Question

Question: Should Peach accept the deal with Young Inc. and allow this new company to oversee its manufacturing? Why or why not?

Reading-
Overview: These problems are meant to encourage deeper thinking on the material presented in the textbook. You are to answer ALL questions presented in the problem using the knowledge you have gained throughout the textbook. However, do not simply repeat what is in the book. Use that information and interpret it the best you can to apply it to the situation.
Requirements: Review the information and questions below. Provide a detailed 4-5 sentence explanation on how you would solve the problem or issue, based not only on the readings in the chapter, but your own personal experience and/or any additional outside research you perform. If quoting a source directly, make sure to cite that source, but do not rely solely on quoted materials.
Issue: Peach Inc. is a manufacturer of consumer electronic devices, including computers, tablets, and phones. Peach has earned a reputation of providing reliable high-quality products at affordable prices. The company has also earned a reputation of being a good corporate citizen with many environmental and social initiatives. For example, the company uses far more recycled materials in its products than any of its competitors. The company is also known for its charity work with educational institutions. In an effort to control costs, Peach outsources manufacturing of its hardware to many overseas factories; however, it closely monitors each facility to make sure quality is maintained. Tom Peach, the company CEO, was recently approached by Young, Inc., a company that asserts it can significantly reduce Peach’s manufacturing costs by overseeing Peach’s manufacturing. Young will find factories that it claims can maintain the same level of quality at lower costs. In addition, Young will do all the monitoring so that Peach can save the costs of monitoring and auditing the manufacturing facilities. Jorge Workman, Peach’s director of accounting, became quite concerned when he learned of the potential deal with Young. Jorge immediately went to Tom with his concerns. In particular, Jorge did not want to turn over the responsibility of monitoring the facilities to another company. Tom, however, feels that the quality control testing done locally is enough to assure that quality can be maintained, and the cost savings are very important to the company’s efforts to keep its prices affordable. In addition, Tom felt that under this arrangement, anything that might go wrong at one of the facilities would be Young’s responsibility and not the responsibility of Peach. Jorge was still not convinced. He knew how labor problems in the supply chain of Nike in the 1990s had caused significant reputational and financial damage to Nike, and he did not want to risk the same thing happening to Peach.

Answer 1

Peach should carefully weigh the potential benefits and risks associated with Young Inc.'s offer. While cost savings are crucial, Peach's commitment to quality and its reputation as a socially responsible company should not be compromised. If Peach can ensure that Young Inc. aligns with its values and maintains stringent quality control measures, entering into a partnership might be viable.

Step-by-step explanation:

In evaluating whether Peach should accept Young Inc.'s deal, it is essential to consider Peach's core values and business priorities. The company has built a reputation for providing high-quality, affordable products while maintaining a commitment to environmental and social initiatives. The proposed cost savings by Young Inc. could be enticing, but Peach must thoroughly assess the potential impact on product quality and its reputation as a socially responsible entity.

Additionally, Jorge Workman's concerns about outsourcing the monitoring responsibilities are valid, considering the historical issues faced by companies like Nike in the 1990s. To address this, Peach should conduct due diligence on Young Inc.'s track record, ensuring they share Peach's commitment to ethical manufacturing practices. A well-structured agreement outlining quality control measures and accountability can help mitigate the risks associated with outsourcing.

Ultimately, the decision should align with Peach's overarching goals and values. If Young Inc. can guarantee cost savings without compromising quality or ethical standards, entering into a partnership may be advantageous. However, Peach must proceed cautiously, considering the potential long-term consequences on its brand and customer trust.