Read the scenario and answer ALL questions listed below.

Application Case

Assume that you are the vice president of a large Singapore company that designs and manufactures sunglasses. Because of the rise in consumer demand, the firm has grown substantially in recent years. At the same time, this growth has not gone unnoticed, and several competitors have entered the market in the last two years. Your CEO has instructed you to find a way to cut costs by 10 percent so that prices can be cut by the same amount. She feels that this tactic is necessary to retain your market share in the face of new competition.

You have looked closely at the situation and have decided that there are three different ways you can accomplish this cost reduction. One option is to begin buying slightly lower grade materials, such as plastic and glass. Another option is to lay off a portion of your workforce and pressure the remaining workers to work harder. As part of the same option, future growth in manufacturing will be outsourced to developing countries. The overseas workers will be paid a lower wage than Singapore workers. The third option is to replace your existing manufacturing equipment with newer, more efficient equipment. Although this will require a substantial upfront investment, you are certain that lower production costs can be achieved.

Source: Griffin, 5thEdition.

Questions:

Whenever possible and relevant, students should include and refer to the facts of the scenario in their answers. Students can also infer additional facts, as long as they are not incompatible with those presented.

a) Examine each of the three alternatives under consideration.

In what ways might each alternative affect other parts of the organization? Which option has the least impact on other parts of the organization?

b) Evaluate the primary obstacles that you might face regarding each of the three alternatives?

c) Suggest other alternatives that might accomplish the cost-reduction goal.