Case Study:

We have recently been approached by a firm in South America which has offered to manufacture our product and ship it to our home area for two thirds of what the product currently costs our firm. The South American firm has good references and has a record of high quality performance. It also has the capability to upgrade models as often as once a quarter.

On the surface, at least, this offer looks very attractive. However, we need to examine it in depth. If we accept the offer, we could sell our product at a lower price, thus benefiting our customers. Our profits would be higher which would benefit our stockholders. However, we would close our production plant(s) and lay off most of our production staff. This would have a serious impact on our current employees as well as on the surrounding community. We need to explore thoroughly the ramifications of this opportunity prior to making a final decision.

Question 1: discussing the problem, your solution to the problem, alternative solutions, why you believe your solution is the best of all the alternatives.

Question 2: What is risk involved, cost involved, and opportunity to firm?