Identification of best practices: a study of passenger car dealers in India

Abstract

Automobile manufacturers and car dealers entering fast growing, emerging markets often face several crucial decisions. A key question in this context is: what are the characteristics of an efficient dealer? In this paper, we identify best practices in dealer management in the Indian automobile industry. The research is based on a survey among dealers and manufacturers in India. We link dealer strategies to dealer performance, using Data Envelopment Analysis as a technique where elements of dealer strategy are treated as inputs, and performance parameters as outputs. Efficient dealers were identified based on this model. Three patterns or configurations of efficient dealers emerged: the laissez faire, where manufacturers leave dealers to function independently with minimum regulation or control, market leaders with high investments in facilities who are associated with high sales, and agile dealers with relatively low sales, low investments and high levels of training. Using regression, we also identified important factors that seem to lead to better performance. These factors were investments in sales and after sales facilities, dealer training, dealer expenditure on advertising and promotions, and dealer participation in decision making. The results also indicate that there is a need to benchmark distribution practices to help dealers improve their performance.