BUS 5910 – Week 4 – Written Assignment

Blaze Manufacturing – An Ethical Analysis

BUS 5910 – Management Capstone

University of the People

Abstract

In this assignment, I will review the case study Blaze Manufacturing – An Ethical Analysis.

Then will identify the problem, diagnose the causes, prescribe alternatives, and recommend a

course of action, relevance of the case study and the limitations of the case study.
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Blaze Manufacturing – An Ethical Analysis

Blaze Manufacturing is a textile manufacturing operation based in New York. They

manufacture curtains and bedspreads for institutional customers, mainly hospitals and hotels.

Due to shifts in textile industry, many companies in textile manufacturing have shifted their

manufacturing operations to outside the US due to lower costs. Blaze's competitors can provide

similar goods for a lower price than Blaze. This has caused Blaze to lose several long-standing

customers. Blaze's management is concerned about not being able to make a profit that year.

Blaze is not a mass production operation, rather it produces goods based on specific

requirements from the customers. Customers can customize based on their needs of size and their

liking for color, design and format. Blaze’s employees are Joe, the President, Bill, the lead

salesman and Wendy who works as a temporary controller, filling in the role for Mike who is a

retired controller. Blaze manufacturing is a subsidiary of Omega Consulting Partners. George

and his family founded the Omega Consulting Partners and they also own significant stock in

Blaze manufacturing. Wendy is a full-time employee for Omega Consulting, and she is very

qualified and capable controller.

Identify the problem in financial terms

Blaze Manufacturing recruited a new customer whose initial order was quiet substantial.

As a part of Blaze Manufacturing Wendy was requested to perform profitability analysis and

determine if the new customer would bring in profit. Wendy performed a detailed analysis of the

process of making the goods and has prepared a Profitability Analysis statement. She reported

that the gross margin per unit is negative 1.25$ and that the selling price of the item, won’t even

cover the costs to make it. Wendy suggested to Bill, the lead salesman to increase the selling

price so that Blaze Manufacturing, or else drop the unprofitable customer. The problem here is
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that Bill disagrees and thinks that the selling price should not be increased, because the

competitor prices are already cheaper. Bill is of the opinion that if Blaze manufacturing makes

enough units for this new customer, that the production costs will be lowered due to economies

of scale and that the new customer will eventually be profitable. Not paying heed to expert

advice, Blaze manufacturing went ahead with the new customer and within a year was

liquidated.

Operational situation that created the problem

As global trade barriers were eliminated, access to foreign markets for American

manufacturers has opened. Manufactures in the United States discovered that it was cheaper to

outsource manufacturing activities to countries overseas where people are willing to work

significantly less per hour and also the limitations and regulations on manufacturing procedures

are not the same as in US (Glocker,2017). Manufacturers are also lowering the price of goods,

manufactured overseas. This trend has impacted the Blaze Manufacturing. Blaze Manufacturing

has lost significant customer base and is fearing an unprofitable year. Bill and Joe want to

acquire and fulfill the needs of a new customer, even if it means a short term loss.

Possible alternatives

Selling price increase: Blaze manufacturing could have raised the selling price per

Wendy’s suggestion. Wendy’s detailed analysis shows that the costs incurred by Blaze are well

researched and the increase in selling price is warranted.

Drop the customer: The costs of acquiring a new customer are skyrocketing. It may

seem imperative to provide the goods to the customer at even at loss in hopes of a future profits.

However, I would recommend dropping the customer since he is unprofitable. As we have

reviewed earlier, Blaze is already anticipating a loss due to old customers moving to their

competitors, adding a new customer at a loss would only make matters worse.

Many businesses are considering customer divestment as a viable strategy to reduce costs

and increase profits. Customer divestment is defined as a strategy where a company stops providing

a good or service to an existing customer (Mittal, 2008).

Recommended plan of action.

There are several approaches Blaze manufacturing could use to increase the selling price.

Add value: Blaze manufacturing should create a bundled product by adding features that

return a profit and make a big impression on the customer. Instead of just selling the product to

the new customer (Score, 2019). Blaze manufacturing can create a bundle with another accessory

like pillow cover and increase the overall price of the bundle to make the deal profitable.

Tiered Pricing: Blaze Manufacturing should adopt a tiered pricing strategy. It should

define a price per unit depending on the range of number of units sold. As the number of units

sold increases, savings from production costs can be used to lower the price (Melanie, 2017).

Example:

0-500 Units - 80$ (This will return a gross profit margin of 1.75$ per unit).

501-1000 - 78$ (This will return a gross profit margin of 1.75$ assuming another $2 can be

reduced by bargaining with direct material supplier and reducing variable costs.)

Importance of case study

The case study is important as it sheds light on how external forces like shift in industry

trends to manufacture overseas impacts the price and competition for Blaze Manufacturing

products. It offers food for thought about customer divestment. It also speaks about the
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importance of policies and procedures an organization should have for conflict resolution in

cases.

Limitations of the case study

The case study does show the overall financial reports for Blaze Manufacturing. It only

talks about profitability analysis for the new customer. Information on profits from other

customers would be useful. The new customer may open strategic avenues for growth in new

markets, and Blaze Manufacturing could probably tolerate a small loss in hopes for future profits

and strategic expansions. The case also does not provide information on the motivation for Blaze

manufacturing to not follow industry trend and move their manufacturing operations overseas.
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References

Causseaux, W., Caster, B. (2016). Blaze Manufacturing: An Ethical Analysis. Retrieved

from https://my.uopeople.edu/pluginfile.php/1184435/mod_workshop/instructauthors/

U4%20Blaze%20Manufacturing.pdf

Melanie. (November 6, 2017). What Is the Difference Between Tiered and Volume

Pricing? Retrieved from https://www.unleashedsoftware.com/blog/difference-tiered-volume-

pricing#:~:text=What%20is%20Tiered%20Pricing%3F,%E2%80%9Ctier%E2%80%9D%20has

%20been%20sold.&text=Once%20these%20tiers%20have%20been,units%20would%20cost

%20%245.50%20each.

Mittal, V., Sarkees, M., Murshed, F. (April 2008). The Right Way to Manage Unprofitable

Customers. Retrieved from https://hbr.org/2008/04/the-right-way-to-manage-unprofitable-

customers

Score. (May 18, 2019). How to Raise Prices Without Losing Customers. Retrieved from

https://www.score.org/resource/how-raise-prices-without-losing-customers#:~:text=Instead

%20of%20raising%20prices%20for,fees%20to%20go%20away%2C%20too.