Business Finance Homework Help

We have recently been approached by a firm in South America which has offered to manufacture our product and ship it to our home area for two thirds of what the product currently costs our firm. The South American firm has good references and has a record of high quality performance. It also has the capability to upgrade models as often as once a quarter.

On the surface, at least, this offer looks very attractive. However, we need to examine it in depth. If we accept the offer, we could sell our product at a lower price, thus benefiting our customers. Our profits would be higher which would benefit our stockholders. However, we would close our production plant(s) and lay off most of our production staff. This would have a serious impact on our current employees as well as on the surrounding community. We need to explore thoroughly the ramifications of this opportunity prior to making a final decision.

I am calling a special Board meeting to consider the offer. Please develop a position on the following issues prior to the meeting.

1. How would our stockholders be affected by the change?

2. How would our customers react to the change?

3. What is the impact upon our employees if we accept the offer?

4. What is the impact upon the community if we accept the offer?

5. Is there likely to be any governmental action if we accept the offer?

6. What is the reaction of our competitors likely to be if we accept the offer?