Question

Ethics Case Swan Sports manufactures golfing equipment. Traditionally, the company has been

busy all year but has noticed that over the past few years business has fallen off in October and

November. If new business does not come in this year, the company will have to lay off some long-

time employees for those 2 months. Rob Patell, a sales representative, received an order from Bet-

ter Equipment Co., a competitor. Better Equipment cannot meet a customer’s rush order on time

and is willing to subcontract the work to Swan Sports on the condition that the Better Equipment

Co. name—not Swan Sports’ name—appear on all products. The order is at a price substantially

below Swan Sports’ usual selling price. The only way this order can be produced is to use lower-

quality materials than Swan Sports normally uses in its own products.

Rob Patell has recommended to his supervisor that this order be accepted and that lower-quality

materials be used. Patell’s reasoning includes the following points:

a. It is clearly a one-time order.

b. Swan Sports’ name will not appear on it.

c. Workers will not have to be laid off during October and November.

A differential analysis shows that Swan Sports will lose $1,000 on the order.

Required

What should the sales supervisor consider before making a decision?

Answer 1

Following points need to considered while evaluating the order:

Since it is a one time order, it might not bring in some further sales.

Since the company is at the condition of laying off loyal employees, it might impact the whole organisation working and may result in huge losses.

Even the order is giving a net loss of $1,000 but it will help in recovery of a portion of fixed cost, which in absence of sales might not.

It will not impact the naming of the Spark even if they use a poor quality material.

Hence, this job may be accepted considering the factors.