Automotive Critical Success Factors

by Dennis Hartman; Updated September 26, 2017
Mechanic fixing engine

The automotive industry is one of the largest business sectors in America, employing thousands and creating products that affect the way people spend money in a major way. Though there are many ways for an automotive company to achieve success, every strong company in the industry must possess some key critical success factors to ensure long-term profitability.

Positive Image

One critical factor that often defines an automotive company is its public image. Because buyers entrust their safety, along with a sizable portion of their income, to a car company, the perception of the company figures greatly in the buying decision. Factors influencing an automotive company's image include advertising, word of mouth and expert reviews and opinions.

Distribution Network

A more practical critical success factor for any automotive company is a strong network for distribution. Because cars and trucks are not sold directly to customers, auto manufacturers rely on franchised dealerships to provide local showrooms. These dealers must be knowledgeable and reputable to sell cars, which is essential for the automaker. Like auto corporations, dealers are reliant on a positive image that may be influenced by, or influence in turn, the image of the automaker.

Cash Flow

A healthy cash flow is another practical critical success factor. When an automaker provides incentives or lowers prices, it almost always sells more cars, but the profit margin may not be a healthy one. At the same time, an automaker needs to keep costs under control, including line items that are prone to fluctuation such as the price of raw materials and outsourced components. Achieving a sustainable cash flow is central to the frequent discussions between automakers and employee unions.

Compliance

Automakers must also ensure that the vehicles they sell are in compliance with various federal and local regulations. These include emissions standards, fuel efficiency and safety standards. While it may cost less to produce vehicles that perform marginally in these areas, the cost of a safety recall or government-mandated repairs are often much higher and difficult to anticipate.

Flexibility

An elusive critical success factor for the automotive industry is the ability to be flexible. American car buyers may change their buying habits quickly in response to factors like the state of the economy, the price of fuel and new automotive technologies. It is essential that automakers remain attentive to these trends and keep in place a system that can adapt quickly to create new products that meet the current and near-future needs of customers.

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