MBA Case Study 1 Part I

MBA Case Study 1

Part I

1.What type of competitive environment does ElectronicCity face? Why doyou say so?

ElectronicCityoperates in an imperfect competition. This market does not havebarriers. Again, sellers offer same products and services. No singlefirm dominates the market. The difference is in the quality and priceof the product. For instance, ElectroniCity sells product (i.e.,high-end, flat-screen, high-definition&nbsptelevision (HDTV) sets)that are similar to other sellers in the marketplace. There is alsointense competition from other sellers. What differentiatesElectroniCity in this market is the warranty extension contract.

2.What can you say about the management style of the VP of Marketing inthe case? Is itappropriate?Why, or why not?

TheVP of marketing employees the consultative management style to managethe organization. Hi is dictatorial. However, he makes decision bytaking into account the best interest of the business and employees.He communicates his decision to the lower level managers. However,the decision he makes is based on the feedback from the juniormanagers and employees. For instance, his decision regarding thewarrant contract was based on what had been observed by lower rankmanagers. He consults employees and managers before making adecision. Consultative management style is appropriate for this case.As evident in this case, this management style empowers workers toset standards in order to help improve job performance. Thismanagement style also encourages the open door policy. This helps inminimizing conflicts among employees.

3.Define any ethical issues that you perceive in the scenario.

Theone ethical issue evident in this case is the corporatemisrepresentation. It was unethical for Phil to knowingly providefalse information to customers with a view to convince them to buythe extended warranty. Phil confirms that he knew the company wasengaging in corporate misrepresentation. He confirms that the Savvyand the educated realized the trick and could not buy the extendedwarranty. In fact, Dr. Smith scorns Phil for this unethical practice.

4.Should Phil become more adept at predicting which of his customerswill likely buy thewarranty- say he goes from 80% accuracy to 90% accuracy – will this impacthis incentive pay? Explain your answer.

Philshould be more adept at predicting the customers who will likely buythe warranty. This will likely impact his incentive pay. He willpredict will accuracy customers’ decision and therefore, focus oncustomers who are likely to be convinced. This way, he will convincemore customers. This will likely to translate to high incentives.

5.How do the comments/reactions of each of these people shape Phil`sthinking regarding hisjob?


Maria’scomments were encouraging because she saw Phil’s story asdemonstrating professional success. As such, her comments mayencourage Phil to think positive about his job. Phil is likely tobelieve that he is succeeding in his profession. This way, he islikely to sustain his strategies.

b.Dr. Smith

Dr.Smith was scornful about Phil’s unethical practice and revealed tohim that the practice was unethical. His comments are likely todiscourage Phil from engaging in the unethical practice. For thisreason, Phil is likely to quit his job

c.Fr. George

Fr.George wondered why Phil was not bothered with the unethical businesspractice. He made Phil to understand think about it. This comment islikely to compel Phil to quit his job

6.What will Phil do when he returns to work next week? Why do you thinkso?

Toinform the management that it was illegal to knowingly engage incorporate misrepresentation. Phil may opt out his job should themanagement fail to adapt his stand. Phil is more informed about theunethical practice he had been engaging. His interaction with Maria,Fr. George and Dr. Smith enabled him to understand that it was wrongto sell the extended warranty to customers.

Part II(You should show work to support your numeric answers.)

1.What is the dollar amount of warranty extensions that Phil sold inJanuary 2013?

Pricefor one HDTV= $710700000/ 320,000 units=$2220.99

Butprice for a warranty extension per unit=8/100*$2220.99=$177.6792

Numberof warrants sold by Phil in one month= $360.40*100/10=3,604

Dollaramount of warranty extensions that Phil sold in January 2013=3604*$177.6792= $640,355.83

2.Estimate the dollar amount of HDTV sales that he generated in thesame month, assuming that he was able to sell warranty extensions inroughly 55% of eligible transactions?

Warrantextension sold in January=3,604

55/100X=3,604warrant extensions

WhereX is the number of transactions


Butone HDTV=$2220.99

For6552 units=$2220.99*6552=$14,551.90

3.Suppose that the number of HDTV sets sold in 2013 is projected to be4% more than the number sold in 2012. How much profit canElectronicCity expect per-store in 2013 from its warranty extensionbusiness? (Assume that the average selling price of an HDTV set in2013 remains the same as in 2012)

Consideringthat in 2012 Phil sold 320,000 units and earned $710.7million from

Anincrement of by 4% in the Number of HDTV sets sold in2013=104/100*320,000 units=332,800 units

Butprice per unit HDTV=$2220.99

Butprice for a warranty extension is fixed at 8% per sale price isfixed=8/100*$2220.99=$177.6792

For332,800 units, the total amount accrued from warranties=332,800*$177.6792=$5912857600