Question

Judy Ling is an entrepreneur who has a used cars dealership in East York, Toronto. Judy has been operating her business for more than ten years and wants to expand its operations. She hired you as a business consultant. She heard that there are some great statistical tools that can help her answer many questions before investing the time and resources into the expansion of her business. Assume the role of the business consultant and answer the following questions: (a) Given Judy’s business idea, suggest one area of concern to be addressed and explain why you choose it. (b) Develop a one-sample hypothesis related to the concern in part (a). () Explain to Judy what are the risks associated with the hypothesis testing in her case (refer to the Type I and Type || errors)

Answer 1

As we all know, used car business is a highly accepted and profitable business at the present time. Most of the car buyers look at the used cars to know if they could get a good deal from it and only after that they would go on for the purchase of a brand new car.

In the given scenario, Judy is already into the business of used car dealership since last 10 years. In such a case, she must be having a good number of trusted customer base and hence getting customers might not be a big task for her company post expansion.     

One of the major concern for her would be to sell of those cars which are comparitively old model without having any of the recent sophisticated technology built in it; ie, the struggle to maintaing the current market trend. One of the most recent development is the concept of connected cars wherein the owners can connect their smartphone with the car and they would be able to control the cars with their smartphones. These technologies provide a great variety of features for the owners.

I chose this as an area of concern because in a used car dealership, they would be dealing with such cars that would be way too old and the hence the technology and other features would be lesser compared to the present day model of the same car. This might inturn affect the purchase decision of the customers and they prefer more features for the money they spent. In such cases, they would instead go for the purchase of a brand new car instead of going for the older one.

To overcome this challenge, the company must concentrate on procuring atleast 80% of their fleet of cars whichare not less than 3 years old. In this case, though the technology has been tremendously changed, they would be able to gain an advantage with a lower purchase price at which they must be selling it. The company must also target at procuring well maintained cars which have minimum damages and looks alike new.

If the company is able to do these works, they would be able to keep up the profits in future periods as well, post expansion.