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Include a visual representation, such...
Include a visual representation, such as graphs or diagrams of Milestones 2 and 3 to support your recommendations.
Submitted: 8 years ago.Category: Business and Finance Homework
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Answered in 12 hours by:
6/29/2010
Business Tutor: amandaredwine,
 replied 8 years ago
amandaredwine
Category: Business and Finance Homework
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AmandaRedwine :

Happy to do it. Just post the milestones either here or on mediafox or someplace like that where I can get to them. When is is due?

Customer:

Monday is the due date.

Customer:

Milestone 2:

Customer:

Business Recommendation: Milestone 2


Let's imagine three different economic scenarios, including a general improvement of the economy in the areas where Big Drive Auto operates, one where the general economy worsens and a third where the general economy stays about the same, but the cost of gasoline changes dramatically upwards.


In the event that the general economy improves dramatically, people will have more disposable income and are more likely to replace their vehicles more often. Big Auto will see a spike in new vehicle sales, probably also a rise in the sales of slightly used vehicles, and lower overall service revenue. Big Auto's pricing strategy should change to increase margins on vehicle purchases to capture this increase in demand. In the short run, vehicle production will not keep up with the increase in demand, presenting a short opportunity to sell above invoice prices. Over the longer term, though, production of new vehicles will match demand and prices should level out.


In the event that the general economy deteriorates, demand for vehicle purchases will fall quickly and demand for service will climb as customers seek to keep their vehicles longer under the "any month without a car payment is a good month" theory. Big Auto will want to watch its inventory closely to ensure that it does not over order and may also want to change the mix of vehicles to carry more used vehicles at an overall lower price point. This does not necessarily mean less margin, as used vehicles often sell at higher margins than new ones.


Finally, in the event that the cost of gasoline spikes for more than a short period of time, the overall mix of products customers want to purchase will change dramatically. Even relatively short term changes in the price of gasoline can drive customer behaviors. Clearly, Big Auto will want to balance its mix of inventory carefully to capture these shifts in buying preferences, and to more gas efficient models.


Recommended Course of Action


A company’s course of action is depended upon the current business cycle. It is important for Big Drive Auto to understand the current economic condition. At a time of recession, Big Drive Auto will need to make price changes as to what their auto’s sell for based on the changes in demand and the cost of materials. Regardless of the business cycle, Big Drive’s best defense is to remain innovative and up to date with technology. “Technological innovations can have an acute impact on business cycles. Indeed, technological breakthroughs in communication, transportation, manufacturing, and other operational areas can have a ripple effect throughout an industry or an economy”. The key to remain relevant in business is to be flexible, plan for the whatever the future may bring, pay close attention to what your customers want, remain objective, and studying its economic environment


Appropriate Course


With the decline in income and employment Big Drive auto will have a hard time selling cars. Big Drive Auto should take a different approach in selling cars. BDA should lower interest rates and make financing cars inexpensive for consumers. Higher interest rates clearly work to make the financing of a car more expensive; the opportunity cost of capital is higher, and as a result that slows down purchases (Zimmerman). With the high gas prices consumer no longer can afford to purchase trucks and SUV’s. Consumers will want to purchase more economical cars to save on gas. The decline has been associated with an oil shock, which also has relative price effect on autos, since autos use oil intensively (Zimmerman).


Big Drive auto would be more productive selling car parts and providing car service to customers. BDA has to realize that consumers are willing to keep their cars in good working conditions rather than spending more money to purchase a new car. This approach will keep BDA in business.


Conclusion


Team C’s final recommendations to the executive leadership team at Big Drive Auto will consist of a new go to market strategy. This new strategy will be defined on a new flexible approach based on potential changes in economic conditions. The conditions examined were economic expansion, economic contraction and status quo.

Customer:

Milestone 3:

Customer:

Business Recommendation Milestone 3


Team C has continued their consultancy work for Big Drive Auto. As Big Drive develops the future business strategy of the company, Team C has provided an analysis of business conditions based on history as a guide to future impacts. Team C has looked at future credit markets, future global conditions and finally overall alternative economic conditions. The group has developed specific action items that Big Drive should undertake to make the company more successful.


