Superior Manufacturing Company - Case Study Example

This research will begin with the statement that considering the income statement and results of analysis of the profit and loss account by each item and factory, Waters’ decision to decision to keep product 103 was not rational, at least in the short run. This is because the company was operating at a loss and a decision to streamline causes of the loss was necessary, considering the tight competition in the industry. Analysis of products’ costs and revenues identified product 103 as the major cause of the company’s realized loss and its elimination would help the company in reducing its loses.

In addition, and even though the company is less differentiated than its competitors are, focusing on stopping production of product 103, would promote the company’s specialization and this, together with focusing the resources on the remaining two products would empower the company towards competitive advantage, based on economies of scale and efficiency. Possible increase in operating income by at least $ 688, would however justify Waters’ decision to retain product 103. This is because the change would eliminate loss that the company suffers and would eliminate the urgent need for streamlining operations.

In either case of operating income, Harvey’s position remains realistic. The researcher states that analysis of possible cost and revenues for the two options informs the decision to reduce the price or not.