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Case 5-2: North Country Auto- Teaching Notes

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Case 5-2: North Country Auto- teaching notes (case facts in red)
Internal Environment – key facts about the Company
• North Country Auto is a: Franchised dealer & factory authorized service centre– 3 manufacturers (SAAB, Ford, VW) o Began operations in 1968 o 5 departments (new car sales, used car sales, service, body, and parts) o Situated in upstate NY- pop. 20,000, served two nearby towns of 4,000 people as well as rural areas covering a 20 mile radius
• George Liddy & Andrew Jones – equal share ownership in the corporation and involvement in operations (Mr. Jones one of the founders), Mr. Liddy (since 1988)(front end), Mr. Jones (back end))

External Environment – 5 forces –
Threat of New Entrants –HIGH/LOW o Proliferation of new entrants o 6 acre lot & 25,000 sq ft facility o Costly to be a franchised dealer - Each manufacturer used a different computer system for tracking inventory and placing new orders and required dealers to maintain an adequate service facility with a crew of trained technicians and spare parts inventory, level of investment per product line, o Fewer than 50% of dealers were expected to make a profit (US) in 1990 o margins to fall below 1% of sales

Rivalry among Competitors –HIGH o Aggressive discounting and small margins o depressed sales (vehicles) o Fewer than 50% of dealers were expected to make a profit (US) in 1990 o margins to fall below 1% of sales o multiple franchises common in the 1980s o Industry parts turnover averages 100 days(slow to move)

Bargaining Power of Customers – HIGH o More educated consumers o servicing 20,000 + 2 nearby towns of 4,000 & rural areas (small, people know each other therefore word travels fast)

Bargaining Power of Suppliers – HIGH o franchisors imposed requirements to operate: computer systems for inventory and orders, training for technicians, carrying of…...

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