Information technology and automobile distribution: a comparative study of Japan and the USA

International Journal of Automotive Technology and Management

Volumn 2, Issue 2, 2002, Pages 206-237

  Nishimura, Kiyohiko G ^a   Morita, Masataka ^b  

^a UNIVERSITY OF TOKYO   (Japan)

^b RISSHO UNIVERSITY   (Japan)

Author keywords

combinatorial optimisation; horizontal dominance; informediary; integral; International comparison; modular; process oriented optimisation; strategic patterns; vertical enclosure

Indexed keywords

EID: 84888771519     PISSN: 14709511     EISSN: 17415012     Source Type: Journal    
DOI: 10.1504/IJATM.2002.000064     Document Type: Article

References (49)

1. Nishimura, K.G. (1995) ‘Seihin sabetsuka: tayona kyoso no keitai’, (‘Product differentiation and diverse modes of competition’), in M. Uekusa, Nihon no Sangyo Soshiki: Riron to Jissho no Furontia (Industrial Organization in Japan: Frontiers in Theory and Practice), Yuhikaku, Chapter 6.
2. Porter, M.E. (1980) Competitive Strategy, Free Press.
3. Frank Knight classified uncertain events into two categories of which one is what is thought to be ‘risk’ (in which objective probability can be calculated) and the other is ‘uncertainty’ (in which there is no such probability). See [4].
4. Knight, F.H. (1921) Risk, Uncertainty, and Profits, Hart Schaffner and Marx. Our concept of ‘drastic, unexpected changes’ is close to ‘uncertainty’ in the Knightian sense. Recent studies of the Knightian uncertainty show that rational decision makers become conservative (or to put it differently, passive) in the face of the Knightian uncertainty. See, for example, [5].
5. Dow, J. and Werlang, S.R.C. (1992) ‘Uncertainty aversion, risk aversion, and the optimal choice of portfolio’, Econometrica, Vol. 50, pp.197–204.
6. Shapiro, C. and Varian, H.R. (1998) Information Rules, Harvard Business School Press.
7. Abernathy, W.J. (1978) The Productivity Dilemma, The John Hopkins University Press.
8. Nishimura, K. (2000) Nihonkeizai Sangyo no Kadai, (Current Issues of Japanese Economy and Industry), Nihon Keizai Shimbun, 25-28, 31 January, 1 February, morning edition.
9. Fujimoto, H. (2000) ‘Nihon no seizogyo, ‘koushu’ ryoron de’, (‘Japanese production industry, active and passive viewpoints’), Nihon Keizai Shimbun, morning edition, 2 May.
10. Kokuryo, J. (1999) Open Architecture Senryaku (Open Architecture Strategy), Diamond.
11. Another factor in the relative decline of the Japanese industries in the world market is the regulatory rigidity of the Japanese government. However, the analysis of this factor is beyond the scope of this paper.
12. Of course there exists an interface in all the inter-firm transactions at the distribution stages, and it is the management of this interface that is important.
13. Shioji, H. and Kelly, T.D. (1994) Jidosha Dealer no Nichibei Hikaku: ‘Keiretsu’ o Shiza to Shite, (US-Japan Comparison of Automobile Dealers: A Minute Look at the ‘Keiretsu’), Kyushu University Press, p.142.
14. Hewitt, C.M. (1956) Automobile Franchise Agreements, Richard D. Irwin Inc., p.95.
15. Shimokawa, K. (1977) Beikoku Jidosha Sangyou Keieishi Kenkyu, (Historical Research on the Business History of the American Automobile Industry) Toyo Keizai Shinposha, p.190.
16. Shimokawa, K. (1977) Beikoku Jidosha Sangyou Keieishi Kenkyu (Historical Research on the Business History of the American Automobile Industry), Toyo Keizai Shinposha, p.210.
17. As a rule, there is a lack of entry regulations to protect incumbent large stores which there is in Japan. Furthermore, in the USA there is less chance of exclusion towards the new wholesalers and retailers at the intermediate entry stages than there is in Japan. Another factor is the lesser land costs in the USA, compared to Japan, for putting up a store.
18. National automobile Dealers Association (1999) NADA Data 1999, NADA Services, http://www.nada.org
