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1. BCD Company is a distributor of medical products in hong kong. Owing to declining business, the company decided to cut labour cost for its clerical
and supporting staff by 30% to improve its profit margin. Three senior managers, Peter, John and Mary, met to discuss how to implement the cost reduction plan.

'I wonder what kind of people we have to lay off to get the 30% decrease in labour cost. 'John said. Peter suggested: 'I think we should keep those who have been with
the company for a linger time and lay off those with a shorter service. ' John disagreed: 'Why don't we lay off those with unsatisfactory
performance first?'

Mary remaked: 'Cutting labour cost does not necessarily mean laying of people. There could be other options. Meanwhile. staff morale should
not be overlooked. Would it be better to consult and negotiate with staff representatives to come up with a plan acceptable to all parties concerned?'

Jhon rejected the idea, 'It is very difficult to have effective communication with staffs on such matter as redundancy. We have to keep everything secret until the day we
deliver the termination letters to staffs.'

a) From the cmpany's perspective , describe two arguments each support
1.the proposal of laying off staff made by Peter
2.the proposal of laying off staff made by John

b) Apart from laying off staff , list three other possible ways cutting the labour cost of BCD Company

c) lllustrate how BCD Company could apply the rational decision making process to formulate the labour cost reduction plan

d) Why would it bee difficult for the management of BCD Company to have effective communication with staffs on redundancy ? Suggest two reasons

e) Explain three possible problems of keeping the redundancy plan secret until the day of delivering termination letters.



2. Suppose you have the following three alternatives when starting a small business:
a) opening an entirely new business
b) opening a new business under a franchise
c) uying an existing business


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