Given the larger population runs in The States than in Canada, the costs are spread over more units. In fact in The States a cost over run of 10% could be dumped in Canada. Given the law of demand, what would happen to the Canadian company? If you worked for that company, what would happen to your job?
Could Someone please help me? What does it mean by a 10% cost over run being dumped in Canada? Thanks a lot.
A cost overrun is when a project or endeavor exceeds its planned or budgeted cost. In this case, it means that if a project in the United States goes over budget by 10%, the extra cost could be passed on to the Canadian company. This could happen because the larger population in the United States means that the costs are spread over more units, making it easier for them to absorb the extra cost.
In terms of the law of demand, if the Canadian company has to pay for the cost overrun, it may have to increase the price of its products or services to cover the extra cost. This could lead to a decrease in demand for the company's products or services, as consumers may choose to buy from cheaper competitors.
If someone worked for the Canadian company, their job could be affected if the company experiences a decrease in demand and has to lay off workers to cut costs. Alternatively, the company may try to find ways to increase efficiency or reduce costs in other areas to offset the cost overrun and avoid layoffs.
In the long run, the Canadian company may also consider renegotiating the terms of the contract with the US company to ensure that any future cost overruns are either shared or avoided altogether. They may also consider diversifying their supplier base to reduce their dependence on any single supplier or market.
Overall, a cost overrun can have significant implications for all parties involved, including the supplier, the buyer, and their employees. It highlights the importance of careful planning, risk management, and effective communication to ensure that all parties are aware of the potential risks and can work together to mitigate them.
In addition, it is important for companies to have contingency plans in place to address any unexpected costs or delays. This may include having a reserve fund, establishing clear escalation procedures for resolving issues, and regularly reviewing and updating project plans to identify and address potential risks.
Ultimately, effective cost management requires a proactive, collaborative approach that involves all parties in the supply chain working together to identify, manage and mitigate risks. This can help to ensure that projects are completed on time, within budget, and to the satisfaction of all stakeholders involved.