27 Do you think that reducing the number of employees is the best way for CFE to reduce costs? Justify your answer. [6]

[BASEL Moderator]

CFE makes high quality steel used in shipbuilding. 40% of its output is exported. CFE’s equipment is old and often breaks down. CFE plans to downsize (reduce) its workforce and 1200 of its 2100 skilled employees could be made redundant. The Managing Director blames reduced demand because of recession in some economies. A trade union spokeswoman said: ‘Where are the opportunities from globalisation? This decision will affect many stakeholder groups. There must be another way for CFE to reduce costs.’

27 Do you think that reducing the number of employees is the best way for CFE to reduce costs? Justify your
answer. [6]

Possible KN Points:
• Less workers needed
• Change may only be temporary
• Costs of redundancy
• Save labour costs
• Damage to reputation
• Negative impact on motivation of other workers
• Relocate
• Update equipment
• Buy cheaper raw materials