The Overhead Reduction Task Force

Harvard Business Case

10-16-07

The Overhead Reduction Task Force: A Case Analysis

The Facts

Central Foods Corporation just hired a new General Manager, Georgia Dixon, to run the deteriorating Countertop Appliances Division. This new division was formed after Central Foods acquired Kitchen Help, Inc. six years ago. With sales decreasing quite dramatically over the past three years and overhead costs at their peak, Dixon is in charge of implementing positive changes in her department. For one of her first moves she appointed Larry Williams as head of the new Overhead Reduction Task Force. This task force is being formed to decrease overhead costs by 20% in the next four months while also increasing sales.

External Factors Affecting CFC

There are three main external factors that are influencing the overall sales production in this case. First off, one of CFC’s major competitors introduced a new household coffee maker that sold at the same retail price as CFC’s coffee maker, but CFC did not have the same innovation incorporated into their product. Secondly, another main competitor of CFC launched a new and improved microwave oven, which severely hurt Countertop’s sales of the same product. CFC’s product line still has not made a comparable substitute for this newly designed microwave oven. Finally, competitors’ pricing of the kitchen products was 10% lower than CFC’s pricing for the same products. CFC believed that these competitors would eventually have to increase their price to cover their actual product costs (which wasn’t the case in this situation), therefore, they kept their prices constant hoping to regain customers eventually.

General Internal Factors Affecting Sales Depreciation

There are not only external factors contributing to the overall decline in sales in regards to CFC, but also internal factors that play a key role as well. One apparent internal factor is the evident paradox presented in this case, whereas there has been a...