Reference no: EM13856062
Question:
Read the Mini-Case information below and answer the four (4) questions using both the information presented as well as what you have learned in Chapter 6 and any relevant information from previous chapters (if applicable).
- Write 1-2 single-spaced pages in 11pt or 12pt font.
- Include each question you are answering (it should be clear what questions you are answering and what responses belong with what questions).
Hint: You have limited space to answer the questions. You must be thorough but concise in how you answer. In other words, you need to answer the questions fully and justify your answers without writing non-essential information. If I need to ask ''why?'' it is likely you have not justified your response. Begin by making a strong statement and then use the following sentences to justify your response.
One method of doing this is answering the ''who, what, where, when and why'' of a question.
*You should not need to cite any outside sources in order to receive full points on this assignment.
Mini-Case Information (also available on pg. 190 of the textbook)
In 2007, Circuit City, a large U.S. consumer electronics retailer, was facing strong competition from larger rivals such as Best Buy and Costco, which forced Circuit City's top management to seek ways to economize on operational costs. The result was an extraordinary decision to lay off 3,400 people, or about 8 percent of its workforce: not because they were doing a bad job and not because the company was eliminating their positions, but rather because executives determined that the workers were being paid too much and that the company would replace them with new employees who would be paid less.
The laid off employees worked in the company's stores and warehouses, selling electronics, unloading boxes and related tasks. They generally earned $10 to $20 per hour. Eighteen months later Circuit City filed for Chapter 11 bankruptcy protection just before the holiday shopping season at the end of 2008. At the time of the bankruptcy filing, the chief financial officer of the retailer attributed the company's poor financial position to an erosion of vendor confidence, decreased liquidity, and the global economic crisis. Recently, suppliers affected by the global credit crunch had tightened terms of credit they extended to the retailer, sometimes requiring up-front payments before shipping goods. In early 2009, a few months after filing for bankruptcy Circuit City went out of business and its assets were liquidated to creditors.
Wall Street analysts believed one of the main reasons for the rapid demise of Circuit City was that it had basically destroyed customer loyalty among its best customers by laying off the most experienced sales staff, which also undermined employee morale and greatly reduced the service provided to customers. Without its top sales staff, Circuit City could not sustain its sales revenues in challenging economic times.
Questions
1. Who are the stakeholders in the case and why?
2. When making decisions it is important to examine reasonable alternatives before settling on the best alternative for the decision at hand. What reasonable alternatives could top management of Circuit City have considered to laying off their most experienced employees?
3. Was there a better/best alternative than a layoff at Circuit City? Explain the basis for your choice.
4. Why do you think companies such as Circuit City that are facing economic challenges so often choose to layoff employees rather than explore other alternatives that might produce better long term results?