Business Model Generation


Exercise # 1

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  • What is a Business Model? At least 2 paragraphs.
  • According to the Business Model Generation and/or Strategic Management Concepts and Cases literature, what is a business model? (Discuss/analyze well beyond a definition). You will need at least 2 scholarly articles and subsequent write-up.
  • What role do value propositions perform in successful business models? This must be at least 2 paragraphs.
  • How does “Brainstorming New Business Models” by answering the “What If” questions impact successful businesses? This must be at least 2 paragraphs.


  • This assignment must be in a business professional format with a cover page in current APA format and must contain at least 600–800 words. This assignment must also include current APA citations and references.


Exercise # 2.


6 pages on Carmax


  1. Specific recommended strategy and long term objectives
    Explain why you chose the strategy, and discuss how much the strategy will cost to implement and how much new revenue your strategy will create. Include your action timetable agenda for accomplishing your strategy.
  2. Proposed new business model


Expert Answer


CarMax Strategy Recommendation and Proposed Business Model


Institutional Affiliations



CarMax is hailed to be the largest used car retailer in the U.S. The company was founded in 1993 as an auxiliary to the Circuit City. According to Folan, Vourman, and Rojo (2013), the company has been able to differentiate itself from the pool of competitors offering the same services by offering high-quality vehicles through a customer-oriented sales process inclusive of no-haggle pricing. According to the trio, CarMax has been traded publicly since 1997 and has served the market as a standalone company from the year 2002. While the company has specialized in late model used vehicles, the company also ventures in selling low-quality used vehicles at wholesale, older used vehicles at retail, and three new vehicles make at four of the company’s outlets. Besides the sale of new and used vehicles, the company also provides complimentary services and products such as vehicle repairs, purchase of vehicles from customers, and CarMax Auto Finance operations.

CarMax Business Strategy

While CarMax has been able to grow to over 173 stores across 39 states in America, the company still aims at expanding its growth to capture a greater market share (Folan, Vourman, & Rojo, 2013). With the e-commerce revolution that has shifted the shape of businesses and how people shop, great value has been placed on broad product lines and quick delivery. Additionally, people had thought that the auto industry might be immune to online shopping pressures due to the desire of performing a test drive before purchasing a vehicle. However, the convenience of the internet has offered an undeniable in this industry that harnesses high-pressure sales tactics. As such, the company should adopt a strategy that will shift it from a brick-and-mortar company to an omnichannel strategy. According to Rothaermel (2017), most businesses are shifting from product-driven to customer-centric approaches geared towards driving customer loyalty as well as adapting to the ever-changing customer expectations and behaviors.

The upsurge in new mobility concepts and shifting customer preferences are causing automotive retailers to rethink their current business models. With the current technology, customers can easily access and interact with information sourced across different devices and media anytime and anywhere. As such, the same needs to reflect on marketing strategies and customer experiences. Therefore, CarMax needs to give a strategic response to the current and future business needs. As Teece (2010) advice, for appropriate responses to the strategic needs to be done, CarMax needs to follow a three-stage channel of evolution based on observation of the current industrial needs. In fact, the three-stage channel evolution has been rampant in automobile retailing and used car market. As such, participants who lag behind in this revolutionary process are likely to suffer severely. As CarMax strives to be a more prominent future winner in the automobile industry, it has to drive through the third-stage revolution by:

  1. Developing a vision of the desired end-game in the distribution channels and making progress towards achieving the vision while at the same time taking care to remain consistent in the short-term and long-term functional improvement agendas.
  2. Systematically and aggressively pursuing functional improvement beyond CarMax outlets.  The most conspicuous opportunity is the cost.
  3. Build the methods through more of the downstream value can be created and captured within the automobile industry and by doing so, aim at being innovative and delivering game-changing approaches to the business.

Based on CarMax current and future needs, there is a need to establish a new generation E-commerce system that the company has been using in the second-hand car market. That includes the inclusion of a comprehensive set of business management, business information, online trading, used car auctions, online transfer of vehicle ownership, parts procurement and vehicle sales alongside other business activities (CarMax Inc, 2017). CarMax intends to innovate a new used car trading pattern as well as strengthen the cooperation within the plethora of trading patterns and simultaneously accelerate the global coverage of second-hand trading network formation. Momentarily, CarMax has been able to adopt to the current market forces through raid adoption of the used cars e-commerce system.

Action plan for CarMax

CarMax action timetable agenda is based on the actions that have been previously recommended to achieve the business goals. To achieve this strategy, the timeline and description table followed by an action plan are provided. An implementation of the strategy is prospected to better the customer service culture and at the same time raise the number of staff to increase the service delivery in the business.

Timeline Description
Where is our current business position now? Annual profit of $664.1 million, 25,110 employees and minimum vacancies filled
Where do we see it in the next six months? Training of all staff done in customer service and business profitability improving.
Where will CarMax be in the next one year? Annual profit of $730.23 million, 26,000 staff, customer service culture, and no vacancies
Where will CarMax be in the next three years? In top 10% of market share within our industry


How will CarMax get there?

