only for reywriter

Doreen is the CEO of Car Destination Inc., a super-

dealership that sells new cars, SUVs, and pickup trucks

from five different manufacturers, and also has a large

used-car lot. Car Destination has been profitable over

the years, even eking out a profit during two different

business recessions. Yet Doreen has the nagging thought

that Destination is slipping a little behind the times.

In talking with an outside advisor, Doreen said, “The

vehicle-sales business is changing more rapidly than we

are changing. Fewer consumers are influenced as much

as they were in the past by the sales representative. In-

stead, they ferret out information on the Internet on what

they think the price of a vehicle should be. Also, they

shop online to find the lowest possible price for what

they want. When they arrive at the dealership, they even

know what accessories and features they want, so they

are less influenced by what our reps have to say. Another

problem is that a greater number of customers who do

come to the dealership to purchase a car or truck don’t

want to haggle with the rep.”

Based on these concerns, plus some discussions with

a few automobile executives, Doreen decides to change

the business model at Destination. The new business

model she wants to introduce to her management staff

and to sales representatives requires that sales represen-

tatives no longer work on commission. They will now

be salaried associates who try to satisfy the needs of cus-

tomers. Furthermore, Destination will now offer fixed

sticker prices on all new and used vehicles. No more

negotiating with customers about price. Doreen calls a

meeting for the following Monday morning with all of

her managers and two of the senior sales representatives

to discuss the new business model. She labels the new

model “The no-hassle Destination.”

Doreen describes the new business model, using a

PowerPoint presentation to support her talk. She speaks

for 15 minutes without accepting comments or questions,

but she does notice a few grimaces and anxious expres-

sions on the faces of the Destination staff. Doreen finally

says, “Okay gang, I’ve talked enough for now. Let me

know what you think of our new business model.”

Tony, a veteran sales representative, speaks first:

“Doreen, it’s good to know that our CEO is up-to-date

on the automotive sales business. But Saturn tried what

you are talking about. The company lost tons of money,

and finally was eliminated by GM. The sales reps did

everything but hug and kiss the customers who drove

off the lot with a new Saturn.” (The people present laugh

nervously.)

Melody, the used-car sales manager, offered her opin-

ion: “Doreen, with due respect to the wisdom of our

CEO, ‘The no-hassle Destination’ may not work here.

Maybe we could act like CarMax sales associates—we

hire a bunch of good-looking sales reps, dress them in

khakis and polo shirts, and teach them to keep a smile

on their faces all the time. But when our clientele comes

to Destination to purchase a used car, they like to nego-

tiate. I love the look on the face of a customer who has

just been given a discount. Buying a used car or truck is

a sport. It’s not like purchasing a six-pack of beer.” (The

group laughs loudly at the beer analogy.)

Sam, the new-vehicle sales manager, said with a con-

cerned expression, “Doreen, I think the business model

you propose probably works well in some situations.

But we should think this through quite carefully. Our

best reps are making a ton of money. If you put them on

a fixed and modest salary, our stars would leave for the

competition. A fixed salary is probably okay for the Car-

Max associate, but I think experienced pros much prefer

commission sales.”

Kaleb, the director of finance, offered a suggestion:

“Doreen, I say let us wait a bit before introducing this

model. We need to study the potential impact of the new

business model on our profitability. We are a consis-

tently profitable super-dealership. A key factor is that

the salaries we pay sales reps are quite low because they

earn so much on commission. This helps lower our fixed

costs. We could wind up with a handful of sales associ-

ates who produce very little in relation to their salary

and benefits.”

Feeling frustrated, Doreen said, “Let’s break for now

and return to this discussion tomorrow morning. You

folks don’t seem ready quite yet to shift to ‘The no-

hassle Destination.’” As she gathered her notes, Doreen

thought, “For the new model to work well, I will have to

change some of these negative attitudes.”

Case 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.

(for each question write 100-150 wrods)