I want you to imagine that I'm a CEO of xyz company and I hand picked you

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Question:

I want you to imagine that I'm a CEO of xyz company and I hand picked you to advise me on the future of the company. We have approximately 500 employees. We are rated as one of the best places to work by various publications. We pride ourselves on quality products and great customer service. Our goal of quality and excellent customer service is not just an idle claim. We are consistently rated first or second among our competitors by independent ratings services. We have been in existence for over 40 years, have name brand recognition, and an excellent reputation with customers. Our earnings are stable by stagnant 4-5% a year. Competition in our existing product lines are intense. We have a venture capital shortage which means new products will require venture capital or internal cost cutting. We are considering a new product and basically have three options for moving forward.

Question: Which option do you think is best for the company and why.

Option 1: A NEW PRODUCT. In order to launch the new product line, we will have to cut costs, seek venture capital, and lay off at least 50 workers. If the new line is successful, our profits will increase to 10-12% in three years. Independent sources rate the likelihood of success at 60% but our internal analysis is less confident estimating only 50% likelihood of success.
Option2: INTERANL IMPROVMENTS: A recent study or organizational efficiency efforts determined that new production techniques, better materials procurement and enhanced marketing could increase profits by an

additional 6-7% in three years. We could finance these improvements from existing earnings gs without layoffs.

Option 3: DO NOTHING: Given that we are profitable we could simply continue current operations and not make any changes.