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