The CFO of an established manufacturing company explains to executives that production costs are rising due to the need to replace old, inefficient equipment and high local wages. He reported “We’re already struggling to stay competitive. I don’t see how we can replace everything that needs to be updated and keep our costs low enough. We need to consider replacing some of the equipment and outsource part of the process someplace that can do it cheaper. Possibly overseas.” He went on to state, “If we don’t do that, we’re going to need to close one of the plants. Probably the one with the highest labor costs.” Frustrated executives don’t see either option as desirable. What factors do they need to consider as they make their choices to reduce costs?