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Precision Worldwide, Inc Case

In: Business and Management

Submitted By areswang
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Assignment #2 Precision Worldwide, Inc

Precision worldwide Inc is currently in the dilemma of determining how to go about the introduction of a new French and Japanese prototype of their steel ring. The French were able to reinvent this plastic ring at a lower cost and more durable at the same time. This is extremely detrimental to the steel ring market and will force precision worldwide out of business if actions are not taken.

Related Business Issues 1. Excessive inventory levels of steel rings
Hans thorborg carries large quantity of steels rings and special steels inventory, which values about $390,000. The special steels couldn’t even sale as scrap as it described in article. The article also indicates that hans thorborg will cost $110,900 to convert special steels into 34500 steels rings. Hans thorborg needs to take in to account the sunk cost of the steel ring and how to be effective with the production of the plastic ring. The sunk cost fallacy is that sunk costs are sunk whatever your decision is and only the future matters. The fallacy in thinking about the sunk costs is precisely that people feel completed to get their moneys work even if it makes them suffer Whether or not the steel rings sell. The second aspect that will influence han`s decision is the will still have over 15000 units when the date of plastic rings roll out.

2. Cost of Steel Rings and Manufacturing Facilities
The total cost of 100 steel rings is $1107.90, which is about 3 times of the cost of 100 plastic rings. As described in this article that plastic rings has longer life cycle compared to steels ring. The lower cost advantages of plastic ring to customers will significantly reduce the steels ring market. And those companies, which are not following the market trend, will eventually encounter serious problems in their business. On the other hand, hans thorborg…...

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