Eco 500 Assignment 2 Essay

1070 Words5 Pages
Operation Decision for Company A Dr. E. T. Faux ECO 550 Strayer University Quinton Fuller Brief Business Description Company A is based in Ohio and it manufactures headphones. Since the plant is based in the U.S., it encounters higher cost than its peers. The headphone is sold for $32 each and the firm only makes $2 per headphone or 6.25% gross margin. Company A is employing 100 workers, including both administration personnel and production line workers. Currently, the firm’s total costs exceed its total revenue and needs to make a decision as to whether it should shut down completely or continue its operations. Current Environmental Scan Factors and Impacts In order to make the decision to continue or discontinue operations, the management needs to conduct the Environmental Scan. The book Corporate Radar, Karl Albrecht (2006) lists the eight basic environments treated in the environmental scan: Customer Environment, Competitor Environment, Economic Environment, Technological Environment, Social Environment, Political Environment, Legal Environment and Geo-physical Environment. Among these eight environments, let’s focus on the two factors that are critical to Company A’s business: Customer Environment and Competitor Environment. First, let’s analyze the customers. People often buy headphones for their entertainment equipments, whether it is TV, DVD players, MP3 players etc. In the past few years, as the iPod and iPhone becomes the most popular music player, consumers prefer to use the sleek-looking headphones originally designed for iPod/iPhone instead of buying separate typical-looking headphones. This reduces the demands for the traditional headphones. Second, let’s look at the competitors. Most of the headphone makers have their manufacturing in the low-cost regions which allow them to generate higher margin than company A. In addition, the
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