Chip Davis has been running his car dealership business successfully for five ye
ID: 330251 • Letter: C
Question
Chip Davis has been running his car dealership business successfully for five years. This year, he started to suffer losses because some of his customers have defaulted on their payments. At the end of the third quarter of the year, the defaulters have increased and the losses have intensified so much that he decides to do something about it.
A consultant suggests that he offer a 5% discount for immediate payment, but Davis is not sure if that will solve the problem. He also wonders how much this discount will cost him in the end.
Davis' friend suggests to him that the offered discounts would be a bad idea because he knows of another business setup that used the discount policy, which ended in disaster. The company lost 5% of its revenue on those who would have paid promptly anyway, and those who did not intend to pay on time simply did not pay. This friend suggests decreasing the monthly installment but increasing the number of installments.
Davis also consulted his uncle, who has run several successful businesses, on this matter; the uncle suggests offering a 5% discount upfront on advance payments and this would give customers more incentive to pay. In addition, he suggests adding a penalty on defaulters who are behind on their payments by more than 30 days. If the defaulters do not pay within an additional 30 days, they could then be referred to a collection agency.
Based on the above scenario, provide your analysis in the following areas:
1. A critical analysis of the advice given by the consultant, Davis' friend, and Davis' uncle. Of the three, which one can assist Davis with his decision on how to collect the payments? Why?
2. An explanation of the relevant aspects of the advice given by the consultant, Davis' friend, and Davis' uncle.
3. An evaluation of the judgments, assumptions, pros, and cons for each piece of advice.
4. An assessment of the type of bias that applies to this scenario.
5. Propose at least two alternatives for Davis, with clear descriptions of their relative advantages as well as disadvantages.
6. An explanation of the impact of emotions—in terms of helping or hindering the ability to make rational decisions—while making a decision.
7. An analysis of at least two factors each that should be most important to Davis' for making a decision.
Explanation / Answer
1. A critical analysis of the advice given by the consultant, Davis' friend, and Davis' uncle. Of the three, which one can assist Davis with his decision on how to collect the payments? Why?
In my opinion David's friends advice can assist Davis to collect the payments. By decreasing the installment amount and increasing the number of installments can help Davis to collect the payments. By implementing this with additional options offering the customers the different installment schemes which is now a days followed in online purchase, the customers can choose the one installmet scheme which is most suitable for them to pay regularly and comfortably.
2. An explanation of the relevant aspects of the advice given by the consultant, Davis' friend, and Davis' uncle.
Advice by a Consultant: 5% discount for immediate payment.
As Davis friend said, this will not give much improvement in collecting dues. Because the immediate payers only get benefit out of it. The non payers wont react to these offers because they were under the situation that they were not able to pay. Only 5% is a smaal difference for those nonpayers.
Advice by Davi's friend : Decrease the amount of installment and increase number of installements:
By paying small amount every installment is not a big burden for the customers and they can pay the due for over a long period. Davis also can collect all his unpaid amount at the end of the period.
Advice by Davis Uncle: 5% advance amount + Penalty on defaulters + Collection agency
David has to collect advance amount 5% and incase of default in any payment may lead to penalty upto 30 days time period. If it continues collection agency will collect the payment with different formalities. In odder to collect the due amount Davis can also implement the advise given by his uncle. Advance amount may help him to collect certain billing amount so that he can somewhat run his business. Imposing penalty also helpful to Davis that the extra amount on billing and most of the falters pay the amount on date to avoid penalty. Consultants approach will be mostly avoded by the customers so that the defaulters pay the billing at time.
3. An evaluation of the judgments, assumptions, pros, and cons for each piece of advice.
Won't help Davis to collect all dues.
Not a good idea.
Best idea to collect dues from customers.
Non payers wont pay at any cause.
This wont attract the defaulters.
Attract the customers to pay at minimum installements.
Attracts new customers.
Will not affect the relationships between Davis and his customers.
Framing strict rules and policies to collect nonpayments.
Customers accepts the conditions before the service itself.
Giving different options for and more time to pay.
5% discount at earlier payment attracts the customers to pay earlier.
Davis may get chance to collect earlier payments from most of the customers.
Decreasing the amount of installments is very helpful for Davis to attract customers for accepting the services.
Builds good relationship between Davis business and his customers.
Regular payments is possible.
Attracts new customers.
Helpful to remind the customers at different times.
Customer aware about the payments, penaluty & consultant approach.
Helpful in collecting good rate of nonpayment amounts.
Davis may suffer from offering 5% discount. It ends with loss for his business over a period of time.
It wont attract the non payers at ant cause. For non payers 5% discount is a small amount so they wont react to it.
Still there may be chance for the non payment of installments.
Affects the smooth runing of Davis business.
Affects the relationship between Davis business and customers.
Involves more expenses during the procedures.
Followup procedure is difficult.
4. An assessment of the type of bias that applies to this scenario:
*In this solution CORNS explained in the table are the bias to this scenario.
PARTICULARS CONSULTANT ADVICE FRIEND'S ADVICE UNCLE'S ADVICE JUDGEMENTSWon't help Davis to collect all dues.
Not a good idea.
Best idea to collect dues from customers.
Good idea but very careful implementation requires. ASSUMPTIONSNon payers wont pay at any cause.
This wont attract the defaulters.
Attract the customers to pay at minimum installements.
Attracts new customers.
Will not affect the relationships between Davis and his customers.
Framing strict rules and policies to collect nonpayments.
Customers accepts the conditions before the service itself.
Giving different options for and more time to pay.
PROS5% discount at earlier payment attracts the customers to pay earlier.
Davis may get chance to collect earlier payments from most of the customers.
Decreasing the amount of installments is very helpful for Davis to attract customers for accepting the services.
Builds good relationship between Davis business and his customers.
Regular payments is possible.
Attracts new customers.
Helpful to remind the customers at different times.
Customer aware about the payments, penaluty & consultant approach.
Helpful in collecting good rate of nonpayment amounts.
CORNSDavis may suffer from offering 5% discount. It ends with loss for his business over a period of time.
It wont attract the non payers at ant cause. For non payers 5% discount is a small amount so they wont react to it.
Still there may be chance for the non payment of installments.
Affects the smooth runing of Davis business.
Affects the relationship between Davis business and customers.
Involves more expenses during the procedures.
Followup procedure is difficult.
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.