19. The following is an explanation of an Auto Mall. Cerritos Auto Square (CAS) in the south of the state of California was the grassroots of Auto Malls. Here there is a franchise of 14 dealers, 24 brands with annual sales of 48,500 vehicles. This Auto Mall was established as a result of the Regional Development Policy in Cerritos city in 1978. With an area of 330,000 m2 and a width of 300 meters, it extends for up to one kilometer. At CAS there are certain representative rules which are (1) the customers can park their cars at any of the parking lots, (2) they must not try to stop any customers who are leaving the shops. (3) force is not allowed.
20. Nikkei Sangyo Shimbun (1997) 3 Dec., p.9
21. Car Max has the following sales features: 1 Large displays of 500-1000 cars 2 One-price sales without discount negotiations 3 Search inventory through computer terminals 4 A 5-day cooling period after purchase 5 30 days guarantee period. (Yasumori, J. (1997) Jidosharyuutsu Kakumei (The Automobile Revolution) Nihon Noritsu Kyokai Management Center, p.108).
22. Based on Nishimura’s personal interview with Leeman Brothers Co., Ltd. in the USA, 2 Nov., 1999.
23. US Department of Commerce (1999) ‘The Emerging Digital Economy,’ http://www.ecommerce.gov/viewhtml.htm 1999. US Department of Commerce, ‘The Emerging Digital Economy II,’ http://www.ecommerce.gov/ede/ede2.pdf.
24. The following is such a report: ‘In the US, car sales through the internet has shown an annual increase to 300,0000 vehicles, which is about 20% of the total sales. This kind of internet purchase has accelerated the reorganisation of automobile distribution, and there are voices calling for the reduction of the 22,000-odd existing dealers within the US to about half’ (Asahi Shimbun, evening edition, 24 May, 1999).
25. Press release by J.D. Powers Asia-Pacific (1999) http://www.jdpower.co.jp/us/99int-car.html.
26. Some of the services that differ from intermediary service are ‘reverse-auction types’ and ‘direct sales type’. In reverse-auction types that are represented in the Priceline, the consumer declares the desired price and the area. Then this information is distributed to participating dealers, and price offer is solicited. The dealer that offers the minimum price gets the right to negotiate with the particular customer. In the ‘direct sales type’, there are the sites such as Cars Direct and Car Order which purchase the car stocks from independent dealers and sell them directly to the customers, or sell cars to the customers through affiliated dealers.
27. Williamson, O.E. (1975) Markets and Hierarchies, Free Press.
28. (2000) ‘Expert: Few franchise laws ban factory dealerships,’ Automotive News Archives, 31 January.
29. (2000) ‘GM moves to mend fences with dealers’, Automotive News Archives, 31 January.
30. Ford tied up with Microsoft on 20 September 1999 and declared that it would sell cars jointly at Microsoft’s site Car Point. Ford’s press release material: http://www.ford.com/default.asp?pageid=106&storyid=405
31. Based on the press release and lectures given at the conference. Richard Lee, General Manager, North America Regional e-GM Operations, General Motors, ‘The Manhattan Project of the Internet: The Explosive Transformation of General Motors into e-GM,’ Marketing on the Internet for the Year 2000, IMC Conferences, at Pasadena, CA, USA, 31 March, 2000. Morita is responsible for the summary of the press release and lectures reported in the text.
32. Mr. Fujio Cho, the President of Toyota offers the following explanation about the manufacturer’s attitude of nurturing dealers rather than of selecting them. “That the relationship with (…) dealers is nurtured over a long time of working together is an aspect of the Japanese culture”. Mr. Eiji Toyoda, the Supreme Advisor of Toyota, expresses this as a ‘culture of nurturing’. In contrast to this, the USA have a ‘culture of selection’. ‘No doubt, a ‘culture of selection’ is necessary to a certain degree, but what would happen to the dealers if we press it on them unconditionally with internet transactions such as BtoC (Business to Consumer)? We should not sever the relationship of friendly cooporation and competition with the dealers.’ (Nihon Keizai Shimbun, 13 May 2000.)
