Case Application 2-1 Summary

Total Cost Function of the US steel Industry in the 1930s wasTC= 182 + 56 Q Where, TC= Total Cost Q= Output Here 182 refers to the fixed cost of $182 million dollarper year and 56 refers to the marginal cost of $56 million for each million tons of steel produced. The Total Cost equation for springs industry is TC= 10.65 + 0.94 S Where, TC= Total Cost S= Sales Here 10.65 refers to the fixed cost of $10.65 million dollar per year and 0.94 refers to the marginal cost of $940,000.00 per million dollar of additional sales. For Sales level of 0, 1, 2, 3, 4 and 5, the calculation is shown-

S 0 1 2 3 4 5

TC (10.65 + 0.94 S) 10.65 11.59 12.53 13.47 14.41 15.35

AC (TC/S) 11.59 6.265 4.49 3.6025 3.07

MC 0.94 0.94 0.94 0.94 0.94 0.94

TC, AC and MC of Springs Industry

18 16 14 12 10 8 6 4 2 0 1 2 3 TC (10.65 + 0.94 S) 4 AC (TC/S) 5 6 MC 0.94 0.94 0.94 0.94 10.65 11.59 11.59 13.47 12.53 15.35 14.41

TC

AC
6.265 4.49 3.6025 0.94

3.07 0.94

MC

Comments
For sales of (S=) 0, 1, 2, 3, 4, 5, Total Cost curve is gradually increasing because the sales is increasing, AC curve is declining continuously because of increased number pf sales and the MC curve is horizontal.

Case Application 2-6 Summary

Jack Welch is the leader to reengineer/redesign General Electronics (GE) into much more efficient, global, and organisation. The steps for redesigning was to make GE competitive through changes, that was needed to survive in the transformed competitive situation, boundaryless firm with cross-functional team work and which is capable of continuous changes with free flowing of information from source to utilization point. Aggressive methods like either GE would be no.1 or 2 in a segment or else the segment would be fixed, sold or closed. Rewards were made flexible, from the below to upper level. Adopted Six Sigma TQM program for quality control.

Comments
According to Peter Senge a learning organisation is based on- New Mental Model, Personal Mastery, System Thinking, Shared Vision and Team Learning. Jack Welch Made GE a learning organisation by prociding those ingredients to GE. Welchs various initiatives added value because of the following factors: 1. Goal setting and preparing the company on a corporate level for its competitive challenges at the same time asking its employees to stretch beyond the set goals and achieve more than what is expected from them. 2. Empowering employees at all levels of the organization by the process of work out. 3. Communicating his new goals and visions through the entire organization, using such tools as extensive training programs, newly formed teams and review processes. 4. Providing Esops and various performance bonus to encourage employees to perform better. Though Jack Welchs method was aggressive but in the end it paid for General Electronics.