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:

a.Begin buying slightly lower-grade materials, including hardwood, aluminum, vinyl, and nylon.

b.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

c.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.

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 costliest 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 each of your three options?

4. Are there any other options for accomplishing your goal of reducing costs?