This problem is mentioned in the text (see the sec- tion on “Organizational Alte

Question

This problem is mentioned in the text (see the sec- tion on “Organizational Alternatives”). Your task is to propose an organizational solution. To briefly recap, a manufacturer is trying to design the next generation of turbine engines for jet air- planes. The company is divided along functional lines. Engineering designs the engine, production manufactures it, and finance figures out how much to charge for it. The engineers invented a radical new design that used hollow fan blades. The award-winning design used less fuel than conventional engines, but the hollow fan blades were very difficult to build. When the Finance Division computed the marginal cost of an engine, it discovered that the new engines were much more expensive than rival engines, even account- ing for the expected fuel savings. No one pur- chased the engine. How would you make sure that this problem does not recur?

Explanation / Answer

This problem can be solved either by reducing the price or by providing a large number of benifits. Some of the benifits are:-

1. Producing a large number of hollow fan blades so that there occurs external and internal economies of scale such that over time the cost is reduced

2.Get hold of the rival's engine and trying to make some modification such that it happens that this firms price of engine is reduced after accounting for expected fuel savings

3 Attention should be shifted from fuel saving to cost minimization

4Capacity for fuel savings is another way to make sure that the problem doesnot reccur anymore

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