AutoZone is a company operating in the retail auto parts industry. AutoZone has two different focuses, one being the do-it-yourself customer and one being for commercial repair businesses (Parnell, 2014; Abbott, 2016). AutoZone currently has the largest market share of the retail auto parts industry (Abbott, 2016). AutoZone sees an opportunity for growth in providing parts to commercial repair businesses, and has established an online presence to focus on this commercial market. AutoZone faces stiff competition from traditional brick and mortar competitors such as Advance Auto Parts, O’Reilly Auto parts, and Pep Boys (Parnell, 2014). AutoZone is also beginning to see competition in the online marketplace by large competitors such as Amazon
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However, it is difficult to see that differentiation in practice. Other companies offer similar services and advice, and Pep Boys even offer repair services which is an additional convenience. AutoZone does have the benefit of having more physical locations than competitors, and the amount of locations available likely increases convenience and brand recognition which is helpful. However, the large fixed cost associated with its ever increasing amount of locations could become a detriment as it decreases flexibility and increases the company’s debt load. AutoZone’s financial performance has benefited greatly from low interest rates since the Great Recession (Abbott, 2016). AutoZone has utilized a very business friendly debt market to repurchase shares and grow internally. A major strategic issue concerns the amount of debt that AutoZone has taken on in the last few years. A change in interest rates to the upside could drastically affect the ability of AutoZone to refinance that debt and increase the cost of its leverage in the future (Abbott, …show more content…
The average age of a vehicle currently being driven is 11.5 years (Agarwal, 2016). Therefore, this specific market focus is likely a good strategic decision. A decrease in gas prices in the recent past may also be contributing to an increase in miles driven. In general, the older vehicles are, and the more miles the vehicles are driven, the more likely they will need repairs and replacement parts. AutoZone’s push to provide parts to consumers as well as commercial repairers should benefit the organization if this trend continues. However, there is a risk that as gas prices rise, consumers will drive less and have less money for repairs. A declining economy in the United States may decrease the amount of new car purchases and increase the amount of used cars on the road. However, global governments appear to be increasing in their willingness to directly intervene in economic matters, and government interventions could provide some unknown risks. A cash for clunkers type stimulus program could affect the retail auto parts industry if implemented on an even greater scale. Trade policies and currency manipulation also have the potential to negatively affect AutoZone long term. A recent global move towards nationalism and increasingly negative public perception towards free trade policies are risk to AutoZone suppliers and its global expansion
However, it is difficult to see that differentiation in practice. Other companies offer similar services and advice, and Pep Boys even offer repair services which is an additional convenience. AutoZone does have the benefit of having more physical locations than competitors, and the amount of locations available likely increases convenience and brand recognition which is helpful. However, the large fixed cost associated with its ever increasing amount of locations could become a detriment as it decreases flexibility and increases the company’s debt load. AutoZone’s financial performance has benefited greatly from low interest rates since the Great Recession (Abbott, 2016). AutoZone has utilized a very business friendly debt market to repurchase shares and grow internally. A major strategic issue concerns the amount of debt that AutoZone has taken on in the last few years. A change in interest rates to the upside could drastically affect the ability of AutoZone to refinance that debt and increase the cost of its leverage in the future (Abbott, …show more content…
The average age of a vehicle currently being driven is 11.5 years (Agarwal, 2016). Therefore, this specific market focus is likely a good strategic decision. A decrease in gas prices in the recent past may also be contributing to an increase in miles driven. In general, the older vehicles are, and the more miles the vehicles are driven, the more likely they will need repairs and replacement parts. AutoZone’s push to provide parts to consumers as well as commercial repairers should benefit the organization if this trend continues. However, there is a risk that as gas prices rise, consumers will drive less and have less money for repairs. A declining economy in the United States may decrease the amount of new car purchases and increase the amount of used cars on the road. However, global governments appear to be increasing in their willingness to directly intervene in economic matters, and government interventions could provide some unknown risks. A cash for clunkers type stimulus program could affect the retail auto parts industry if implemented on an even greater scale. Trade policies and currency manipulation also have the potential to negatively affect AutoZone long term. A recent global move towards nationalism and increasingly negative public perception towards free trade policies are risk to AutoZone suppliers and its global expansion