Wonder Widgets

In: Business and Management

Submitted By mikemilo
Words 788
Pages 4
Shutter Or Not To Shutter Wonder Widgets Inc.
Xxxx xxxx
Dr. James xxxxx
ECO550 Managerial Economics and Globalization
February 20, 2014
Strayer University

Wonder Widgets, Inc. designs and manufactures widgets for use in various commercial manufacturing facilities. Wonder Widgets has been in business since 2004 with a steady and reliable group of core customers. Recently however, costs of raw materials have risen reducing the profitability of the company. The board of directors has become concerned and requested an independent valuation of the company with recommendations for increasing profits or cutting losses and shutting down the plant.
Current Environment
Environmental scanning must be used to determine factors used to continue operations or close the plant. BusinessDictionary.com (2014) defines environmental scanning as “careful monitoring of an organization’s internal and external environments for detecting early signs of opportunities and threats that may influence its current and future plans.”
The customer environment is stable and has been for many years. However, pricing has not increased significantly in the last 5 years. With the cost increase in raw material looming and the narrow profit margin, a decision must be made on how to absorb or pass on those costs. With pressure from the Wonder Widget stakeholders increasing, absorption of those costs in the profit margin is the least likely scenario. Passing those costs along to the customer may not be well received and could cost the company business (Albrecht, 1994).
Competitors in the widget business have managed to stave off price increases by decreasing internal costs; with labor being the greatest factor. Wonder Widget enjoys a good reputation with its labor force, if a labor restructuring were necessary it could plunge the manufacturing process into chaos. Great…...

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