1-33 Ethics; Product Quality HighTech, Inc., manufactures computer chips and components.
HighTech has just introduced a new version of its memory chip, which is far faster than the
previous version. Because of high product demand for the new chip, the testing process has been
thorough but hurried. As the firm’s chief of operations, you discover after the chip has been on
the market for a few months and is selling very well that it has a minor fault that will cause hardto-
discover failures in certain, very unusual circumstances.
Required Now that you know of the chip’s faults, what should you disclose and to whom should you
2-56 Value Chain; Harley-Davidson Harley-Davidson Inc. (HD) is one of the most recognized brands
worldwide. The motorcycle manufacturer has one of the most loyal owner groups of any company.
Unfortunately, the firm’s success has come at a price. Harley has a reputation that drives
some customers away and a “this is for a different generation” effect on some potential younger
customers. Other potential customers are simply intimidated at the idea of riding a 400 1 pound
Harley-Davidson. To deal with these concerns, and to try to encourage new owners, HD developed
the Rider’s Edge program in which anyone who could pass the Motorcycle Safety Foundation’s
written test and driving test would be eligible for instructions on how to ride a Harley. The
instructions are provided by local dealers. Another new program at HD is intended to attract
women. HD publishes Harley Women magazine and has introduced a new bike, the SuperLow,
which has a lower seat height, sells for a lower price, and is more than 150 pounds lighter than the
Required Where do these two new programs fit in the Harley-Davidson value chain? From a value chain
perspective, how do these programs support the firm’s strategy?
3-52 Executional Cost Drivers; Internet Retailer Assume that you are a consultant for a start-up
Internet retailer, Bikes.com , which provides a variety of bicycle parts and accessories in a convenient
and effective customer service approach. The firm operates from an office building and
nearby warehouse located in Danville, Virginia. Currently, the firm has 10 permanent administrative
staff, 6 customer service representatives who respond to customer inquiries, and
12 employees who pick, pack, and ship customer orders. All orders are placed over the firm’s
website. An 800 telephone number is available for customer service. The firm’s sales increased
at about 20% per year in the last two years, a decline from the 50% rate in its first three years
of operation. Management is concerned that the decline will delay the firm’s first expected
profit, which had been projected to occur in the next two years. The firm is privately held and
has been financed with a combination of bank loans, personal investments of top managers,
and venture capital funding.
Required What specific executional cost drivers are important in this business? How should the firm
use them to improve its sales rate?
3-53 Structural Cost Drivers
Case A. Food Fare is a small chain of restaurants that has developed a loyal customer
base by providing fast-food items with more choices (e.g., how the hamburger should be cooked;
self-serve toppings) and a more comfortable atmosphere. The menu has a small number of
popular items, including several different hamburgers, grilled chicken sandwiches, and salads.
Recently, to broaden its appeal, Food Fare added barbecue, seafood, and steak to its menu.