Information Technology and Automobile Distribution: A Comparative Study of Japan and the United States

Automobile distribution has undergone a drastic change in recent years both in Japan and the United States, because of so-called "market globalization" and "digital/network revolution." The purpose of this paper is to provide an analytic framework of this change and to apply it to Japan and the United Sates to foresee differences in future development. We argue that the firm's strategic positions can be summarized in the three dimensional "strategic-pattern" space: (1) whether the firm is prone to "combinatorial optimization" or "process-oriented optimization", (2) whether the firm's products are based on "modular architecture" or "integral architecture", and (3) whether the firm adopts "horizontal-dominance strategy" or "vertical enclosure strategy". We then characterize recent developments in the US and Japanese car markets as a result of car manufacturers' and dealers' adaptation to global competition and information technology. We identify three typical combination of strategic patterns: (1) "dealer consolidations by manufacturers", (2) "dealer consolidations by retailers", and (3) "informediaries' initiative". We examine advantages and disadvantages among the three strategic patterns. We argue that, while three strategic patterns are likely to coexist in the near future in the United States because of strong regulatory restrictions (dealer protection laws), manufacturer-driven changes are more likely in Japan.