Andrews is a sensor manufacturer in the market. While the company has been unable to develop a straightforward competitive advantage over the course of the past three years, the competitive landscape of the market has become a significant source of concern for the company’s leadership. There are other companies out there who produce better products, or are able to compete strictly based on price cuts. It came to the CEO’s attention that there is an opportunity for Andrews to shift a large portion of its production to an offshore location. This decision will not only allow Andrews to reduce its labour and material costs, but will also allow for improved distribution practices.
When you are the smallest manufacturer in the market and are actively competing with larger businesses, any opportunity to reduce costs is truly welcome. But as a business, when handling such a dilemma, Andrews must understand the implications of making one decision over another. For instance, deciding to shift production to the offshore location will help reduce prices, but will negatively impact the company’s reputation when it comes to media and the press. This offshore supplier has previously violated the country’s labour laws in the past, and must be audited before a decision can be made to further pursue this opportunity. The last thing Andrews wants is negative media attention and increased legal costs when labour law violations are found. However, with that said, Andrews can still proceed with this unethical decision if it refrains from incurring more labour costs until next year. This would mean that the auditing team will go to the offshore supplier next year which would ultimately give it more time to actively produce s...
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...tion will positively impact marketing promotions (as Andrews will not have to deal with negative media attention) and human resources (because the labour costs in the offshore location is still cheaper than in the domestic location). In the short-term, however, production will be negatively impacted due to the training of new employees, and a neutral impact will be made on the financial position because while Andrews will undoubtedly lose sales, it will also not incur any legal costs associated with the continuing business with the previous supplier.
Outside of the recommendations provided by CAPSIM, alternative option 1 has a lot of advantages for Andrews: it supports the fairness approach, ensures long-term profitability and considers the CSR of the company. This option effectively connects the problem of business ethics and capitalism principles.
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