The following scenario looks at how escalation occurs when making a decision. Ch
ID: 457788 • Letter: T
Question
The following scenario looks at how escalation occurs when making a decision.
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 on this matter who has run several successful businesses; 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 their payments by 30 days. If the defaulters do not pay within 30 days, they could then be referred to a collection agency.
Based on the above scenario, create a 4- to 5-page report in a Microsoft Word document that includes the following:
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?
A description of the relevant aspects as well as any judgments in the advice given by the consultant, Davis’ friend, and Davis’ uncle. Does the consultant, Davis’ friend, or Davis’ uncle make any questionable assumptions?
A description of the judgments, assumptions, pros, and cons for each piece of advice.
A description of the type of bias that applies to this scenario.
At least two alternatives for Davis with clear descriptions of their relative advantages as well as disadvantages.
An explanation of the impact of emotions—in terms of helping or hindering the ability to make rational decisions—while making a decision.
A description of at least two factors each that should be most important to Davis’ for making a decision.
Explanation / Answer
Ans:
Chip Davis has been maintaining his auto dealership business effectively for a long time. This year, he began to endure misfortunes since some of his clients have defaulted on their installments. Toward the end of the second from last quarter of the year, the defaulters have expanded and the misfortunes have escalated so much that he chooses to make a move.
An expert proposes that he offer a 5% rebate for quick installment, yet Davis is not certain if that will tackle the issue. He likewise thinks about the amount this markdown will cost him at last.
Davis additionally counseled his uncle on this matter who has maintained a few effective organizations; the uncle recommends offering a 5% rebate forthright on development installments and this would give clients more motivator to pay. Likewise, he proposes including a punishment defaulters who are behind their installments by 30 days. In the event that the defaulters don't pay inside 30 days, they could then be alluded to an accumulation organization.
Davis' companion proposes to him that the offered rebates would be an awful thought since he knows of another business setup that utilized the markdown strategy, which finished in a fiasco. The organization lost 5% of its income on the individuals who might have paid expeditiously in any case, and the individuals who did not expect to pay on time just did not pay. This companion recommends diminishing the regularly scheduled payment yet expanding the quantity of portions.
Davis additionally counseled his uncle on this matter who has maintained a few fruitful organizations; the uncle recommends offering a 5% markdown forthright on development installments and this would give clients more motivation to pay. Likewise, he recommends including a punishment defaulters who are behind their installments by 30 days. On the off chance that the defaulters don't pay inside 30 days, they could then be alluded to an accumulation organization.
The accompanying situation takes a gander at how heightening happens when settling on a choice.
Chip Davis has been maintaining his auto dealership business effectively for a long time. This year, he began to endure misfortunes since some of his clients have defaulted on their installments. Toward the end of the second from last quarter of the year, the defaulters have expanded and the misfortunes have escalated so much that he chooses to make a move.
An advisor recommends that he offer a 5% markdown for prompt installment, yet Davis is not certain if that will take care of the issue. He additionally thinks about the amount this rebate will cost him at last.
Davis' companion proposes to him that the offered rebates would be an awful thought since he knows of another business setup that utilized the markdown arrangement, which finished in catastrophe. The organization lost 5% of its income on the individuals who might have paid quickly in any case, and the individuals who did not expect to pay on time just did not pay. This companion recommends diminishing the regularly scheduled payment however expanding the quantity of portions.