Fundamentals of Management 6th Edition by Ricky Griffin

Exercise 3

Exercise Overview
Decision-making skills include the ability to recognize and define problems or opportunities and then select the appropriate course of action. This exercise will help you develop your own decision-making skills while also underscoring the importance of subsystem interdependencies in organizations.
Exercise Background
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.
Exercise Task
With this background in mind, respond to the following questions:
What are the primary obstacles that you might face in trying to implement each of your three options?