Bus 599 Assign 2

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Assignment 1: Operations Decision

Student’s name: Helen Davenport

Professor’s name: Dr. Chris Walson

ECO550 Managerial Economics and Globalization

8/15/2012

Abstract

This paper will describe the details of a fictitious business and will assess the current environmental scan factors while determining the factors that will have the greatest impact on plant operations and management’s decision to continue or discontinue operations. Thirdly, this paper will evaluate the financial performance of the company using the information provided in the scenario; consider all key drivers of performance, such as company profit or loss for both the short term and long term. Also, a recommendation as to how the company can improve its profitability and develop a brief plan to implement the recommendations. Lastly, this paper will assess the circumstances in which the company should discontinue operations while providing a set of reasonable rationales.

1. Briefly describe the details of the fictitious business that you created for this assignment.

The fictitious business in this assignment is named TopShop, which is an American multinational retailer with its main headquarters in New York. It is a high end fashion brand that specializes in fashion clothing, shoes, make-up and accessories. Currently, TopShop has 150 workers for its factory in New Jersey, and has hired a consultant to offer some advice that could help it make a decision as to whether it should shut down completely or continue operations. In addition, TopShop has 100 workers that produce 6,000 units of output per month (working 20 days / month). The daily wage (per worker) is $70, and the price of the firm’s output is $32. The cost of other variable inputs is $2,000 per day. The firm’s fixed cost is “high enough” so that the firm’s total costs exceed its total revenue. The marginal cost of the last unit is $30.

2. Assess the current environmental scan factors. Determine the factors that will have the greatest impact on plant operations and management’s decision to continue or discontinue operations.

The environmental scan factor refers to the macro environment and is the activity of acquiring information about events and relationships in a company’s outside environment, the knowledge of which would assist top management in its task charting the company’s future course of action. (Aguilar,1967). Comparably, finance, marketing, and operations will have the greater impact on plant operations and management’s decisions in determining if the operation continues its business.

First, finance is responsible for acquiring financial resources at favorable prices and allocating those resources throughout the business, as well as budgeting, analyzing, investment proposals, and providing funds for operations. Secondly, marketing aims to analyze and determine consumer demands in the future, then selling and promoting its products and services. Thirdly, operations are responsible for production of goods and customer services in business. In addition, the production of goods or services supply could transform inputs into outputs (Michaels, 2011). Inputs such as capital, labor, and information are used to create goods or a service. That is why companies take measurements at various points in the transformation process and then compares them with previously established standards to determine whether corrective action is needed.

In other words, the three factors; finance, marketing and operation can work in the study and interpretation of the political, economic, social and technological (PEST analysis) events and trends which influence a business, an industry or even a total market. In summary, they have the greatest impact on plant operation and management’s decision.

3. Evaluate the financial performance of the company using the information...
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