Discussion Point

What is the problem from the company’s point of view?
The problem from the company’s point of view is that it is now struggling and that it is running currently at an overall loss. This is because now total costs had exceeded revenue, this means that there was more money going out than there was going into the company.

What is the problem from Neil’s point of view?
The problem from Neil’s point of view is that his job may be on the line. This is because he knows that money has to be saved and already some members of staff are loosing their jobs and being made redundant. In addition, Neil has to decide which member of staff to loose their jobs because he had been given that task.

Is Jill’s reading of the situation correct?
Jill’s reading of the situation is correct because from the graph provided, I can see that salaries have increased the most and that costs excluding salaries have not increased much over the period. I feel that these costs will have grown inline with inflation. She if reading the situation correct, as these are the most expensive cost, as if the wage bill can be decreased, this will be advantageous to the company.

Is the plan of action Jill proposes likely to be successful?
Jill’s plan of action is likely to be successful because she will be cutting on the biggest costs that the company faces. However, cutting jobs mean that there will be less staff to carry out the necessary work, and it is unlikely that production will decrease. Also making staff redundant can be costly, and may ruin the company’s reputation. In addition, staff will be worried as they may loose their jobs.

Apart from a reduction in the wage bill what other effects could Jill’s plan of action have?
The other effect that Jill’s plan of action may have is that there will be less staff to carry out the necessary work, and it is unlikely that production will decrease. Also making staff redundant can be costly, and may ruin the company’s reputation. In addition, staff will be worried as they may loose their jobs, because of this some may decide to resign and find another job where there is increased job security. This many demotivate staff.

What other courses of action could be taken?
Other courses of action which could be taken included reducing the number of days the factory is open, for example just having a four day week, this will cut the wage bill and the variable costs. They could also try to increase production, this will mean that there will be more products to sell and this should not affect the fixed costs such as wage bill.

What are the likely effects of these courses of action?
The likely effects of the first course of action is that staff may be demotivated and look for alternative work, and the second will mean that there is more revenue coming into the business, hoping to reduce the gap, and make the company profitable.