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Are franchised car dealers really entrepreneurs?

By Professor Jim Saker

Lord Young, David Cameron’s adviser on enterprise, visited Loughborough last month as part of a select tour of business schools. In his report ‘Growing your business’, he had emphasised the importance of the SME sector to the UK economy.  

In a discussion during his visit, I pointed out that most car dealerships came under the Government’s definition of an SME, but retail automotive didn’t feature heavily in government initiatives. Some would argue ‘scrappage’ was a key intervention, but a number of people have cynically suggested it would not have happened in Britain if it had not first started in Germany.  

     
 
 

Professor Jim Saker is director of the Centre for Automotive Management at Loughborough University’s Business School and an AM Awards judge. He has been involved in the automotive industry for more than 20 years.

 
 

The Government obviously sees the future being driven by people with an entrepreneurial drive and the capacity to take risks. The impression I get when I speak to people about this is that franchised dealers are not seen in the same light as non-franchised small businesses.

The question is whether by being a franchisee, one appears in some way protected by the franchisor and as a result is seen as less of a risk-taker and less entrepreneurial? Does the franchise system, with its manufacturer standards and control mechanisms, take the entrepreneurial spirit out of dealerships? Does being forced to conform to dealer standards actually damage a franchise network?

 

Are entrepreneurs born or made?

As a marketer, I fully understand the need to build brand equity that can be measured and recognised across a market. It is also imperative that the delivery of the brand at retail is accomplished professionally and levels of customer service need to be given high priority.

There is, however, a nagging doubt. Do the constraints imposed by manufacturers have a negative effect on enterprise and the growth of a dealership?

Much has been written on the subject of enterprise and whether entrepreneurs are born or made. One popular concept is ‘the psychodynamic model’. This suggests you are more likely to have entrepreneurial tendencies if you suffered some painful psychological inheritance. Basically, you are more likely to be a risk-taker if you have faced  trauma in your earlier life. This has been linked to the ‘social marginality model’, which suggested you were more likely to be entrepreneurial if you were marginalised in society.

For many years, I thought this type of explanation was a little odd, but having started to read business histories, it is apparent that enterprise often flourishes in persecuted or marginalised ethnic groups.

Oliver James, the psychologist and author of Britain on the Couch, suggested boys who lost their father before the age of 16 had a tendency to succeed and reach the highest levels of leadership in government and business. I first read a summary of his argument 10 years ago in a BA inflight magazine. At the time, my son was 14. As is apparent, I did not to make the ultimate sacrifice for him. If this means he is going to be less successful in life I shall have to live with the guilt.

Most entrepreneurs are driven by something inside them. As a result, they often take risks that may turn out to be reckless – many succeed only after initial failure.

 

There is a dealer-manufacturer balance to be struck

As I meet people from our sector, I see entrepreneurial flair and drive. The difficulty is the underlying tension – between the control of the manufacturer and the entrepreneurial drive of the retailer. If the manufacturer’s controls are too tight, then the dealer becomes a puppet dancing to an inappropriate tune. If the dealer takes too many risks, it damages the business and the manufacturer brand.

The irony is you need both. Over the years, I have seen the balance swing – in the good years, manufacturer standards tend to rise. But when the market falls, the manufacturer relies on entrepreneurial dealers to keep selling and often turns a blind eye to breaches of its standards.  

In the late 1990s, when we were about to launch the world’s first degrees in retail automotive management, everyone said it was academic suicide and I shouldn’t do it.

The decision coincided with my dad dying in St Thomas’s Hospital in London. I travelled down from Leicester and my mother asked if I could go to the hospital to collect his things, which I did, but forgot to take a bag. The hospital kindly gave me a Sainsbury’s plastic carrier bag.

As I walked from the ward, I pondered that my father had entered hospital as a human being but was departing as a bag of shopping. I decided to take the risk and launch the programmes.

Maybe the ‘psychodynamic model’ does not apply in all cases, but Lord Young should visit car dealers as well as business schools. I am sure he would be surprised by the number of entrepreneurs he would discover.



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Comments

  • Jon Tatnall - 30/12/2013 10:24

    I totally agree...what is the future when delaers and franchisers are not willing to take on new idea's!!! Back to basics is a phrase of which I have heard far to much, my question is basics is old fasioned and dependent on your experience will be different to another person going back to there basics.

    So take a chance with the new blood motor industry. Dinosaurs eventually became extint that is not an option we need the new breed

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  • Fred - 03/01/2014 10:16

    Those who can, do; those who can't, work for manufacturers!

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