Analogical reasoning is widely used in the analysis of management problems. Analogies draw lessons from one situation to another based on assumptions of relevant (causally important) similarities.
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In the assignment below, we examine a proposal to expand Circuit City’s business beyond consumer electronics into used cars. Your assignment is to evaluate the analogy and make a recommendation for Circuit City in preparation for our live session.
In the mid-nineties, Circuit City considered expanding to markets beyond consumer electronics retailing. Using analogical reasoning, an executive at the company proposed that Circuit City enter the used car retailing market as he believed that what made Circuit City successful (at the time) selling consumer electronics products would also make it successful selling used cars.
We are looking at such an early example for two reasons. First, it is a great example of analogical reasoning. Second, it allows us to focus on the analysis itself without letting what happened since (e.g., rise of Internet sales, further evolution of the market, etc.) color our analysis. As in any standard case study analysis, focus on the facts presented in the case and don’t try to augment them with additional research of analysts’ opinions, what happened since, etc.
Please read the “Circuit City” case attached below and answer the following questions, which are designed as preparation for our live session:
What were the key conditions that, at the time, led to Circuit City’s success in consumer electronics?
To what extent were the key conditions you identified in (1) met by Circuit City’s possible expansion into used cars?
Based on your analysis, what would you advise: Should Circuit City enter the used-car business? Answer Yes or No.
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