621 discussion

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Business Finance

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Please read the case and answer the following questions.

  1. How strong does the resistance to the new business model at Destination appear to be?
  2. What advice can you offer Doreen for overcoming the resistance to change?
  3. What is your opinion of the potential effectiveness of “The no-hassle Destination” business model? Explain your reasoning

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Doreen is the CEO of Car Destination Inc., a sllperdealership that sells lte\v cars. SUVs. and pickup trucks from five different tnatrttfactttrers. and also lras a large used-car lot. Car Destination has been profitable over the years. even eking out a profit dr-rring trvo different business recessions. Yet Doreen has the nagging thought that Destination is slippin-q a little behind the times. In talking r'vith an oLrtside advisor, Doreen said, "The vehicle-sales busiuess is changing rnore rapidly than u'e are cltanging. Fer,ver coltslllrers are ittfluenced as nlttch as they rvere it.t the past by the sales representative. hrstead. they ferret out ittfonlatiotl on the lnternet otr rvhat they think the price of a vehicle shoLrld be. Also, they shop online to find the lor'vest possible price for rvhat thel' rvant. When they arrive at tlie dealership, they even knor.v rvhat accessories and features they rvant, so they are less iufluenced by rvhat ollr reps have to sa1'. Atrother' problern is that a greater ttlttrrber of cttstotnet's r.vho do corne to the dealership to purchase a car or trucli don't rvant to haggle r'vith the rep." Based on these concents, pltts some discussious rvith Melody, the rtsed-cat' sales tnanager, offered her opirriou: "Doreen. u'ith dtte respect to the rvisdonl of our CEO, 'The tto-hassle Destiuation' nlay not rvork here. Maybe rve could act like CarMax sales associates-we hire a bunch of good-looking sales reps. dress thetn irr khakis and polo shirls. and teach thetn to keep a smile on theil faces all the time. But rvhett our clieutele comes to Destination to purcltase a used car, they like to negotiate. I love tlte look ott the face of a customer rvho has just beert girren a discount. Buying a used car or truck is a sporl. It's not like purchasirtg a six-pack of beer." (The group laughs loLrdly at the beer analogy.) Sarn, the ner.v-velticle sales tratrager, said r'vitlt a concerned erpressiot.t, "Doreett, I think tlte busittess model vou propose probably u,orks rvell in some situations' think this through quite carefully. Our best reps are tnaking a ton of molley. If yoLr put them on a fixed and modest salary, ottr stars uould leal'e for the courpetition. A fixed salarl is probabll' okay for the CarMax associate, but I think experienced pros tnuclt prefer Bnt r.r,e shoLrld commissiou sales." Kaleb, the director of finattce. offered a suggestion: to cltange a ferv autotlobile execLrtives, Doreen decides I say let us r'vait a bit before introdLrcing this "Doreen, the business trodel at Destination. The uerv bttsitless need to stLrdy the potential impact of the neu' We model she rvants to introduce to her managelrlellt staff model. and to sales represetttatives requires that sales represell- business rlodel on ollr profitability. We are a consistatives no longer rvork otr commissiort. They rvill norv tentll, profitable sLrper-dealership. A key factor is that the salaries \\'e pay sales reps are quite lor'v because thel' be salaried associates r.r,ho try to satisfy the needs of custorners. Furthennore. Destirtation ri'i1l norv offer fixed eam so n.tuch on commissiou. This helps lorver our fixed sticker prices on all treu, and used vehicles. No rtlore costs. We coLrld wind up rvitli a handful of sales associnegotiating u,ith cltstotners about pl'ice. Dol'een calls a ates rvho produce very little in relation to their salan' meeting for the fbllorving Monday' mornittg lvith all of and benefits." Feeling frr-rstrated. Doreetr said, "Let's breali for nou' her rnanagers and trvo of tlte senior sales represelttatives to discuss tlte neu, bttsiness model. She labels the trer'r' and return to this discltssiott totnorrorv mortting. You fblks don't seeur readl' quite y'et to shift to 'The tromoclel "The no-hassle Destittatiotl." Doreen describes the new business model. ltsin-e a hassle Destination."'As she gathered her trotes. Doreetr PorverPoint presentation to sllppoft her talk. She speaks thought. "For the nerv ntodel to rvork rvell, I r'vill have to for I 5 rninutes lvithout accepting conlmellts ol qtLestiotts. change sorne of these negative attitudes." but she does notice a ferv grimaces and atxiotls expl'es- Case Questions sions or.r the faces of the Destinatiou staff. Doreetr finally Horv strong does the resistatlce to the tterv busiuess 1. says, "Okay gang, l've talked enouglt for tlou,'. Let me model at Destination aPpear to be? knor,v rvltat you think of our ner'v bttsiuess model'" 2. What ac[r,ice calt yotl offer Doreen for overcoming Torty'. a veteran sales representative, speaks first: the resistance to chatrge? "Dol'eell, it's good to knorv that our CEO is Lrp-to-date What is your opinion of the poterttial effectiveness 3. ou tlte automotive sales business. But Satttrtl tried rvhat "The no-hassle Destinatiott" bttsiness model'l of you are talking abottt. The comparly lost tons of lnolley, reasotting. Explain,vout' and finally was eliminated by GM. The sales reps did everythirrg but hug and kiss the cttstomers rvho drove offthe lot r.vith a new Satttrn." (The people present laLrgh nervously'.) Part 4 The Organizational System and the Global Environment
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621 DISCUSSIONS

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Question 1
The resistance to the new business model at Destination appears to be strong. There are a
number of factors that depict this. The first is the aura as Doreen, the CEO gives the talk. The
aura appears reluctant towards the ideas as they express grimaces and anxious expressions. The
second indication is when Tony, the veteran sales repre...


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