Production improvement option B (with capital costs of $1.6 million per million pairs of production capacity and annual depreciation costs of 10%) that reduces production run setup costs by 50% each year makes the most economic sense in which one of the following circumstances? Company managers expect to produce 100 models/styles and 6 million pairs of branded footwear on an ongoing basis at a 6-million pair capacity facility in the Asia-Pacific-annual production run setup costs for 100 models of branded footwear are $2 million Company managers expect to produce 350 models/styles and 4 million pairs of branded footwear on an ongoing basis at a new 4-million pair capacity facility in Latin America-- annual production run setup costs for 350 models of branded footwear are $9 million. Company managers expect to produce 150 models/styles and 3.6 million pairs of branded footwear on an ongoing basis at a 3-million pair capacity facility in Europe Africa--annual production run setup costs for 150 models are $3.25 million Company managers expect to produce 200 models/styles and 3 million pairs of branded footwear on an ongoing basis at a 3-million pair capacity facility in Europe Africa--annual production run setup costs for 200 models are $4.5 million. A company's strategy is to pursue actions that will reduce production costs per pair produced at each of its production facilities to as low a level as possible--lowering production run setup costs helps achieve this strategic objective, therefore, installing option B should be done at each of the company's production facilities, irrespective of facility capacity and number of models to be produced. In which one of the following circumstances should a company's managers seriously consider modifying their strategy to strongly differentiate the company's branded footwear from the offerings of rival companies and achieve a competitive advantage based on a wide selection of 450-500 models/styles and "high" S/Q ratings? When the company's cost per branded pair sold is above the industry average in all four geographic regions When the company is struggling to achieve the sales volumes needed to meet or beat the five investor-expected performance targets because the global marketplace for branded footwear is overcrowded with companies locked in a fierce competitive battle to sell 450-500 models of branded footwear with high S/Q ratings at premium prices to the same comparatively narrow high-end buyer segment When many rival companies are spending heavily on retailer support and search engine advertising When one or more rivals produce and market branded footwear with the same (or higher) number of models/styles that the company is offering to the buyers of athletic footwear and also have below-average retail prices in the Internet segment and below-average wholesale prices in the Wholesale segment o When one or more rivals also produce and market branded footwear having much the same (or higher) S/Q ratings and these rivals are offering higher mail-in rebates and delivering orders for branded footwear to footwear retailers in 1-2 weeks
