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SWOT Analysis

Team BamaZona

College of Integrative Sciences and Arts, Arizona State University

OGL355: Leading Organizational Innovation and Change

Dr. B

February 1, 2022
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Carvana SWOT Analysis

Carvana has successfully demonstrated its presence in the automotive industry.

This SWOT analysis will discuss how Carvana maintains its position as one of the

leading forces in the industry through innovating new technology and creating strategic

partnerships. Additionally, it can continue to grow in this competitive environment by

opportunities like society's desire for a hassle-free shopping experience and the

increasingly digital marketplace. This analysis will also explore Carvana's weaknesses in

fostering customer relationships and lack of target marketing; and the threats from

encountering different laws around eCommerce and the supply chain.

SWOT Analysis

SWOT stands for strengths, weaknesses, opportunities, and threats; these four

vital components are crucial when analyzing an organization because they help

decision-making. A SWOT analysis serves as a tool to complete internal and external

audits of an organization that dissect multiple points from each category. This matrix is

focused on Carvana and consists of four topics in each section that can promote action.

Strengths
● Low overhead costs
● Innovating new technology
● Streamlining the car buying
experience for consumers
● Creating strategic partnerships
Weaknesses
● Available in the US only
● Organizational structure
● Inability to continue building
customers relationships
● Lack of target marketing
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Opportunities Threats
● Environmental awareness ● Different laws around e-commerce
● Societal trends ● New competitors entering online
● Buyer want of a hassle-free car car buying/home delivery (ex:
buying experience Nissan)
● Increasing digital marketplace ● Supply Chain
● Inflation rates increasing in the
United States

Strengths

Carvana entered the automotive industry with a revolutionary way to purchase a

car. One of their main focuses when entering the industry was to rely heavily on

technology (Morgan, 2021). One of the many innovative changes Carvana made was to

have the car purchasing contracts auto-populate data. While it does not seem clever at

first glance, this simple technology has saved their customers valuable time. It turned a

process that would take hours "into a 10-minute transaction" (Morgan, 2021). In a recent

press release from Carvana, they allowed everyone to test out one of their most

revolutionary innovations, 360-degree vehicle photography (2020). These are just a

glimpse of technology innovations that Carvana has used to create a more

customer-focused car buying experience.

Carvana can cultivate partnerships to increase its name recognition and benefit the

organization financially. Recently Carvana partnered with Barrett-Jackson to provide

people with an opportunity to preview their 360-degree vehicle photography by showing

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collectible vehicles (Carvana, 2021). A presentation like this allows people who may not

have known who Carvana was to preview the technology that makes them stand out. In

August 2021, Carvana invested approximately $126 million into an exclusive partnership

with Root, Inc (Carvana, 2021). This partnership will allow Carvana customers to find

insurance options immediately after purchasing their vehicle. This partnership will help

make Carvana a one-stop shop when buying a car.

Weaknesses

The shopping experience at Carvana may be convenient, but it is not ideal for

building customer connections. According to a survey conducted by the Better Business

Bureau, 69.6% of Caravan's customer complaints are regarding their customer service

(Better Business Bureau, 2015). Customer connections are crucial for the success of a

business because they serve as opportunities to earn returning customers and organic

referrals. Caravana has focused on eliminating the dealership experience from their

brand; they have also removed the opportunity to establish a human connection that

encourages people to come back because of familiarity and comfort. Additionally,

creating a personal relationship allows customers to be more compassionate when they

have a negative experience.

Another significant weakness is Carvana's lack of target marketing. Although they

have demonstrated their success in sales, Carvana has not defined a direct audience.

Unfortunately, this affects their company because they cannot curate targeted

advertisements that appeal to the needs of a specific customer. Additionally, this leads to

investing in inefficient marketing strategies that do not attract high-quality leads.

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Referencing Carvana's 2020 annual report, Carvana cannot grow as quickly if it does not

appeal to a unique audience (Carvana, 2021). Target marketing may be the key for

Carvana to develop unique representations of its brand to stand out to its audience and

separate itself from its competitors.

Opportunities

Today's consumers desire a streamlined, hassle-free auto shopping experience.

This change in consumer demands represents itself as an opportunity for Carvana. With

the lack of differentiated options to purchase vehicles in the Automotive industry,

Caravanas' buying experience speaks directly to the consumer's needs. By identifying

these changing demands, Cavana can better align the customer experience to build on this

opportunity.