33. Jidousya Nenkan (1999) Automobile Yearbook 1999, Nikkan Jidousya Shinbunsya.
34. (1999) Jidousha Sangyo Handobukku, 2000 (Automobile Industry Handbook, 2000), Nikkan Jidousha Shimbunsha.
35. A personnel manager of one of the dealers has this to say: “The rate of over-the-counter car sales in showrooms has steadily increased, especially for the customers below 40 years of age.” (1997) Jidosha Hanbai (Automobile Sales), Nihon Jidosha Hanbai Kyokai Rengokai, Vol.35, No. 7, p.4.
36. (1997) Jidosha Hanbai (Automobile Sales), Nihon Jidosha Hanbai Kyokai Rengokai, Vol.35, No.7, pp.4.
37. The preference for door-to-door salesmanship seems to be on the decline especially with the younger generation.
38. Shimokawa, K. (2000) ‘Joho Kakumei to Jidosha Ryutsu Inobeishon (Information Revolution and Innovations in Automobile Distribution)’, Chapter 4, in K. Shimokawa and T. Iwasawa (Eds.), Joho Kakumei to Jidosha Ryutsu Inobeishon (Information Revolution and Innovations in Automobile Distribution), Bunshindo, p.78.
39. (1997) Nikkei Sangyo Shimbun, 2 December.
40. (1999) Jidosha Hanbai (Automobile Sales) Nihon Jidosha Hanbai Kyokai Rengokai, Vol. 37, No. 10, p.13. NADA public information (http://www.nada.org). This is calculated at 110 JPY per 1USD. A revenue commission is included in the Japanese dealers sales turnover and gross margin.
41. (1985) Jiduosha Hanbai (Automobile Sales) Nihon Jidousha Hanbai Kyokai Rengokai, Vol. 37, No. 10, p.13.
42. (1985) Nissan Jidousha Chosabu ed., ‘Jidousha Sangyo Handobukku, 1985 (Automobile Industry Handbook, 1985), Kinokuniya Shoten.
43. It is not that there is no move towards innovation in distribution in the Japanese automobile market. For example, the sales of used cars differ from that of new cars where there is no need for a franchise contract with the maker. Because of this, there is a higher degree of freedom for new entries and one can observe various attempts at reforms. The most representative of these innovative newcomers are ‘Aucnet’ who make use of satellite circuits between the dealers, Gulliver, which is a national chain of specialised stores buying used cars, and USS, whose activities ranges from large scale auction to retailing.
44. (2000) Biztech News, Nikkei BP, 30 May. http://biztech.nikkeibp.co.jp/wcs/show/leaf?CID=onair/biztech/inet/103274
45. As a part of the automobile assessment project by the Ministry of Transportation, the following internet site has put up the data of evaluation tests. In 1999 the tests were carried out on a total of 27 vehicles: 18 small and standard sized cars, 7 midget cars and 2 station wagons. http://www.motnet.go.jp/carinf/ass/ass-m-11.htm
46. The questionnaire survey by the Japan Automobile Distribution Research Group is used as research material for group members home page of Japan Automobile Distribution Research Group: http://www.jcdp.net
47. Regarding the involvement concept in marketing research the following author offers a detailed explanation. Laaksonen, P. (1994) Consumer Involvement: Concepts and Research, Routledge.
48. The annual sales of new cars in the US are about 17 million and, transaction costs aside, the number of transactions are far less compared to consumer goods or services (such as airline tickets). For instance if we take a very optimistic estimate that all the new cars go via the intermediaries in some form or the other, and if the commission per car is about 100US$, even then the market scale of the intermediaries would not exceed a turnover of 1.7 billion US$ per year. As we have seen in the case of Autobytel, the costs incurred through advertisement and marketing to maintain the brand name are enormous. Due to this, it is estimated that the net profit of the new car sales intermediary businesses would not amount to more than a few million dollars.
49. However, for the information providers to maintain their relationship with the manufacturers, they should take a stance that leans towards the latter, thus neutrality may be compromised and in the process they may lose the trust of the customers.