the net, can lead to competitive advantages if the Internet fits well into the firm's overall strategy (i.e. target market, product offerings etc.). Given the trend today for overcapacity in this industry, the apparent affordability problems of today's models and heightened foreign and domestic competition, the lower the cost structure, the better. The competitor who is best able to reach his target consumers and persuade them to buy, and can do so at a reduced cost will gain an advantage over most of today's traditional dealers and the manufacturers. The Internet can be viewed as a means to help accomplish this task.

The Cybermediation Stage

The cybermediation stage is the introduction of a new channel layer. As stated, the manufacturers have not been active with disintermediation, however, independent of the manufacturers' efforts has been the pioneering of the Internet as an automotive distribution channel by firms like Autobytel (, Autoweb (, and Automall USA ( These companies serve as intermediaries between the automobile manufacturers and consumers by selling both used and new cars on line. These sites link directly to the manufacturers site to give the visitor information about a specific manufacturer's different models and then offers you a means of ordering the car on line. As these companies rely exclusively on the Internet is their only source of distribution, they have created a new means for consumers to purchase a car.

All of these companies are independent of the auto makers, thus they will not experience the wrath of disgruntled dealers attempting to stop their progression with the Internet. Instead, Autobytel (, Autoweb (, and Automall USA ( are acting as on line dealers themselves, offering consumers a new and convenient means for consumers to get what they want, when they want at a very attractive price. If anything, other dealers (with the support of their manufacturers) should be studying how the same type of proactive and convenient means could be used to grow their specific businesses. The challenge for most dealers is to try to become more of an outwardly and customer focused organization to use the Autobytel ( example effectively. The challenge for manufacturers is to make this same purchasing example a true global and friendly experience.

Given the development of the Internet, the opportunity to fully exploit this medium lies within its ability to act as a means of reaching more customers and/or reducing distribution costs. It is unclear how a manufacturer could replace a dealer network entirely with the Internet, albeit it could make the dealer network more efficient and effective. The dealer is essential for vehicle servicing and to help close a sale through the essential test drive. It is suspected that the car purchasing decision is sourced from an emotional test drive as much as from logic (some would argue more emotion than logic). A cyber test drive experience could not capture or equal the same degree of intensity that a test drive could afford. The reliance on the dealer will continue, however, As stated previously, manufacturers should be evaluating how to use the Internet to sell a vehicle in this matter through their existing dealer network. Autoweb (, and Automall USA ( and their cybermediation are succeeding only because the dealers and manufacturers have not yet equaled their Internet abilities.

The Strategic Alliance Stage

This stage revolves around the simple concept of the sum being greater than its parts. This strategic alliance involves two or more companies within a value chain partnering to make the Internet experience more effective and interesting for the visitor. Within the automotive industry, the best examples are found with those firms who use the Internet as a cybermediation channel, such as Automall USA ( and Autobytel ( who have made strategic alliances on their web sites with automobile trade publications, insurance companies and others. These specific alliances do make the sum greater than the parts because the consumer now has the opportunity to purchase and finance and insure his new/used vehicle the moment the purchase decision is made. The convenience, coupled with the ease of execution is the reason why it succeeds. Again, no other traditional dealers or manufacturers appeared to have followed suit to this extent.

The manufacturers have preferred to ally with organizations that do not typically add a lot of overall value to the convenience of the purchase of a vehicle. On the contrary, the manufacturers are looking to alliances to help build their brand names. Landrover (, as an example, utilizes within its web site links with Tread Lightly, a 4-wheel drive conservation group and attempts to associate itself with Tread Lightly by driving traffic through that site and grow Tread Lightly's awareness and its cause. This is very good for the persona of Land Rover and helps to build its brand identity, but it does not help to make the purchase of a vehicle any easier. The opportunity is very wide for manufacturers to ally with financial institutions, insurance companies. This new thrust could work not only for the Internet applications, but also for the dealer networks to equal the ease of buying that the on line companies offer. The challenge to this innovation is the global implications, though alliances could be operated as regional specific alliances

Future Strategies and Industry Implications

The automotive industry is currently subject to trends which provide many opportunities for manufacturers to exploit the Internet, the result of three major issues facing the industry, namely the affordability of new vehicles, overcapacity in the industry and decreasing product life cycles.

