The role of manufacturer incentives as control mechanisms within the automotive industry of South Africa

The automotive industry, one of the main contributors to the South Africaneconomy, has become a complex and competitive sector. Marketcompetition has resulted in an environment in which automotivemanufacturers and retailers have become increasingly competitive tosurvive in a captive market space and have implemented various controlmechanisms in the dealer network to ensure sales optimisation andmarket share retention. The automotive industry in South Africa is under continuous economicpressure and has to meet the challenge of changes in the automotiveretail landscape. The dealer networks of the different brands representedin South Africa must evolve to deal with the management challenges theyface in terms of market share retention of the particular brand theyrepresent, as well as dealer profitability. A retail organisations success normally depends on a number ofoperational decisions that management must make on a daily basis.Moreover, these decisions affect the businesss profitability and strategicplacement in the market. The study investigates the impact of automotive industry controlmechanisms, notably the use of incentive models, in the context of theSouth African automotive industry. This investigation was done by means of a quantitative approach, analysing public data. The purpose was also toassist the retail environment with a strategic approach with specialreference to creating an independent retail environment. The research has indicated that there is evidence that OEMs do attempt tocontrol or affect profitability, market share and operational behaviour byusing incentives, and that this does have a financial impact on the differentbrands reviewed. The control mechanism of additional sales incentivesoffered by the OEMs is intended to stimulate or drive the market. There isa clear indication from the trend analysis that this strategy may have along-term negative impact on the retail environment. The respectivebrands should change their approach to the day-to-day operationalmanagement of their individual dealers. Copyright © 2009 University of Pretoria. All rights reserved. The copyright in this work vests in the University of Pretoria. No part of this work may be reproduced or transmitted in any form or by any means, without the prior written permission of the University of Pretoria. Please cite as follows: Fischer, A 2009, The role of manufacturer incentives as control mechanisms within the automotive industry of South Africa, MBA dissertation, University of Pretoria, Pretoria, viewed yymmdd < http://upetd.up.ac.za/thesis/available/etd-04072010-160713/ > G10/304/ag