As technology advances, we see an increase in consumers making their purchases

through digital marketplaces. An article from Mediapost in 2018 stated that 91% of

vehicle shoppers used the internet. A Cox Automotive report from 2020 noted that the

average car buyer spends ten hours online researching their purchase. Being an

e-commerce platform to buy and sell cars, we see this shift in the way consumers want to

purchase goods as an opportunity for Carvana. Carvana can position itself to target this

opportunity by developing each part of the online experience with Carvana's strategic

partners.

Threats

There are many external forces to consider as possible threats against Carvana.

The first threat to Carvana is laws around e-commerce and purchasing vehicles.
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Ecommerce laws are struggling to keep up with the fast-growing market. Uniquely,

digital signatures are accepted in some places while they are not in others, which sparks

the debate about who and how the virtual market is (Wallman, 2016). If a state requires a

title paper to be physically signed, the buyer would need to discover how to sign the

necessary documents while the rest is online, adding another layer of complexity to the

process. Unfortunately, this minor inconvenience could make it less attractive to

customers and increase their time spent on each sale. When thinking on a larger scale, if

companies were doing e-commerce internationally, another set of laws and regulations

are in play for transportation and approval. However, this is not the only outside factor

Carvana may need to consider a threat.

The second threat is a struggling supply chain system. Grocery stores and

businesses are struggling to get products on their shelves. In much the same way, the

imbalance of supply and demand for vehicles, Mathew Vann from ABC noted, can affect

Carvana's ability to source vehicles and transport them (2021). The cost of a used car has

risen 40% since March of 2020, while production has decreased 23%, causing automobile

prices to go up to 100s of dollars a week (Sraders & Lambert, 2021). If the demand for

automobiles continues to stay high while the supply frequently lags, Carvana could

struggle to source and compete. In the short run, Carvana can offset some of this by

continuing to keep overhead low to buy cars that may be more expensive until the market

stabilizes.

Conclusion
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Carvana has many internal and external factors that affect its business. Their

strengths in innovation and partnerships in the e-commerce market make for a simple

way of buying in an increasingly virtual world. The online automobile market also gives

way to opportunities in customer service and targeting a specific market. The company

must leverage its strengths by preserving the customer experience and reaching the right

audience. The company should capitalize on its opportunities to bolster its shortcomings

in the saturated market to continue to grow.

Each team member must update the name to the those on the team and provide

initials, confirming and agreeing to “SWOT” stated above.

APPROVAL: (sign off with initials by 12pm AZ time 6/24/2020) - plan to submit by
1-2pm 6/24/2020

Ian Name - Alicia Roman Kadlec Name - Jessica Name - EE

Couey-Livings Garcia AAG - RRK Hurtado
- IMC jh
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References

Better Business Bureau. (2015). Carvana LLC: Complaints: Better Business Bureau®

profile. BBB. Retrieved February 2, 2022, from

https://www.bbb.org/us/az/tempe/profile/online-car-dealers/carvana-llc-1126-100

0037076/complaints

Carvana. (2021). Investor relations | Carvana. Investors.Carvana.com. Retrieved

February 2, 2022, from

https://investors.carvana.com/~/media/Files/C/Carvana-IR/documents/ar-new/CV

NA-2020-Annual-Report.pdf

Carvana. (2021). Carvana upgrades its own industry-changing virtual vehicle tour

experience with New Automotive Imaging Technology. Carvana. (2021, August

19). Retrieved February 2, 2022, from

https://investors.carvana.com/news-releases/2020/08-19-2020-140123662

Carvana. (2021). Carvana upgrades its own industry-changing virtual vehicle tour

experience with New Automotive Imaging Technology. Carvana. (2021, August

19). Retrieved February 2, 2022, from

https://investors.carvana.com/news-releases/2020/08-19-2020-140123662

Morgan, B. (2021, February 9). Disrupting the auto industry customer experience with

Carvana. Forbes. Retrieved February 2, 2022, from

https://www.forbes.com/sites/blakemorgan/2019/10/01/disrupting-the-auto-indust

ry-customer-experience-with-carvana/?sh=6990aea84391
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Sraders, A., & Lambert, L. (2021, November 1). What to expect in the 2022 used car

market. Fortune. Retrieved February 1, 2022, from

https://fortune.com/2021/11/01/used-car-prices-high-carmax-2021/

Vann, M. (2021, October 18). What’s causing America’s massive supply-chain

disruptions? ABC News. Retrieved February 1, 2022, from

https://abcnews.go.com/Politics/whats-causing-americas-massive-supply-chain-di

sruptions/story?id=80587129

Wallman, S. A. W. K. M. H. M. H. (2016, July 28). Law and Electronic Commerce: The

Next Frontier. Brookings. Retrieved February 1, 2022, from

https://www.brookings.edu/articles/law-and-electronic-commerce-the-next-frontie

r/