ESCALATION DECISION MAKING
Shekima Jacob
Doc Sherry: Sheron Morgan
South University
Dynamic Decision Making | BUS3101 S01

Chip Davis is suffering a loss in his car dealership company because some of his customers have defaulted on their payments. The following is the analysis of the cause of action as he is advised by his consultant, friend and his uncle. The consultant advise him to offer his customers a 5% discount for immediate payment, but this cause of action has no guarantee that the customers who have defaulted to pay will rush to pay due to this small offer. If he offers the discount, the cost will be on him which he had not budgeted for. Take an example that every car cost $ 1000, 5 % discount will be $ 50 and take instance ten customers has defaulted. It will cost him $50 to offer a discount assuming that all of the pay. What if some customer was to pay eventually the full amount despite the offer this will be a loss to Davis in addition to the one who will permanently default. The friend advises Davis to decrease the monthly instalments and increase the number of monthly instalments. This cause of action assumes that the customers who are defaulting their payment are because their monthly instalment is too high for them. This action would not improve the current situation since the defaulting customers will be having the more amount of company’s money than they do right now. The company might financially strain in short and long term due to this decision. Davis’ uncle is an experienced businessman advises him to offer 5% discount upfront on advance payment, and this is a good incentive to customers. He suggests a penalty on the customer who doesn’t pay after 30 days, and if they default for another 30 days their car gets repossessed. This decision will improve the cash payment of their car to get a discount and the penalty added will be an extra income for the company. If the car is reposed, Davis will be in a better position since he can resell the car and get more income. Of the three advices, uncle’s cause of action is the best since it will force the defaulters to pay failure to pay their car gets repossessed. The penalty is an additional income, and the company will recover from loss making. Yes, Davis uncle makes questionable assumptions. The cause of action, he proposes has to be analysed on how legal it is. The action of adding a penalty to late payment maybe was not in the sale agreement Davis and the customer signed. To enforce the penalty will be difficult since they have entered into an agreement that suggests otherwise. How legal is it for Davis to send the collection agency to collect the car from the customer who has a sale agreement that has no provision for such an action in the event of him defaulting. Davis’ friend made assumption on the bases that a friend of his made a decision to offer discount and it ended badly. The friend does not have firsthand information of what transpired to that business. He further assumes that lower instalments payment will help the defaulter to pay their debt. It cannot be assumed that the defaulters have accumulated debts due to inability to pay the current high instalments. The consultant made an assumption that d 5 % discount offer will entice all defaulters to clear their debts promptly. This cannot be ascertained since a discount is not a guarantee for payment of debts. The advantage of this consultant suggestion is that it will not rub the defaulters the wrong way but it will be an added cost to Davis Company. While the friend assumes that the defaulters are defaulting due to high instalments. The advantage of this suggestion is that the defaulter will have an easy way of paying their debts but it is a disadvantage to the company as it will continue to be in higher financial crises. Since the cash collection period will be very long reducing even the profit of the company. The uncle assumes that a threat of a penalty and repossession of the car will put more pressure to defaulters and the will pay. This is true since no one would want to pay an extra cost or risk his car being repossessed. This will benefit the company and threaten its relationship with the customers There is cognitive bias on the advice suggested by Davis uncle who may lead to inaccurate judgment based on the prior knowledge and experience which he believes and it might not work in this case (Evans, Barston, & Pollard, 1983) Davis uncle suggested the cause of action had advantages on that it will discourage late payment and might add an extra income to the company from the penalty or the repossession of the cars. The disadvantage with this action is that Davis might be involved in a legal tussle as he tries to effect this action that be more expensive to him or destroy his company reputation and loss customers. Cognitive bias might affect the decision that Davies will make. If he takes the advice of the consultant due to his professional expertise, he might not be able to collect all the debts since not all defaulters will pay. Then Davis will incur the cost of discount. Davies decision should be the one that will make all the defaulters pay the debts promptly or as agreed. The decision that will encourage prompt payment and reduce the rate of default will be the most appropriate decision.

Reference
Evans, J.ST., Barston, J.L., & Pollard, P. (1983). On the conflict between logic and belief in syllogistic reasoning. Memory & Cognition, 11(3), 295-306.