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Business Growth and Revenue Maximisation in a Car Dealership

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Business Growth and Revenue Maximisation in a Car Dealership

 

Generation Automobiles Pte Ltd sells second hand cars. Cars are parked in lots for potential customers to view and test drive. Mr. Satya Nitin, the general manager, wants to sell more cars. The main objective is to maximise revenue by increasing the number of cars sold and/or the prices of transactions. To that end, Mr Nitin wants to know the following:

What make (brand) of cars should they hold?

What models of cars should they hold?

What features should be built in as standard in these cars?

What features should be added optionally?

Which locations sell more cars and/or at higher prices?

Mr. Nitin came across a study done by the Car Dealers Association (CDA) on sales of cars in year 2014. The sample had 1000 transactions randomly selected from car dealers in the country. The sample proportions for make, model and add-on feature are similar to those of the population.

Mr. Nitin speculates that this study could help him to address the above concerns but he is not sure how to interpret this study. Mr. Nitin has engaged you as a consultant to help and has provided you an excel file with this random sample of 1000 transactions. The variables in the data are:

CarID:                                    Autogenerated ID of transactions in the sample

 

Price$:                                   Price of car sold in Singapore Dollars

 

Mileage:                                   Number of kilometres completed

 

MakeID:                                    Numeric ID of the make (or brand) of the car

 

Make:                                    Make (or brand) of the car

ModelID:                              NumericID of the model of the car

Model:                                  Model of the car which briefly describes the main features of the car

Engine Capacity:                     Size of the engine capacity

Doors:                                  Number of doors in the car

Theatre:                            Video and sound system; 1 indicates installed and 0 indicates not installed

Leather:                          Leather upholstery, 1 indicates there is and 0 indicates there is none

GPS – Video_Rec:                GPS provides traffic and routing information while Video Rec provide recording of front and rear view during journeys, 1 indicates installed and 0 indicates not installed.

LocationID:                       Numeric ID of the location

Store Location:          Location; 1 indicates that car store within the city and 0 indicates outside of the city

 

Make ID

Make

1

Chery

2

Proton

3

Hyundai

4

Nissan

5

Toyota

6

Honda

7

Others

 

Model ID

Model

Doors

1

2D sedan

2

2

4D sedan

4

3

5D hatchback

5

4

MPV

5

5

2D sports

2

6

4D sports

4

7

4D luxury

4

 

 

Location ID

Store location

0

Non-city

1

city

MPV: Multipurpose Vehicle

 

Note: see the attached Excel sheet for required data

Choose appropriate hypothesis tests to determine if the Price$ is different with and without each of the three add-on features: Theatre, Leather and GPS-Video_Rec.

You should include the following:

  • State the null and alternative hypotheses and explain how you develop these hypotheses.

 (b) Present the output from your software for an appropriate hypothesis test with α = 0.05. List the test statistic you use for this test. Explain your decision criteria.

(c) Execute the hypothesis tests and conclude if Theatre, Leather and/or GPS-Video_Rec have an impact on Price$. If yes, what is the impact? What is your advice to Mr. Nitin based on these conclusions?

(d) Discuss the assumptions you have made in performing these hypothesis test? Are these assumptions reasonable for this case? Please provide explanation/s to substantiate your view.

 

Summary: This question belongs to operations management and discusses about Business Growth and Revenue Maximisation in a Car Dealership.

Total word count: 840

 

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