Paper 4 – Circuit City (Prepare a one to three page type-written response to the following questions)
1. a. Do a Google search and identify what case went to the Supreme Court regarding arbitration and an employment dispute for Circuit City? Name the case and briefly summarize what it was about and the outcome.
b. Do you think that there was any indirect linkage to this and the eventual bad decisions that led to the end of Circuit City? Discuss.
2. Evaluate the influence of Circuit City’s organizational management beginning around 2000.
3. Who was Circuit City’s target market? Did that change after the decision in 2000 to remove
appliances from its product offering?
4. How would the store remodeling effort play into customer satisfaction levels? What impact
did the remodeling have on the company’s financial strength and profit levels? What about the role of Circuit City’s real estate decisions?
5. If you were Alan McCollough (Circuit City CEO in 2000), would you have exited the appliance business? Why or why not?
6. How would you have evaluated the option to exit the commission-based pay schedule? Do you believe Circuit City made the right decision to be in line with its industry, given that Best Buy operated under this structure and held market leadership?
7. From a customer perspective, did Circuit City provide a product or service offering that differed from competitors and if so, what was that?
8. According to Peter Galuszka, there were eight reasons for Circuit City’s demise. These reasons are:
It dumped sales of popular appliances.
When it spun off CarMax, it let a lot of talented management go with it.
Stores became too impersonal and too large.
As Best Buy took off, Circuit City became merely reactive and not innovative
To please Wall Street analysts, it went on a store expansion spree that resulted in too many
stores in dicey neighborhoods.
To save money, it stopped paying commissions to its sales force and then fired 3,400 of its most experienced sales people.
When the going got tough, too many C-suiters and directors came and went.
Commercial credit became tight.
Required: a. Provide one managerial accounting solution for each reason that may have eliminated or lessened the catastrophic meltdown of Circuit City and its eventual bankruptcy.
b. Summarize you answer in (a) by reflecting on the question: Do you believe, after filing for Chapter 11 bankruptcy protection in 2008, that Circuit City could have successfully reorganized its business using these managerial accounting techniques?
9. What was the most surprising thing that you learned from the video?