Burns Auto Corporation
Besides the main objective of earning the optimal amount of revenues for its shareholders, a business must also make sure that it keeps its cost of operating at a minimum level. By reducing its costs, and maintaining or increasing the amount of revenues, the business increases its net profit. Increased profits also result in a higher value of the business to potential investors.
Situation Background (Step 1)
Burns Auto Corporation, owned by Thomas Burns, consists of twenty-five new car dealerships selling cars produced by foreign automakers. The corporation has ...view middle of the document...
The decision of Thomas Burns to adopt a "turn and earn" approach has created certain issues for the corporation. Some of the issues created by the decision include the implementation of the new approach at all of the dealerships, the costs to hire a consultant, disagreements among the management team, and the Richard Settle's reservations about working with the consultant hired by Thomas Burns.
The first issue deals with the implementation of the new "turn and earn" approach. With the new approach, it is important that dealerships not underestimate demand and have too little supply, because their ability to acquire additional inventory depends on the number of cars they sell. On the other hand, ordering too many cars will result in excess inventories and hurt the dealerships' profits due to the costs of carrying excess inventories. The implementation process of the new "turn and earn" approach will take a long time to successfully implement in all twenty-five dealerships. If careful planning is not done, the cost to implement the approach will increase tremendously and it may even result in a failure of implementation at certain dealerships. Thomas Burns and his team have to plan everything in advance and create backup plans for any contingencies that they may encounter during the implementation process.
The second issue facing Burns Auto is the cost to hire a consultant. Thomas Burns finds it necessary to get the help of a consultant with the implementation process. The issue regarding the hiring of a consultant is the cost. Thomas Burns has hired a consultant who is going to charge $50,000 to provide his services to Burns Auto.
Another issue faced by Burn Auto is the disagreements among some of the management team members. Although they agree with Thomas Burn's decision to hire the outside consultant, Lisa Hopkins, Corporate Vice President of Burns Auto, and Mary Peterson, the Associate Vice President and Marketing Director of Auto Burns, have both suggested that a different statistical model be created for each dealership instead of creating one statistical model for the entire corporation as a whole. Both Lisa and Mary feel that the dealerships would be closest to their environments and would have a better idea about the economic factors in their environments.
The fourth issue facing Burns Auto regards the resistance of Richard Settle to work with the new consultant. Richard has been working with different consultant in the past and does not find it necessary to hire another consultant. Richard had stated to Thomas Burns that the problem could be fixed within the...