A SWOT Analysis for Car Dealers

Car dealerships rank among the businesses that can see their fortunes quickly altered based on shifting customer preferences, competing dealers and changes in the economy. Conducting a SWOT analysis will give your dealership a clear sense of the strengths, weaknesses, opportunities and threats that it faces, leaving you better positioned to respond to business challenges. Standing out from the competition is critical, and dealerships need to be agile to respond to market changes.

To determine strengths, a car dealer has to determine what sets it apart from the competition. Good prices and quality vehicles represent the biggest advantages, and it helps to offer newer models that consumers like. A big lot with hundreds of vehicles to choose from might be an asset to a customer unsure of what they want. Dealerships with electric or hybrid cars will have an advantage in markets with customers who value green vehicles, while SUV dealerships will do better in affluent areas that have a larger percentage of families with small children.

A weakness might be a brand name or style that’s in trouble. Sometimes cars fall out of favor, and if a dealership is trying to sell SUVs during a time when gas prices are rising, that adds to the difficulties of making sales. It's also a weakness if a dealership is located in a saturated market, particularly when other nearby dealers sell the same models that you do. If you're a Ford dealer and there are five others within a 50-mile radius, you're probably in a worse position than the lone Honda dealer who's the only game in town for customers looking at Civics and Accords.

Some car dealers have opportunities presented to them by the car manufacturers or financial companies, like dealer incentives that reduce the cost of the car and allow stores to pass on savings to the customer. Adapting to market conditions quickly provides a competitive advantage over those who are slower to react. Dealers can also seize opportunities by setting themselves apart from the competition. Free maintenance, loaner cars or any measure that makes car buying less of a hassle can help win business. A used car dealership can stand out by offering certified vehicles with extended warranties.

Economic conditions can pose threats to car dealers, though they affect different types of dealers in different ways. New car dealers will be hurt by tougher economic times, when buyers might elect to go with cheaper models or used cars. And if world events lead to a gas shortage or rising prices, customers might drive less and keep their old cars longer. On the other hand, used car dealers could find that in a better economy, customers are more reluctant to go with pre-owned models and want something new. Other threats include rival car dealers offering similar models and innovative tools that make it easy to shop around. Customers may show up at your dealership for a test drive and then solicit many dealers to find the best price on the Internet, cutting profit margins. Because cars can be interchangeable among dealerships, customers might have little loyalty to any particular dealership. Dealers also have to watch their reputation online, to make sure that negative comments on popular news and social media sites are not affecting their status in the community.