Full Annual Report - Inchcape

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Business review Strategy Group Chief Executive’s strategic review continued Resilient business model We operate scale retail and distribution businesses in 26 markets across the world and are a leader in 14 of these. Our core brand partners, with whom we have longstanding relationships, have a history of outperforming the market.Inchcape’s global scale of operation is unique in our industry. Our business model is further strengthened by the Group’s broad geographic spread, which embraces developed markets (like Australia,the UK and other western European countries together with powerful Asian centres like Hong Kong and Singapore), and emerging markets (such as Russia, China and other central and eastern European states) and is unequalled. Our diversity has spread risk, as decline in some markets has been balanced by strength in others. It also gives us a vital presence in those emerging markets where sales potential is highest and which,in the fullness of time, we believe will deliver the best returns thanks to our efficient retail footprint. We also match the demands and opportunities in each territory with the appropriate channel strategy. In small to medium sized markets, we predominantly operate as country distributors, where we become the custodian of brands like Toyota, Lexus and Subaru to manage every step of the journey between the factory and the end customer. This demands our deep involvement with our brand partners, as well as developing local brand, marketing and sales strategies, finance products, aftersales servicing, parts and accessories, plus managing sales via a mix of Inchcape-owned retail centres and third-party independent dealerships. In larger markets like the UK and Russia, manufacturers use their own national sales companies to distribute and appoint independent dealers. In these markets, we operate a retail service that is increasingly focused on bigger, better sites that deliver an enhanced customer experience and provide scale volume for our sales and aftersales activities, including servicing, parts and accessories. In the city state markets of Hong Kong and Singapore and a number of central European states, we operate a ‘vertically integrated retail’ (VIR) model where we are both the distributor and the exclusive retailer, enabling us to deliver heightened efficiencies and strong margins through our management of the entire value chain. Inchcape has a mix of growth and defensive value drivers, which gives the Group a diversity of revenue streams. Our growth drivers are new and used vehicle sales together with associated finance and insurance products, which are particularly important to facilitate the sales process. Defensive drivers are our resilient parts and aftersales servicing businesses, which in 2009 represented approximately 50% of our Group gross margin. We are in close partnership with many of the best known and most respected automotive brands in the world.These are strong, innovative brands that outperform and lead the market based on years of investment, to create deep customer relationships through constant technological advance and continuous improvement. 1 Resilient business model Our business model enables growth, spreads risk,and delivers resilience. It is fundamental to our position as a global leader. 12 Inchcape plc ¦ Annual Report and Accounts 2009
The Inchcape business model Section One Business review Our defensive drivers become increasingly important in times of economic difficulty Defensive drivers • Growth and defensive value drivers • Diversified multi-channel business model Vehicle Service sales Retail Distribution Parts Finance and insurance • Broad geographic spread • Strong brand partnerships Growth drivers Our growth drivers give us opportunities to drive our business forward Growth and defensive value drivers Vehicle sales As fewer, better retail centres drive efficiencies, our scale operations present the best performing manufacturer brands with superior operating and customer facing processes. Finance and insurance products While credit has been harder for customers to arrange during the downturn, our ability to organise finance has supported sales, reassured customers and provided income. Service Strong customer relationships, a high level of customer service, trained technicians and hi-tech resources give us a source of competitive advantage. Parts Ensuring customers have immediate access to genuine spare parts from our manufacturer brand partners both strengthens relationships along the value chain and provides a resilient source of revenue. Strong brand partners We are proud of our portfolio of winning brands which outperform and lead the market. Our long-standing relationships with the world’s leading manufacturers have created strong partnerships at both a national and international level. Broad geographic spread We have scale positions across 26 developed and emerging markets.We benefit from a decentralised organisational model which enables us to stay close to changes in the marketplace and react quickly to flex our operational focus. Multi channel business Distribution In markets where Inchcape is the distributor,we effectively become the custodian of the manufacturer’s brands, handling every aspect of their operation as the national sales and marketing company. Retail As a retailer,Inchcape’s strategy is to have scale operations on a regional basis with premium brands and to leverage the benefits of diversified income streams. Vertically integrated retail (VIR) In city state markets,where we are both the exclusive distributor and the exclusive retailer,we deliver a seamless brand experience and drive superior returns,leveraging our scale position with leading market shares. www.inchcape.com 13
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Section Four Shareholder informatio
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Full Annual Report - Inchcape

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