The following extract is describing the problems of a company which manufactures high quality glass and china pottery.

Waterford Wedgwood, the luxury goods company, has warned it may have to cut jobs after experiencing a slump in sales since the start of the year.

Redmond O’Donoghue, the chief executive of the group which bought Royal Doulton for £40m earlier this year, warned that annual profits will miss expectations and that the company was being forced to cut costs to improve profitability.

‘The demand for our type of products is softer than it has been. Although we are still maintaining our leading market share, the size of the sector is falling.

In this position, we have to accept that our sales will be lower than we would have hoped and instead attack our fixed cost base,’ he said, adding that job losses were possible.

Discussion points 1 What kinds of fixed cost might be expected at a company which manufactures glass and china goods?
2 Why are fixed costs a problem when demand is falling?