Your Turn * Chapter 1
The Role of Labor Costs in the Retail Electronics and
Airline Industries pg. 27
1.
Thinking back to our discussion in the chapter
section, Caveat Emptor- Be an informed Consumer, evaluate whether the
replacement of highly paid workers with lower paid workers did or did not cause
Circuit City to perform so poorly. How confident are you in your evaluation?
Why?
2.
Do you believe that the compensation changes at
Best Buy are a major reason for its current difficulties?
3.
Why are Walmart, Samâs Club, and Costco doing
better that Best Buys (and Circuit City)? Do they have high pay?
4.
Are the larger problems in the competitive
landscape for Best Buy that cannot be solved by compensation strategy changes
alone? When customers look to buy electronics, what options do they have other
than Best Buy and why would they choose these options over Best Buy? Where do
customers âtest driveâ the product and where do they buy it? Can compensation
changes address these challenges? Explain.
5.
In 2011, American Airlines had labor costs of
$7,053,000,000 and ASM of $154,321,000,000. If they are successful in cutting
$1.25 billion per year, what would their labor cost/ASM be and would that be
competitive with USAir? If you are interested, you may wish to do more reading
about Americanâs plan to cut labor costs to learn more about how they propose
to do that.
6.
What is your opinion on whether this change in
compensation would significantly enhance Americanâs ability to compete in the
airline industry? How does Americanâs position compare to that of Best Buy? Is
having a competitive labor cost of equal importance in the two industries?
Explain.
1.
How do differing perspectives affect our views
of compensation?