You are the VP for production for a small but growing fast food chain similar to Checker’s. Cost leadership has been your company’s mantra since its inception, and the extensive one-dollar and two-dollar menus have attracted price-conscious customers for years. Armed with a number of recent customer surveys suggesting that your company ranks far below average in terms of product taste and overall quality, the VP for marketing says it’s time to move away from the cost emphasis and develop more appealing products. She insists that your chain should be able to do so without compromising its low cost position. The CEO appears to support her argument. How should you respond and why?
A. Accept the challenge and begin revising your product line to include better quality offerings. You can make up for the additional costs through higher volume.
B. Discuss with her the critical trade offs between costs and quality, and argue for a continued emphasis on low costs. Your company has been successful so far and you don’t want to end up “stuck in the middle.”
C. Retain the existing strategy, but offer to develop two or three high-end menu items. These would cost more to produce, but could be offered on a new three-dollar menu for more demanding customers.