Clear_Hear_Manufacturing

Recommendation to Clear Hear Manufacturing Change in technology has rapidly created a competitive market where companies’ CEO are in “war” with each other. ‘40 years ago, a company competed with another company located just down the street, today that company competes with an organization from another continent.” To survive and compete in this new global marketplace, organizations must understand both their customers and their competitors. Clear Hear, a cell phone manufacturer, meets factory standards and makes a good profit; however, the company does not operate to its full capacity: over the next 3 months, Clear Hear will have an excess of 70,000 cell phone units (University Of Phoenix, 2009). These 70,000 cell phones, if not sold, might place Clear Hear in deficit because variable costs are already used to build these phones. This paper will identify alternative strategies that Clear Hear can adopt to reduce cost, achieve ideal production levels, and, finally, adjust fix and variable costs to maximize profit.  INCREASING REVENUE Successful companies have a business operation model designed to maximize company profit. Clear Hear needs to put some marketing strategies in place to increase profit: for instance, the company needs to create a well designed website that can generate a large volume of traffic. The more people who visit the website, the more likely the customers will buy company product. To survive in this global competitive economy, the company needs to increase its number of customers, sell at a price lower or equal to the competitor’s price. Selling at a lower price can increase revenue for Clear Hear if demand for cell phone increases. Original Equipment Manufacturer (OEM) is considered one of the toughest competitors to Clear Hear because this company is in a position not only to supply 100,000 cell phone units on short notice but for a nonnegotiable price of $14.00. How OEM is able to operate on a reduced price compared to the $20.00 per unit price that Clear Hear charges' Big Box, Clear Hear’s customer, has been able to go to OEM and easily obtain a similar product for less. Therefore identifying a method to reduce cost must be a priority for Clear Hear if it is survive this market. IDENTIFY METHODS TO REDUCE COSTS Cost reduction is an important factor in business. Sometimes the right strategy to stay in business has to include pleasing the customers. Clear Hear’s top management should sit down with their company accountant in other to find specific areas where spending can be cut without jeopardizing the quality of the product. Reducing cost can make Clear Hear a stronger company and therefore increase its profit. Meeting with the company accountant will help eliminate unnecessary expenses. Clear Hear can choose different methods such as downsizing and reducing customer service levels. Each one of these methods must be implemented very carefully otherwise it might end up hurting the company: sometimes good employees resign due to job insecurity. When that happens the company is left with fewer devoted workers. Clear Hear needs to define how the role of each employee impacts business before laying off anyone. The cut must be done from top down, not from bottom up. Another way that cost reduction can be done is for Clear Hear to form an alliance with its raw material suppliers so the company can get supplies to make cell phone at a discounted price, one that is lower than the competitors (Ravindra, 2008). The partnership will allow Clear Hear and its suppliers to share products quality and improvement. This strategy will not only reduce cost but will allow Clear Hear to offer a better price, a better quality to the public which its competitor will not be able to achieve. ACHIEVE IDEAL PRODUCTION LEVELS Can Clear Hear reduce cost by downsizing and still achieve ideal production level' The number of employees is not equivalent to high level production, and the opposite is also true. However, it is possible to downsize and have a more efficient team of hard workers who can deliver maximum level of production that a company needs to operate. My proposition to Clear Hear is to create morning, and night shift positions of 8, 10, and 12 hours. The company should allow employees to self-schedule so they can have time to take care of their families. By doing so, employees will be happy and turnover can be dramatically reduced. Happy workers will produce more and will not waste company supplies. In addition, Clear Hear can boost its production level by creating a comfortable workplace environment, where employees are not feeling threatening or unsafe. The company can also create a method of competition within its departments first by creating a monthly production level goal. This will allow every single worker from the department that achieve the goal first to come to work or leave work two hours early with pay. “People enjoy to be rewarded for hard work; your employees are no different; when they put in a lot of effort, they want to see something good come out of it.” (Stone, 2007) ADJUSTESD FIXED AND VARIABLE COSTS TO MAXIMIZE PROFIT Maximize profit is any business’ main objective. Clear Hear is also looking for ways to adjust fixed and variable cost to obtain maximum profit. All production involves fixed and variable cost but since fixed cost does not generally change with the level of production, variable cost changes depending on the amount of output. Clear Hear needs to focus on adjusting its variable cost. Although fixed cost cannot be adjusted in the short run due to the fact that it does not change the point where MR = MC, but it can be adjusted in the long run. One of Clear Hear’s recommendations calls for downsizing the number of employees; by doing so, the company will eventually reduce its fixed cost in the long run and eventually increase its fit. On the other hand, Clear Hear by forming a partnership with its suppliers (suppliers will provide discount rate) will in part reduce its variable costs which will again added to Clear Hear Profit in both short and long run because variable costs change the point where MR = MC. Below are two graphs that illustrate Clear Hear profit if Clear Hear reduces its variable cost. CONCLUSION Keeping product quality while reducing business costs to save money can be tough but it can be done if management carefully reviews its spending habit. Often this will involve reducing waste in supply and workers time at work, award workers who deliver quality work, getting quality goods from suppliers at a discounted rate, and using some form of total quality management (TQM) tools. Sometimes it may involve training workers to keep them up to date, “Lack of proper skills--and especially the latest skills--can prevent a company from being a leader, as well as affecting the bottom line—profit” (Ravindra, 2008). References Ravindran, N. (2008). Effective ways of reducing business costs:. Entrepreneur Magazine, Retrieved September 19, 2009, from http://www.entrepreneur.com/tradejournals/article Stone, J. (2007). 5 Ways to Increase Production in Your Business. Retrieved September 21, 2009, from http://ezinearticles.com/'5-Ways-to-Increase-Production-in-Your-Business&id=863604 http://www.globusz.com/ebooks/Costing/00000011.htm