Management: Carmax Case Study

Case Study: CarMax

The Used Car Superstore: Smooth Ride or a Rocky Road?

Case Study CarMax

CarMax is one of the largest used car dealers in the United States of America formed by Circuit City during the 1990’s. Its intended goal was to create growth of the organization in a different market. The company survived the day in 2002 when t gained its independence but as for Circuit City they reached economic failure and discharged all assets in 2008. CarMax offered a new experience for its car buying customer’s it consisted of four key supports for customers. “CarMax has carved out a solid niche with its used-car superstores that feature no-haggle pricing and financing, a five-day money-back guarantee, and a national database of cars that can be delivered anywhere” (McCuddy, Morgal, & Morgal,[8]). They also brought use cars from people that didn’t purchase from them.

Money manager Doug Schaller stated that he believes that there was a rock-solid business model, and few competitors would challenge CarMax on a national scale because of its business model and sales-data trends(sold 345,465 used vehicles), that create entry barriers. Operations were challenging during the first seven years and caused financial loss. They overpowered their impediments and their future seems to look promising. CarMax strategic goal was to expand its superstores at a rate of 15-20% each year; this growth rate proved to be great for the fiscal year of 2007. In 2008 the gas prices rose and car sales slow dramatically; the cause was the downward change in the economy and low clearance prices of brand name dealers of new cars.

They tried to get cost and sales under control by lowering the staffs level and overhead cost. Although they made adjustments they still faced difficulties well into 2009. The abundance of factors that affected the auto market it also caused CarMax to experience tough times.

External forces for change has four key managerial challenges,...