Case Study Toys, Inc., is a 20-year old company engaged in the manufacture and sale of toys and board games. The company has built a reputation on quality and innovation. Although the company is one of the leaders in its field, sales have leveled off in recent years. For the most recent six-month period, sales actually declined compared with the same period last year. The production manager, Ed Murphy, attributed the lack of sales growth to the economy. He was promoted to undertake a number of belt-tightening moves that included cuts in production costs and layoffs in the design and product development departments. Although profits are still flat, he believes that within the next six months, the results of his decision will reflected in increased profits.

The vice president of...