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4.0 Internal Analysis

4.1 Organizational Strategy Analysis

Group 1 Automotive functions under a unified regional structure based on standardized approaches to achieve operational efficiency, industry-leading customer service, growth in regulated purchases, and geographic and brand marketing diversity. According to Group 1's chief executive officer Earl Hesterberg, "Based on a strategic review of our operations, we have reaffirmed that our used vehicle and aftersales segments are the key elements of our business model, which need to be strengthened to compete more effectively in the auto retail environment as it continues to evolve in the future“(PRNewswire, 2018).

The current peak in the new vehicle and off-lease used/new vehicle market in the U.S. and U.K. is applying pressure to the company’s margins, which is forcing the company to have to find more used vehicles and services to compensate. Parts & Service is the main functions of Group 1’s operations. “Parts & Service accounted for 12 percent of Group 1’s total revenues but represented 43 percent of the company’s consolidated gross profits in 4Q17. Totaling the company’s Parts & Service gross profit between 90 percent and 95 percent of the total company fixed costs and Parts & Service selling expenses, which affirms Group 1’s strategy to drive business into its service department with new and used vehicle sales” (Group1Automotive Inc, 2013). GP1 must continue to make strategic investments to maintain their long-term strategies in order to be affected in their operations.

4.1.1 Corporate mission.

The corporate mission for Group 1 Automotive is “In our dealerships we prioritize simplicity and efficiency so that customers receive attentive assistance and competitive pricing for our professional staff.” This mission mirrors Group 1 Automotive passion for their customers and their people as they are with their cars. The company strives to focus on its customers continuously, achieving to integrate acquisitions and flexible operating model to improve operational decisions for the market.

4.1.2 Strategy (business level and corporate level).

By analysis Group 1 Automotive, we notice that this company is implementing best-cost provider strategy which crosses with the low-cost leader strategy, by offering “Val-U-line” of cars that are older model and have higher mileage. This targets a wide variety of customers demand and allows the company to sale lower cost units that might have been sent to auctions. Then you have your luxury brand mix that has contributed the increase in Certified Pre-Owned sales by 26 percent for used vehicle retail sale. According to a recent annual report back in 2017, “the company primarily focuses on the performance of our existing dealerships to achieve growth, capture market share, and maximize the investment return to our stockholders” (Morningstar, 2017). They are always assessing opportunities to increase the overall improvement to have profitable dealerships. Therefore, best-cost provider strategy is used by GP1, to give customer more value for the money by accentuating both low cost and high cost difference. The goal is to keep costs and prices lower than those of other providers of comparable quality and features.

Group 1 Automotive is always looking for strategies to improve their overall profit for their dealership, but to achieve that they will have to prioritize these four key areas to become the best automotive retailer.

· “Sustained growth of our higher margin parts and service business” (Morningstar, 2017). The focus to expand parts and service operations can help target marketing, strategic selling, operational efficiencies, and capital investments which will sustain the growth.

· “Improvement of new and used vehicle retail margins, as well as total new and used vehicle retail profitability” (Morningstar, 2017). Striving for efficient and effective innovation and promote to enhance sales, along with having a more productive management of inventory.

· “Promotion of the customer experience and customer satisfaction, in all areas of our business” (Morningstar,2017).

· “Improvement of operating efficiencies, through further development of our operating model that promotes commonality of processes, systems and training, to further leverage of our cost base” (Morningstar, 2017). Making substantial changes in the company’s operating model from the last six years, was intended to decrease variable and fixed expenses. They remain their leverage scale, minimize costs, improve internal controls, and allowed further development.

As for the growing health of the company, it will continue to grow if they continue to manage costs cautiously and look for more opportunities to improve procedures and distribute the best strategies. Focusing on their geographically diverse growth in areas with great economic outlook for long-term and improving their current dealership portfolio by strategic acquisitions, GP1 can improve tremendously. With all this being said, “Group 1 expects the Val-U-Line brand to capitalize on the Company's scale, provide incremental volume and grow to represent 10 percent of the Company's used car business. As part of this initiative, the Company has significantly enhanced the used vehicle compensation structure and opportunities for its sales associates” (PRNewswire, 2018).

4.1.3 Organizational culture and core values.

Each day, Group 1 Associates strive to achieve success through our Core Values of Integrity , Transparency , Professionalism and Teamwork . They show qualities of integrity to conduct selves with the highest level of ethics both personally and professionally when selling to and perform service for customers without compromising their honesty. They believe in being transparent, to promote open and honest communication between each other and the customers. They strive for professionalism, to set GP1 standards high so that expectations are exceeded and strive for perfection in everything that is being done. Lastly, they believe in teamwork, by putting the interest of the group first, before GP1 individual interests, because success only comes when working together.

