Business model innovation in automotive distribution

As competitive contexts evolve in a given industry, firms are required to adjust their strategies accordingly. This implies taking decisions that determine changes in the business model adopted, in one of the components or in more than one, determining a new combination. Business models have become a popular category as it draws attention towards the identification of the basic constituents of a strategy, and particularly of the way in which a firm does business at the system level: how it creates value and how it aims at capturing it from its target market. In the automotive industry a profound reorganization has been in place for quite some time, however it has only recently started to structurally affect the distribution system that has traditionally been based on family-owned franchised dealerships. The market downturn triggered by the global recession has exacerbated an already critical situation of diminishing profits in Western European countries. This report argues that the new context is inducing relevant transformations in the traditional business model, outlining some key directions of change in the individual components (target, offering, chain of activities and profit model). Also, the new context is likely to trigger greater differentiation across brands and specific situations. In this regard, some fundamental types of business models are outlined (low cost, premium, volume, scale), identifying their respective key characteristics.