Business Strategy Action plan Completion Date Person responsible
Training Train all staff on how best to offer customer service May 2019 Sales Manager
Recruitment plan Identify the required skill set for a commission recruitment agency to aid with the employment of additional staff March 2019 Human Resource Manager
Improve customer services Keep official website updated with new cars and remain current. To start in April 2019 and then ongoing ICT Manager
Increase the number of sales Customer sales manager to organize a meet up with top 30% of customers to help in the identification of mechanisms through which sales can be increased. September 2019 Customer Sales Manager
To produce a brochure for products and services March 2019 Marketing Manager
Improve cash flow to minimize costs Implement an easier payment plan for customers such as mobile money. August 2019 Finance Manager
Increase current customer base Identify regional and international selling and auction events and make reservations where necessary May 2019 Sales Manager
Perform competitor review to understand what they offer and mainly target their weaknesses in what they offer June 2019 Sales Manager
Maintain Customer Loyalty Manage complexity and trust throughout the customer lifecycle through:

·         Providing more information to customers through digital, mobile and social media.

·         Managing customer lifecycle by retaining more customers through vehicle research and aftersales services

·         Deploying customer relationship management


To commence in March 2019 and ongoing Customer Sales Manager


Why the Business Strategy?

Every business adopts a business strategy with the intention of propelling its operations to a notch higher, seizing greater opportunities, and gaining higher returns. While the automobile industry has been quite resistant to the transformation in the industry, CarMax has embraced better approaches intended to seize what the market has to offer. Further, CarMax intends to offer its customers better services centered on their needs, preferences, and taste (Baines & Lightfoot, 2013). As such, the business strategy chosen for CarMax aims at raising the odds by shaking off habits that would send off customers and instead adapt a culture aimed at creating customer loyalty and attracting more customers. The rationale for choosing this strategy is based on the fact that CarMax intends to visualize and implement revolutionary approaches to the selling of vehicles.

Another reason for choosing this strategy is the fact that the strategy is geared towards raising customer satisfaction and loyalty. According to Xujiao, Lihua, and Jing (2014), these two elements serve as the rich veins to business improvement. Mostly, many businesses have tried to bribe the channels with the intentions of improving customer services. However, CarMax intends to perform better within the sector and thus reap the benefits of higher sales, large market share, and continued customer loyalty. Further, Xujiao, Lihua, and Jing (2014) indicate that customer service in the auto industry is continually improving in terms of keeping commitments, fixing right, offering convenience delivery and pick-up where feasible. Sloppy execution is seen as the enemy to achieving such business success (Baines & Lightfoot, 2013). However, the strategy previously provided also caters for any loopholes that might hinder a swift execution thereby offering the best portfolio for achieving the company’s objectives.

Proposed new business model

CarMax current business model is comprised of used vehicles, wholesale vehicles, CarMax Auto Finance operations and other services. Based on findings by Kolar and Lindstrom (2018), a business model helps in understanding one’s business as well as that of the competitors. As such, it’s seen as a tool for analyzing CarMax as a player in the automotive industry and how it’s able to identify new value propositions. The proposed new business model is channeled at coping with the ever-evolving business environment.

CarMax Business Model

Business Model Elements
Customer Relationships Establish customer loyalty programs
Value Propositions Offer ultimate buying experiences through the following elements:

·         Focus on continued technological advancement

·         Ultimate purchasing experiences through up-to-date websites and convenient online buying platform

Marketing Channels Maintain a network of second-hand car buyers to ensure sale and after-sale services

Employ use of mobile apps for purchase and selling of second-hand cars.

Key partners IT companies

Other second hand car selling companies

Innovative partners

Revenue Streams Second hand car sales

Wholesale car sale

New car sales

CarMax Finance Operations

Service and Maintenance

Cost Structure Training for personnel

Sales and Marketing

Exploration and Innovation to offer the ultimate customer experience

Working with emerging cutting-edge technology.



Business strategy offers an opportunity where businesses can seize the available opportunities and at the same time prepare a business for the future. An omni-channel strategy offers a business an opportunity to offer a seamless customer experience (Johnson, Christensen, & Kagermann, 2008). The strategy offered to CarMax will allow the company to guarantee a consistent and seamless customer experience through mobile, stationer, virtual sales, and communication channels. As previously seen, CarMax will need to analyze its technological readiness and define the future distribution channels and technological landscape. Additionally, collaboration is a fundamental factor through which customers gain a different perspective of the business. Similarly, the proposed business model is intended to propel CarMax to its future without any challenges while at the same time remaining as a leader in the second hand vehicle sale market.





Baines, T. S., & Lightfoot, H. (2013). Made to serve: how manufacturers can compete through servitization and product service systems. Chichester, West Sussex: John Wiley & Sons.

CarMax Inc. (2017). Annual Report Fiscal Year 2017.

Folan, B., Vourman, I., & Rojo, A. (2013). CarMax Strategy Report. Bridges Consulting.

Johnson, M., Christensen, C., & Kagermann, H. (2008). Reinventing Your Business Model. Harvard Business Review, 86(12), 50-59.

Kolar, E., & Lindstrom, L. (2018). Future Business Model for OEMs in the Automotive Industry. Master’s Thesis: Chalmers University of Technology, 1-80.

Rothaermel, F. T. (2017). Strategic Management (3rd ed.). New York: McGraw Hill Education.

Xujiao, Z., Lihua, C., & Jing, L. (2014). The Development Strategies of Used Cars E-commerce. International Journal of Business and Social Science, 5(6), 161-168.





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