Business Recommendations Based on Economic Projections


Big Drive Auto must base its business decisions based on different economic factors that will affect its national growth potential. Big Drive executives will need to take into account the relationships between income and consumption, saving, interest rate and investment, and changes in consumer spending. “Corporations reap several benefits from taking the trouble and incurring the expense of employing alternative economic scenarios. Diverse projections encourage management to look beyond the present to the future and enhance awareness of the economic and other uncertain interrelated environments in which the organization operates”. (findarticles.com)


Evaluating consumer consumption and savings can provide Big Drive Auto with information that will allow them to make predictions within their markets as well as future markets they wish to develop. The interest rate investment relationship decisions are made based on marginal benefit and marginal costs. It will be very important for Big Drive to consider the consumer’s needs to modify their strategy to remain competitive in domestic markets.


Recommendations Based on Future Global Forecasts


Big Auto has one main thing going for it - transporting automobiles over long distances is costly and inefficient, so in terms of competition for repair services, it only has to consider the local competitive market. However, in terms of selling parts or add-on components to vehicles, like after-market accessories, Big Auto will need to maintain an internet presence and will need to monitor competitive pressures from virtual competition.


Alternative Economic Future Recommendations


Further, the advent of the Internet has completely changed the auto purchasing decision process, allowing the customer to have a great deal more transparency into the transaction and to be able to rapidly compare prices on comparable vehicles in many markets. In the past, the customer had to physically drive from lot to lot to compare vehicles - today the customer does not need to visit the lots to gather that information quickly and efficiently. This will add a great deal of price pressure - to the extent that the customer can buy a comparable vehicle at the same price including freight, they will likely be willing to do so if there is a perceived advantage (included warranties or other special add-ons).


 


Appropriate Course Based on the Projected Credit Markets


Companies are aggressively borrowing in the debt markets once again—a sign of renewed confidence in the world economy following recent fears that struggling countries could have difficulty financing their budget deficits (ANEIRO, 2010). While the sales are a boon for larger companies, data shows that their smaller counterparts are still struggling to find funding. Small businesses typically rely on banks for financing (ANEIRO, 2010). With this in mind Big Drive Auto will have a difficult time to receive credit from a banking institution for themselves or their customers. It will be important that Big Drive Auto has outstanding credit to prove itself worthy of a line of credit from the banking industry. Big Drive Auto would have to do extensive credit report for their customers. This could keep Big Drive Auto from offering credit to customers with poor credit ratings. However, with the credit market on the rise it could be good news for Big Drive Auto and it’s customer that they have loaned money to.


Conclusion


Big Drive Auto has a potentially bright future ahead. The company has placed itself in a position to take advantage of changes in consumer spending habits brought on by changes in investment vs. consumption spending. Secondly, Big Drive has adjusted their plans based on global forecast changes and how consumers look for the most efficient method of service delivery. That will cause Big Drive to be more efficient. Finally, changes in the credit markets and understanding the hesitancy of banks to extend financing based on new calculations of credit worthiness will cause Big Drive to examine opportunity costs carefully when purchasing inventory.


References


ANEIRO, M. (2010, March 11). Credit Market Springs to Life. The Wall Street Journal , p. 1.


 


http://findarticles.com/p/articles/mi_m1094/is_n2_v24/ai_7544055/pg_2/?tag=content;col1; Retrieved June 25, 2010


 

AmandaRedwine :

Got it. What exactly are we waiting for the prof to post for the exam?

Customer:

The actual exam, but that is separate from the above, so its two things you will be doing for me. When I get the exam I will post it here and we have 3 hours to complete it. see my issue/

AmandaRedwine :

Ok...so let's talk about the first assignment, which is this milestone assignment. What is the actual assignment? Write recommendations for each milestone?

AmandaRedwine :

Ok, so do you want to do the exam Monday or do you think he'll post it earlier?

Customer:

1st assignment: Is the milestone: I need recommendation and you need to include visual representation on those recommendations.

AmandaRedwine :

For milestone 2 or 3 separately? 750 words each?

Customer:

No, about 200 words each and then the visual

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