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Situation Analysis and Problem Statement: Burns Auto Corporation

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Situation Analysis and Problem Statement: Burns Auto Corporation

Scott Watson

University of Phoenix

Professor: Murray Pyle

MBA 510

Table 1



Issue: Increased inventory cost.

* Details: Recent to an average of $360 million in vehicles in inventory on a daily basis; a cost of $10,800,000 to finance.

Issue: No systematic approach in place to forecast sales. * Details: Richard Settle relies on manufactures forecasts for each model car including sedans, coupes, sport cars, SUVs and trucks.

Issue: Conflict to use or not use an outside consultant. * Details: Richard Settle does not believe in using an outside consultant to forecast sales.

Issue: Push down approach or individualized forecast. * Details: Thomas Burns believes corporate should "push down" the forecast to each independent dealership; Lisa Hopkins believes each dealership should develop its own independent forecast.

Table 2



Opportunity: Adopt a systematic approach to forecasting sales. * Details: Utilize linear regression.

Opportunity: Revamp sales efforts. * Details: Focus on sales efforts.

Opportunity: Utilize regression analysis. * Details: Compare variables to predict future sales.

Table 3

Stakeholder Perspectives and Ethical Dilemmas

Stakeholder Perspectives and Ethical Dilemmas

Stakeholder Group Interests, Rights, and Values Ethical Dilemmas

Customers Want competitively priced automobiles. Being over charged for an automobile.

Employees Far working conditions with competitive compensation. Being treated unfairly in the workplace.

Stakeholders Want a profitable company with security. Be unethical in order to become profitable.

Manufactures Want to produce a product that will be utilized by the consumer. Producing an unsafe product.

Problem Statement

Burns Automotive Corporation is experiencing increase inventory costs. The increase in inventory can be directly related to their lack of efficient statistical analysis and forecasting.

Situational Background

Burns Auto Corporation has a major presence in the western region of the United States. The corporation and owner, Thomas Burns, have been in business for twelve years. The business has been successful, largely due to the efforts of Richard Settle, Corporate President and Sales manager.

The Players

Thomas Burns owns Burns Auto, sells autos through twenty-five new car dealerships. I It is one of the largest automobile dealerships in the country. Richard Settle, President and Sales Manager, his work includes working for a large American automaker for fifteen years, rising to Senior Vice President. He then began working for Thomas Burns, where he has spent the last twelve years. Peter Reardon is the consultant Thomas is considering hiring. He has a PhD, has ten years experience working as an economist for a Japanese automaker. He has owned his own consulting firm for four years. John Peterson, a consultant, Richard has had a positive experience with in the past. He has a PhD, and has worked for two American automakers in Detroit, he is now a partner in a marketing consultation group in Detroit. Lisa Hopkins, Corporate Vice President, she has her BA in business and marketing. She worked for a large domestic automaker for fifteen years in the firm's finance and marketing departments. Mary Peterson, Associate Vice President and Marketing Director, Mary has her MBA and is a strong advocate of implementing a systematic approach to forecasting sales based on statistical analysis and the input of management at each dealership.


The main issue plaguing BAC (Burns Auto Corporation), has been an increase in the company's vehicle inventory costs. Historically the firm had an average vehicle inventory cost of $300 million on a daily basis. This inventory was financed through a bank at an annual rate of 3.0%. The result was the cost to finance the inventories equaled $9,000,000 annually, or $750,000 a month. During the past two years, however, inventories have fluctuated more than usual on a month-to-month basis, the result has been an increase to an average $360 million in vehicle inventory and a cost of financing equal to $10,800,000. The following table depicts the sales over the last ten years for BAC.

The second issue facing BAC is Thomas Burns has expressed an interest in hiring Peter Reardon, an outside consultant, to help with sales forecasts. Settle is opposed to hiring a consultant they have not used before. He feels that the responsibility for forecasting sales should belong to one person this will help to promote accountability. Settle relies on his contacts with the manufactures. They provide him with their forecast for each model including sedans, coupes, sport cars, SUVs and trucks. He then takes the past ten years of sales to create a monthly



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