Business Recommendations for Clear Hear

Business Recommendations for Clear Hear
According to the Clear Hear Scenario (n.d.), Clear Hear is a manufacturer of cell phones. Clear Hear has to decide to accept an order from a major chain, Big Box. The following are recommendations to Clear Hear for increasing revenue, achieving ideal production levels, determining how fixed and variable costs should be adjusted to maximize profit, and identifying methods to reduce costs. Based on these recommendations as well as Clear Hear’s statement of values, the decision can be made in regard to the order.
Increasing Revenue
In order in increase revenue, Clear Hear must differentiate the current products from the rest of the market. Clear Hear has two products on the market, the Alpha and the Beta models. The Alpha model is nearly identical to a potential order of 100,000 cell phones that will support a promotion that a major chain, Big Box, is running. An Original Equipment Manufacturer (OEM) showed Clear Hear a prototype of the Alpha cell phone. This indicates that Clear Hear’s cell phones are easily substituted by other manufacturers; therefore, distributors will go to the cheaper model. The scenario indicates that OEM has a unit price of $14, which is less than the fixed and variable costs of Clear Hear totaling $17. Clear Hear should outsource the Alpha cell phone model and focus on the Beta model.
Production Levels
An opportunity cost for Clear Hear exists in deciding the ideal production levels. Opportunity cost is the value of a resource in its next best use (McConnell, 2009, p. 155). For example, capital assets used in the production of the Alpha model will not allow for simultaneous use in the production of the Beta model. The Alpha model is in a competitive market with competition from OEM and other manufacturers. By utilizing the OEM to manufacturer the Alpha model order, Clear Hear would be in good standing with the customer with a consistent, quality product and receiving the 100,000 units in a timely...