Question
You're the vice president of a large company that makes outdoor furniture for decks, patios, and pools. Each product line and the firm itself have
You're the vice president of a large company that makes outdoor furniture for
decks, patios, and pools. Each product line and the firm itself have grown
substantially in recent years. Unfortunately, your success has attracted the
attention of competitors, and several have entered the market in the last two
years. Your CEO wants you to determine how to cut costs by 10 percent so that
prices can be cut by the same amount. She's convinced that the move is
necessary to retain market share in the face of new competition. You've
examined the situation and decided that you have three options for cutting costs:
Begin buying slightly lower-grade materials, including hardwood, aluminum,
vinyl, and nylon.
Lay off a portion of your workforce and then try to motivate everyone who's left
to work harder; this option also means selecting future hires from a lower-skill
labor pool and paying lower wages.
Replace existing equipment with newer, more efficient equipment; although this
option entails substantial up-front investment, you're sure that you can more than
make up the difference in lower production costs.
With this background in mind, respond to the following questions:
1. Carefully examine each of your three options. In what ways might each option
affect other parts of the organization?
2. Which is the most costly option in terms of impact on other parts of the
organization, not in terms of absolute dollars? Which is the least costly?
3. What are the primary obstacles that you might face in trying to implement
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