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Clear Hear is cell phone Manufacturing Company that has a responsibility to ensure that its customers are satisfied with their products by maintaining high quality standards and therefore ensuring the company's profitability. Tucker (2008) suggests that employees are a very important part of the company who should be considered in all major decisions since one of the company's statements of value requires that employees should be kept working (Tucker, 2008). The issue at hand is how Clear Hear will obtain its ideal level of production, meet the customers' demand and more so maximize its revenue. Although it has received a lucrative deal to deliver 100,000 units, this has also brought about challenges which require that the company adjusts its approach so as to make full use of its resources for better results.
One of Clear Hear's goals is to reach an ideal production level by reaching its maximum production capacity. The first recommendation would therefore be that the company produces more products so as to reach its full production capacity. At the moment, the company has 70,000 units in excess for the coming three months. This means that it has not made any profits from 70,000 units. It would be better if the company increased its production level but lowers their prices so that it can attract customers who were scared of the previous price that might have been perceived to be high. A decrease in price leads to an increase in demand and therefore although the profit per unit will be reduced, the overall profit will increase because it will make more sales (Tucker, 2008).
Clear Hear is monopolistic and competitive and therefore has so many competitors, occupies a small percentage of the market and has very little control over price. For instance Original Equipment Manufacturer was willing to produce as many Alpha units as possible on short notice but at a nonnegotiable price of $14 per unit. For the company to increase its revenue, it only has three options. Kendra and Lisa can take the order and use the facilities excess capacity to produce 70,000 units then out source the remaining 30,000 units from OEM , outsource the entire 100,000 units to OEM and lastly Produce all 100,000 units in-house by substituting the different models and using the remaining production capacity. The first option would not benefit the company much since the report indicates that the cost for producing the units by itself would cost $20. This way above the $15 that Big Box is willing to pay. According to Mukherjee (2002), the company will therefore go at a loss if it accepted this offer. Even through this option would bring in better profits per unit product in addition to high quality products that OEM night produce, the company will not have utilized its full production capacity. This will mean that Lisa and the company will not get the profits that they could have obtained on the additional 70,000 units.
The second option calls for outsourcing all 100,000 units to OEM. Although this option would see the company fulfill the order and maintain its normal production though making only a small profit, the company would not wish to ruin its reputation of being one of the leading cell phone manufacturing companies. It has to retain its monopolistic control of the market. Considering that OEM is a competitor, Clear Hear should not agree to its offer to produce the Alpha unit since OEM will gain a competitive advantage over it (Mukherjee 2002). If word goes around that it OEM produced the Alpha brand on behalf of Clear Hear, then most clients might move to OEM leading to Clear Hear loosing its customers and control over the market. Moreover, the company's statement of values requires that Employees are kept working which means this option will have gone against this.
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This option would also bring about many differences in case OEM infringes on the copy right and patents of the company. It would also create bad blood between the two main competitors which is not good for the industry. In case such an issue comes up, the legal procedure might stop the sell of the products until the dispute is resolved which might take quite some time. According to Clear Hear's statement of values, customers should be provided with products on time. The court case might lead to a delay. Moreover, considering that OEM is a major competitor it might produce law quality products that won't meet the customer's expectations. This would have gone against Clear Hear's values of producing products that reliably meet or exceed customers' expectations (Henderson, 2008).
This leaves Clear Hear with the last option which is producing all of the 100,000 units in house using its spare capacity of production in addition to the available substitute of Beta model. Although the Beta model has a high production cost, it also has high returns. Clear Hear can therefore accept Big Box's order and produce the remaining 30,000 units required to complete to complete the required 100,000 using their Beta model. One of the company's statements of value is to do to their business partners what they would have wished their partners to do to them. Since Beta model is a product of their other line of production, Clear Hear can shift production to Beta model (Henderson, 2008). It will be able to sell all the cell phones produced by the company, the workers will be kept working as required and Big Box which in this case is the customer would receive cell phones on time. Moreover, this will also ensure that the business partner has its products sold into the market.
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