Shui Fabrics Company: Operational Costs and Strategy

According to Ray Betzell, the rate of returns on investment that Shui Fabrics was making was too low compared to the expectations of the Americans and that was the reason why he said that the Chinese manager Chiu Wai could not be pleased by the way things were happening; as the president of the company had also started complaining that the low rate of returns on investment the company was making compared to other global companies. Due to the low rates of return on investment, Ray Betzell had been broaching the subject of possible layoffs to his Chinese staff so as to enable the company achieve higher rates of return on investment than the 5% they were doing.

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From Chiu Wai’s perspective, the rate of returns which Shui Fabrics was making was at the normal level; the rate was not that too little to complain and neither too high for the Chinese administration to investigate chances of exploitation. His view was supported by the fact that most of the USA- China companies operating at that time were still operating in the red tape where they were even not breaking even due to the high costs which were involved and thus a rate of return of 5% from the company was favorable.

According to Chiu, the company was fulfilling his expectations due to the fact that the company was able to employ 3000 people in China thus making a big contribution to the economy. At 5% annual return on investment, these rates were good according to Chiu as they could never land him to any problem with the Chinese authority who viewed the high profits made by western companies as exploitative.

The differences between Ray Betzell’s and Chiu Wai’s over Shui are very critical to the issue at hand. Wai’s ideas are very different from Shui’s views over the firm. This poses a big problem because they ought to differ in making critical decisions about the firm.

First, Wai was convinced that Shui was making the right amount of profit. He comments that the profit was not unnecessarily too much neither too little. Therefore, the company was producing at the right level. On the other hand, Betzell thought that the company was experiencing exploitation as the return on investments was too low (Daft & Marcic, 2010). He thought that the fraction should rather be above the current 5 per cent. These differing views pose a major problem on the existence of the organization. Their views are based on their location rather than the profitability of an organization. This poses a major problem in the management. It becomes difficult to come up with the right decisions effectively in such situations.

Wai was comfortable about the prevailing situation at the company. He is comfortable that the company has helped in creating the jobs for many people in China (Daft & Marcic, 2010). This significantly helped the nation in reducing the cases of unemployment. Therefore, Wai is comfortable with the prevailing system of production which was more labor intensive. On the other hand, other parties were discouraged about the excessive costs the organization was incurring.

Their views was differing with Wai’s who thought of employing sophisticated technology and improve on efficiency in order to cut down its workforce significantly (Daft & Marcic, 2010). On the other hand, Wai and government policy makers are impressed by the job creation through this firm. This will therefore lead to tensions which may even trigger reactions by the labor unions.

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There are several ways which can be used to solve the prevailing problems at Shui in order to solve the differences between the leaders. However, there still remain some restrictions over the extent to which adjustments can be made. According to Lebedun (1999), differing opinions between the leaders in most cases leads to conflicts, which negatively affects the productivity of an organization. Therefore, any difference should be tackled as soon as possible to solve the discrepancies.

In order to solve the prevailing problem in the company, two things should be considered. First, something must be done on the returns on investment. This is one of the main areas of differences between the leaders. Secondly, something must also be done on the production system in order to please the boss back in the U.S.

The organization can negotiate with the government to have the policies imposed on the firm softened. To date, the company is forced to follow excessive government regulation which has significantly affected the running of the organization.

The companies perform better by reducing its operational costs if some of these regulations were softened. This can significantly improve the performance of an organization. For instance, the firm can negotiate with the government to have the ROI increased to some level. The leaders can also negotiate with the government to reduce other obstacles, which increases the costs in the firm. This will significantly help the organization in improving its profitability and may please the leaders.

Instead of laying a significant number of employees, it is also advisable for the company to consider other methods of reducing expenses. For instance, the leaders can organize employee training which can significantly help in improving the productivity of employees. The company can also improve the productivity of its employees through motivation. This will help in reducing the total production costs.

The above proposed strategy has several benefits over the status quo. It seeks to solve the problems as it tries to maintain the prevailing conditions. According to Jager (2005), it’s important to consider the status quo while implementing changes in an organization. Therefore, the method is likely to be accepted since it does not significantly affect the prevailing arrangements. Thus, is one of the main advantages of this strategy.

Through this strategy, the company will manage to reduce the operational costs by improving the employee productivity rather than laying them off. This is as opposed to Paul’s idea of replacing the workforce with a sophisticated technology. By increasing the productivity of employees, the company will be able to get similar results while impressing the needs of both sides. By making negotiations with the government to soften the policies, the company will also be able to increase their profits. Paul’s major concern is the level of returns in the firm. Therefore, increasing the level of returns will help to solve the problem and maintain the status quo at the same time.

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Reference List

Daft, R. & Marcic, D. (2010). Understanding Management. Mason, OH: Cengage Learning.

Jager, P. (2005). Dissecting the Status Quo. Web.

Lebedun, J. (1999). Between You and Me: Solving Conflict. Web.

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StudyCorgi. (2021, March 12). Shui Fabrics Company: Operational Costs and Strategy. Retrieved from https://studycorgi.com/shui-fabrics-company-operational-costs-and-strategy/

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