In the past decade, the average number of weeks salary needed to purchase a new car has increased steadily, outpacing the rate of inflation. This is the primary reason why people are now holding on to the cars for almost 7 years on average in North America (almost 3 years longer than this same statistic 5 years ago). Since the consumer is now holding on to their cars longer, the interval between purchases now slows. This creates a prolonged slacking in the demand curve of the overall market. More car competitors are competing for consumers who do not purchase cars as often as they once did. Furthermore, there has been growth in less expensive alternatives to buying a new car, namely the increased popularity of leasing and used vehicles. Leasing requires coordination of information between the automotive manufacturer and the leasing company, a process which can be streamlined through the use of the Internet-- companies that will benefit from the popularity of leasing will succeed if they maximize the potential for work flow reorganization to make leasing a hassle-free experience for the customer. The popularity of used cars is also another area that has yet to be exploited by the automotive manufacturers-- though there are many dealer web sites dedicated to the sale of used vehicles, manufacturer representation in this market has been small. Providing opportunities for customers to search for and purchase used vehicles via a manufacturer's web site would help in building relationships and brand identity, much like what Saturn has done with its 'pre-owned Saturn' program.

In the near future, it may be possible that the consumers, in order to reduce the cost of their new vehicle purchase, to completely bypass the dealers and buy directly from the manufacturers. In this scenario, the dealers would be relegated to a service and support role for the customer, with the Internet as an increasingly important distribution chain. However, to take advantage of this new distribution medium, the manufacturers must develop means for electronic commerce and processes to translate an Internet purchase transaction to a delivered vehicle at the customer's front door. This new distribution chain also allows the possibility for mass customization-- vehicles built to the exact specifications of the customer, much like the service BMW presently offers in Germany. Furthermore, as bandwidth increases and download times decrease in the future, the graphically-intensive utilities needed for achieving mass customization may become more widely used.

Another challenge facing the automotive industry is that of overcapacity. According to The Economist, the current capacity of the automotive market is running at approximately 65% of manufacturing capacity. This fact is coupled with the fact that cars are now lasting longer, which will increase the competition among automotive manufacturers for consumers. Already, there are more makes and models available now than there ever have been. A consolidation is expected within the next 5-10 years with the weaker brands being forced out of business. To survive, automotive manufacturers must become creative in cutting costs and inventory levels to succeed. Through the use of Extranets, linking the manufacturers with their suppliers and dealers, many transactions can be conducted electronically, thereby reducing costs. Cost savings can also be realized through the sourcing of lower cost raw materials, which can also be done electronically-- Textron Automotive currently uses the Internet to receive competitive bids for parts contracts. Though many manufacturers have implemented just-in-time inventory management for their manufacturing processes in recent years, the use of the Internet and Extranets can assist the manufacturers in better matching product inflows and outflows to reduce inventory levels-- with the ultimate extension of such a manufacturing system being mass customization, mentioned earlier. Finally, on the sales side, automotive manufacturers can take advantage of the changing demographics to reduce overcapacity. The luxury segment of the industry, where manufacturers make the highest margins, appeals to the aging baby boomers with high levels of discretionary income, and this can be seen in the recent upswing in the luxury and sport-utility vehicles market segments. Computer and Internet usage is also high among this demographic group-- automotive manufacturers would be wise to take advantage of this excellent fit.

Increased competition, changing consumer tastes and government-mandated safety regulations have shortened the lifespan of models, making it necessary for the manufacturers to revamp their models more frequently than in the past. Instead of developing and modifying components in-house, manufacturers have increasingly 'farmed out' such activities to their suppliers, and this type of product development requires a high level of coordination between the manufacturers and their suppliers. Schematics and measurements must be shared between many stakeholders in order for the finished components to fit together-- hence, the need for Extranets.

In conclusion, the Internet will become increasingly important to the automotive industry both as a means to reduce costs and as a distribution chain. Here is a possible scenario: a savvy marketer will attempt to proactively contact potential customers via the net in an attempt to get them to go to a neighboring dealership to test drive a new (or used) luxury sport utility vehicle after the customer is familiar with the cost (less the promotional discount appearing on the site) that the interactive site has informed him or her of. Of course, the dealership will customize the vehicle to match the customer's special needs, and the dealer will follow up, via the Internet, to ensure the test driving experience was positive and confirm that the order for the car is on the way and all insurance and financing needs have been taken care of. The car would be delivered to the customer's driveway a few days later, once it has arrived directly from the factory... just imagine. It is the companies that exploit the Internet to this degree will be able to meet the challenges of affordability, industry overcapacity, and decreasing product life-cycles.

Back to the New Economy Page