Business Case Studies & Business Publications

Motor City: A Disruptive Business Model ...

Hess, Edward D.

Case

Motor City: A Disruptive Business Model (A)

Hess, Edward D.

ENT-0130 | Published September 24, 2009 | 3 pages Case

Collection: Darden School of Business

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This case is appropriate for teaching in entrepreneurship, strategy, marketing, and finance courses. Motor City, the business brainchild of an absentee owner, is a new business model for selling used cars requiring a senior management familiar with the car industry. Some issues are: How should the management be compensated to align interests with the owner? Stock ownership, phantom stock ownership, profit sharing? The B case (ENT-0131) that follows raises such issues as matching the pace of growth with available cash flow.

How to compensate management in a private company to have them act as owners. How to finance the growth of capital-intensive businesses and the impact of financing on the pace of growth and competitive advantage. Examine the pros and cons of debt financing versus private-equity financing