Question

Jeanine, the operations manager of an auto dealership, has been redesigning operations. She feels there are many places where the dealership can cut costs to save money. One of these is all the "perks" for customers like free coffee, freshly popped popcorn, and a children’s play area. Assume you are the general manager of the dealership (Jeanine’s boss) and an advocate of the planning/control cycle, what would you do?

Answer 1

Answer: If i am the general manager of the organization i will try to make a survey about customer relation in other competitive organization before i can conclude whether it is wise to cut down cost through removing giving out free gifts to customers like the free pop corn, coffee etc. Customers will choose other organizations where they can get the same quality service and other benefits especially in a perfectly competitive market. Rather i will suggest more profit can be made by slightly increasing the cost of services rendered to customers from which the cost of the freebies can be regained.

Explanation:Customer's satisfaction and profit maximization are the two main objectives of a firm. It is only when an organization is able to maintain good customer relationship with their customers that profit can be maximized regardless of how efficient their other services are.

Answer 2

Answer:

In conclusion, I would not approve Jeanine to cut customer-related costs that create customer experiences that are key to earning revenue

Explanation:

There are certain reasons that should guide cost cutting or reduction.

1. Cost Reduction should involve reducing and not cutting entirely the costs

2. The reduction should not affect the processes and product quality

3. The process of manufacturing may be improvised without affecting the  product quality or nature

4. Features of the product or service may be modified without affecting the quality of the product.

Hence, the innovative ways that would be ideal for cost reduction or cutting would be meaningful ways that would not compromise the quality of customer experience and most probably impact revenue; such as:

1. Sourcing modifications : Better offers or higher discounts on raw material purchases

2) Improvising processes : Looking through the value-chain and eliminating duplicated processes leading to improved efficiency

3) Energy saving equipment : Switching to leasing energy-saving or fuel efficient machines

4) Hiring processes : Improving negotiation at on boarding of new staff.

In conclusion, I would not approve Jeanine to cut customer-related costs that create customer experiences that are key to earning revenue