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)
