Question

1. Choose one situation from the following given below.
2. Read carefully and analyze the situation based on what you have learned from the previous readings that we tackled in class.
3. Write a proposal addressing the concern in the given situation. Do note that you are already in the situation. You are not allowed to take precautionary measures before the situation happens.  
4. Explain as to why you come up with your answers. It is best that you provide basis as your support.

Situation 1 – You are part of the board of directors of H&M based in the Philippines. Revenue is dropping in the first quarter of the year due to high production costs.

Your task is to come up with a solution to lower the cost of production while simultaneously maintaining the same price point and expanding other markets all over the country.

You may want to take into consideration the following themes:

A) Branch location B) Worker compensation C) Consumer location

Situation 2 – You are part of the board of directors of Jollibee in the Philippines. You are under pressure from the head office, as the price of raw materials is rising, and they plan on opening more branches abroad (following Italy).

Your task is to come up with a solution to lower the cost of production while simultaneously maintaining your price point and providing manpower in all branches.

You may want to take into consideration the following themes:

A) Branch location B) Worker compensation C) Consumer location

Answer 1

SITUATION 1:

Given,

The production costs of the company is high as a result the revenue generated is low in the first quarter. As a part of the board of directors I am supposed to meet the obligations of the organization. It's the responsibility of the board of directors to manage the resources efficiently.

Production costs are the costs incurred to convert a raw material into a finished product. It includes procurement of raw material, labor cost and other overheads on manufacturing.

Production cost = Direct material cost + Direct labor cost + Manufacturing overheads

A) Branch Location:

Branch location refers to the place where the business is located. Branch location plays a major role in deciding the production costs. Since production costs also includes direct materials procured, it includes the expenses icurred to bring the raw materials from the supplier location to the factory. This increase in production costs can be reduced if the location of the branch is shifted to a place where the raw materials are easily availabe. This also reduces the transport cost icurred during purchase.

B) Worker Compenstion:

Worker' compensation helps employees at a workplace get compensated for their damages. Workers' compensation can be reduced if the safety of the organization is improved. By doing so there are less possibilities of the worker getting injured.

C) Consumer Location:

Consumer location means the place or locality where majority of the consumers who are consuming the product are located. Identify the main customers of the product and supply goods to those areas where the product is largely consumed. This results in no stock available. When there is no inventory, the maintenance costs are also reduced.

In order to control or reduce the cost of production identify the areas of wastage and implement measures to prevent them.