4.1.4 Leadership.

Earl J. Hesterberg Jr. has been the CEO and president for Group 1 since April 2005. Mr. Hesterberg did an interview back in 2008 with Chron Newspaper, on giving advice to Obama to focus on the economy and mending our relationships with foreign countries. Hesterberg feels that, “We need to be more collaborative in global economy, and he (Obama) has a chance to set that tone very early in his administration. That there’s still overwhelming proof that free markets work best. (Houston Chron, 2008). Earl showed a few of GP1 core values throughout this interview and that was him showing integrity while being transparent but stayed professional throughout the whole interview.

4.2 Financial Analysis

Financial ratios are evaluated in financial reports (income statements and balance sheets) to analysis the financial health of a company. This can establish comparisons for a duration over time or a relation to other data in the report. I will be comparing Group 1 Automotive, Inc. (GPI) stock to Rush Enterprises, Inc. (RUSHB) stock and Agilent Technologies, Inc. (ABG) stock to see the growth comparison within the recent five years ending in 2018. On the site amigobull.com and finance.yahoo.com, financial data has been collected for the ratios.

4.2.1 Valuation Analysis

Valuation analysis is the financial process of determining what a company is worth. Gives an insight of a company’s share price that can analysis investment potential. Appendix A illustrates that GPI PE ratio had the strongest growth until July 2016, then RUSHB PE ratio took over and increased tremendously. As for ABG PE ratio, it stayed constant from Jan 2016 to Jan 2019.

4.2.2 Growth Analysis

Growth analysis is the financial process of evaluating the company’s revenue, earnings, dividends of a company. It shows the real revenue change impacts a company over all operations. In Appendix B & C, over the 5-year period Group 1 Automotive revenue in 2018 was at its highest of $11.6B. In the latest quarter, GPI revenue 2018-Q4 has changed from 2.89B to 2.91B indicating a rise of 0.68%.

4.2.3 Profitability Analysis

Profitability analysis can evaluate the ability of how a company generates income during a specific period. In Appendix D, Group 1 Automotive Net Income: Group 1 Automotive, Inc. saw a decline of net income by 11.67% from 2018-Q3 to 2018-Q4. The net profit is found by eliminating the COGS, expenses, and taxes from the total income of the firm. The overall net income is constantly determined for a given accounting period.

4.3 Value Chain Analysis

Value Chain analyzes a company visually and evaluates its business activities to see how the company could implement competitive advantages for itself. Group 1 Automotive is an International Fortunate 500 automotive retailer and a leading operator in the automotive retail industry. Group 1 has grown to become the third largest dealer group, right behind AutoNation and Penske. The company prospered in leveraging its management experience to point out geographic and brand diversity, interrelated revenue streams, operational efficiency, and prudent capital allocation strategies. Through dealers, the company sells new and used and light trucks, finances related vehicles, sells service contracts, provides maintenance and repair services, and sell automotive parts.

The automotive value chain is known to be one of the largest connected markets in the US economy. The automotive value chain is defined as the cumulative value produced by parts, materials and businesses that sell light vehicles to consumers, businesses, governments annually, and services and aftermarket products purchases by individuals and businesses each year. This is how the Accenture manage and maintain small cars in the US.

4.3.1 Support activities

4.3.1.1 Structure

With Group 1, the auto department offers a wide range of customer driven vehicles. The company uses a variety of tools including an experienced sales team and an amazing software. The program is aware of whether the program is in line with the main dealership of the vehicle or whether it may be needed in another one store. This will help “inform the dealers about the real-time auction prices, you can accurately determine the vehicle’s price” (Group1 Automotive, 2018). The software will help increase the closing sale and support and manage the shares of used vehicles, along with avoiding wholesale loss during retail gain.

4.3.2 Primary Activities.

The exchange rates of the countries in which Group 1 Automotive Inc. operates affects the probability of Group 1 Motor companies, especially when Group 1 Motor companies are engaged in international trade. Currency stability is also important for international investors. The social factors that affect Group 1 auto companies directly reflect the society in which Group 1 auto companies operate, and the cultures, beliefs, values and values that most populations can have as a community it covers. The influence of social factors is important not only in the operation of Group 1 automobile companies but also education, and their conviction to social or social class can help design products and marketing information that makes venture capital a success. Demographics of the population mean of age and gender, also has a great influence whether the product can be sold to them.

Appendix A

Appendix B

Appendix C

Appendix D

WORK CITED