Margaret Peake’s Office, 1 Year Earlier

Margaret PEAKE: It’s absolutely vital that we cut our costs and we’re asking all our suppliers to play their part. If we don’t reduce our own selling prices by 5% per annum over 3 years, we’ve had it, and so have you.

Carl RITCHIE: That’s possible, but we’ve made huge efforts over the past 2 years and our margins have been slashed.

Margaret PEAKE (smiling): Oh, I’ve heard those arguments before. Our own sales reps use them on our customers, and sometimes it allows us to negotiate something in exchange. However, as things stand…

Carl RITCHIE (interrupting): In the meantime, we’re faced with an increased wage bill and raw materials costs, and we have to make a reasonable margin on our products or we’ll be unable to invest for the future, and then it will be our customers who lose out.

Margaret PEAKE (more tersely): That’s all very well, but you don’t seem to understand that we have absolutely no choice because of the new competitors we are dealing with. Our purchasing department has been given clear instructions to cut costs by an average of 5% from this year on, and that applies to all our suppliers.

Carl RITCHIE: You want to have your cake and eat it too! We’re obliged to trim prices, raise performance levels, slash deadlines, and now cut our prices by another 5%.

Margaret PEAKE (calmly and more slowly): Yes, it is a hard burden for you to bear. If you’re not up to it, that’s your problem. In every competition, there are winners and losers—in every war, there is a victor.

Carl RITCHIE: Just hold on a moment! I wasn’t saying that 5% was out of the question.