This case details the position of Carol Sullivan-Diaz, the 28-year-old daughter of Walter Sullivan who died at the age of 56. Walter had bought a Ford dealership in 1983 that eventually grew into what is now Sullivan Ford Auto World. The business sells cars but also services them. Carol is disappointed by current turnover in car sales and sees that the service revenues are below average for this size of dealership. Carol’s now has to decide what way to tackle the future. She can sell the business but will probably only return a value below what it might be worth if profitable or she can look at the operation and see if she can turn it around herself. While she has a bachelor’s degree in economics, an MBA degree and a background in health care management, she also served time working with her father so she appears to have the skills and experience to tackle the issue if she so desires.
Characteristics of Services
The car sales and car service are closely linked. Here, we look at the car service following on from the car sale and both these processes are happening with the same provider, Sullivan Ford Auto World.
While we generally say that services are intangible, in this case the car sales service has a high goods content that is the car at the end of the process. The car service on the other hand, is intangible. The core business here can be looked at as the car sales and the supplementary service is the car servicing. Sullivan is trying to establish the service as a stand-alone service. Sullivan could have customers that have not bought a car but have their own car serviced at the garage. But Sullivan would hope that when they sell a car, this customer will come back regularly to have their car serviced. However, survey results suggest Sullivan is not getting repeats.
Another difference here is that when a car is sold, ownership changes to the buyer but in services we say that ownership does not change. What happens is that the car service “process” changes the physical possession that is the car. As we know, services cannot be stored. The physical car can be stored and kept as stock or inventory but the car servicing cannot. Therefore, it is essential that the servicing is kept working in order to generate turnover. If the service department has capacity to service ten cars per day, it must try to meet that target because if it is idle at any stage, that time (and time is money) cannot be regained.
In the sale of a car, the customer can be involved as they are making the purchase decisions. They will decide if they need or want the car and then seek information. They can view the car, test drive it, smell the “new car” smell and enjoy the experience. They can contact Sullivan and see what’s on offer in advance. With the car service, the customer is not really involved (except to deliver the car for appointment) as car service is specialised and the customer will not be present when the service is being carried out. They cannot see the “service” and may have to wait and drive for days to be sure the service was successful.
When the customer is buying a new car, they will be fairly sure of what they are getting. Ford has a good reputation and is seen to be a reliable brand, so the customer can be confident. The service is not the same. It is harder for Sullivan to maintain consistency with the service. Sullivan will be depending on his own mechanics to provide the quality whereas the car purchase will depend on Ford. Also, if there is a problem with the service, it will be difficult to hide this from the customer. It will be essential for Sullivan to be aware of the customers expectation so as he will not be disappointed afterwards. I also feel that there is a feel-good factor to buying a car and the customer is often happy to be involved in the deal but with a service, it usually happens when there is a problem so the customer may not feel happy when availing...
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