Instructions: Read the following scenario below and offer a comprehensive soluti
ID: 1226729 • Letter: I
Question
Instructions: Read the following scenario below and offer a comprehensive solution to each problem. Also write a solution and which you do the following for each case:
Analyze the key economic issues in the case.
Recommend three different business solutions to the case using managerial economic models and methods.
Justify the role of managerial economics by identifying the metrics you would use to assess the success of your decisions.
Scenario
In 2005, BB Gunn took over his father's network of 15 forklift dealerships. BB had just receive his MBA, and he was eager to show his dad that he knew how to manage the business. BB began with a weekend "strategy retreat" where he brought the various epartment heads together at a resort. BB thought the meeting went well, and they emerged with a coherent longrange strategic plan to guide the company through the next five years. However, when BB returned to work the following Monday, he discovered that he had a more immediate problem. The rental divison, headed by a former salesman, needed a cash infusion to keep operating. This was puzzling to BB because the accounting statements indicated the division was generating profit even though it was clear that the division was running out of cash. After a few hours of going over the books, BB discovered that the rental divison was selling its forklifts after five years and then buying new forklifts. Purchasing the new machines was eating up cash, but it did give the company a significant advantage over their rivals: their rental fleet was much newer (three years) than their rival's (seven years).
Explanation / Answer
The rental division here was eating up the cash, There is no doubt about it. We must bring the rental division back to profits there are many solutions we can follow to increase profits
Sol 1) Even we lost some money now, all our fleet is working great with just 3 years of service. So over the years the division will make money it has lost. So do nothing is the first solution
2) We can stop buying new equipment until looses from the division go down, So this means you issue a buying ban
3) Advantage can be retained and sell our service more to more customers to maximise revenue, Also we must inform our customers about our model, Our fleet is newer than our competitors this will help more customers retain our service and maximize revenue.