Modeling Distribution Channel Dynamics of North American Cars in the Spanish Automobile Industry

By Mangin, Jean-Pierre Levy; Valenciano, Jaime de Pablo et al. | International Advances in Economic Research, May 2009 | Go to article overview
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Modeling Distribution Channel Dynamics of North American Cars in the Spanish Automobile Industry


Mangin, Jean-Pierre Levy, Valenciano, Jaime de Pablo, Koplyay, Tamas Michal, International Advances in Economic Research


Abstract Relations between manufacturers and distributors have been the center point of the distribution channel's management. This study covers the effects of coercive, as well as non-coercive power on intermediary variables such as cooperation and conflict. It will also analyze the effects of cooperation and conflict on American car dealers' satisfaction and performance in Spain. Due to the small sample size (46 dealers), the model based on causal modeling compelled us to use the optimization method based on the partial least squares (PLS) regression techniques coupled with a bootstrapping to enable some generalization of the results.

Keywords Channels of distribution * Satisfaction * Performance

Partial Least Squares (PLS).

Introduction

At this point in time, when an important turning point is emerging in the relationship between manufacturers and dealers, we note the increasing power of negotiation of the latter vis-a-vis the manufacturers. There is a tendency for consolidation at the level of the dealers, creating quasi associations to achieve superior powers in purchasing, and novel forms of integrating their common interests. The bottom line for these changes is to improve the competitive position and the negotiating capacity of the dealers, to promote a significant increase in the growth sales through franchising (Stem and El-Ansary 1993); to increase the quality sought by the consumers (a feature of the franchising approach), and to improve the demand for custom quality goods on the domestic and export markets.

The franchising sectors, which have experienced the most dramatic increase in volume of sales, are those in services, and of course, clearly those associated with automobiles sales.

In Spain, the Detroit based companies have had a really good performance since the sixties; even today they do better than in North America. The relationship with the dealerships is premised primarily on the concept of power but more and more on those related to continuous quality improvements and the development of technically superior products (Maynard 2003).

Over the last few years, the American manufacturers have steadily lost market share in America to their surging foreign competitors: Japanese, Korean, European, and possibly soon, the Chinese, but this doesn't seem to be the case in the Spanish market where North America manufacturers hold a steady market share. In North America, the Asian competitors have practiced pressure from below strategies, where they enter the low end of the market and relentlessly start invading the higher margin sectors as the North American companies retreat. The Europeans on the other hand have been applying pressure directly in higher margin segments. Hence, the North American firms are caught in a classic squeeze play, forced to abandon the low ground, as they are receiving steady fire from above.

For example, although General Motors held 60% of the North American market in 1960 this has shrunk to 40% in 2003 and has eroded even faster since 2006. This is not the case for the Spanish market where the Asian car invasion has not begun yet.

Although superficially alike, the North American and the Spanish automotive markets show many differences. For example, in the American market, we can find Japanese and European models in the mid range and high end of the product offerings (luxury segment). This is not necessarily true in the Spanish market where the North American brands are present in middle segments of the market. The average Spaniard consumer also has the penchant to buy more compact vehicles than his North American counterpart (this is due to the price of gasoline at the pump but also to the price tag of cars), and his purchasing behavior is completely different.

Within this context, the objective of this article is to analyze the present relationships between manufacturers and Spanish dealerships selling American cars (GM-Opel-Chevrolet, Ford and Daimler Chrysler) by examining the level of satisfaction and performance (some of the most important factors in vehicle sales) between the dealerships and the manufacturers.

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