Critical Thinking: Chapter 1

Question: Should Peach accept the deal with Young Inc. and allow this new company to oversee its manufacturing? Why or why not?

Reading-

Overview: These problems are meant to encourage deeper thinking on the material presented in the textbook. You are to answer ALL questions presented in the problem using the knowledge you have gained throughout the textbook. However, do not simply repeat what is in the book. Use that information and interpret it the best you can to apply it to the situation.

Requirements: Review the information and questions below. Provide a detailed 4-5 sentence explanation on how you would solve the problem or issue, based not only on the readings in the chapter, but your own personal experience and/or any additional outside research you perform. If quoting a source directly, make sure to cite that source, but do not rely solely on quoted materials.

Issue: Peach Inc. is a manufacturer of consumer electronic devices, including computers, tablets, and phones. Peach has earned a reputation of providing reliable high-quality products at affordable prices. The company has also earned a reputation of being a good corporate citizen with many environmental and social initiatives. For example, the company uses far more recycled materials in its products than any of its competitors. The company is also known for its charity work with educational institutions. In an effort to control costs, Peach outsources manufacturing of its hardware to many overseas factories; however, it closely monitors each facility to make sure quality is maintained. Tom Peach, the company CEO, was recently approached by Young, Inc., a company that asserts it can significantly reduce Peachs manufacturing costs by overseeing Peachs manufacturing. Young will find factories that it claims can maintain the same level of quality at lower costs. In addition, Young will do all the monitoring so that Peach can save the costs of monitoring and auditing the manufacturing facilities. Jorge Workman, Peachs director of accounting, became quite concerned when he learned of the potential deal with Young. Jorge immediately went to Tom with his concerns. In particular, Jorge did not want to turn over the responsibility of monitoring the facilities to another company. Tom, however, feels that the quality control testing done locally is enough to assure that quality can be maintained, and the cost savings are very important to the companys efforts to keep its prices affordable. In addition, Tom felt that under this arrangement, anything that might go wrong at one of the facilities would be Youngs responsibility and not the responsibility of Peach. Jorge was still not convinced. He knew how labor problems in the supply chain of Nike in the 1990s had caused significant reputational and financial damage to Nike, and he did not want to risk the same thing happening to Peach. Questions to be Answered: 1) Should Peach accept the deal with Young Inc. and allow this new company to oversee its manufacturing? Why or why not?