Let’s assume that the business that you have selected for the discussions throughout this course has
flourished. The business has grown by having a number of branches throughout the Central Texas area.
For example, if you have chosen to open a restaurant in Killeen, TX, you now have about ten restaurant
branches throughout the Central Texas area.
One day, you heard that your employees are preparing to form a company-wide labor union. The main
motivation of employees for forming a union is to receive X% of pay raise. The employees feel that the
company’s overall pay level is too low compared to other companies in the same industry that are
similar in size. They feel that at least X% in pay raise is necessary for themselves to be satisfied with their
pay level.
After running a simulation, however, you found out that X% in company-wide pay raise will make the
net profit level just above zero, with an assumption that the productivity and all the other conditions
remain the same.
With the above case in mind, answer the following four questions.
Q1. What could be some advantages of having this labor union in your company? List at least two.
Q2. Other than the disadvantage of potentially damaging the profitability of your company, what could
be some disadvantages of having this labor union in your company? List at least two.
Q3. Considering the advantages and disadvantages that you have identified, will you let the union be
formed? Or will you take measures to prevent the formation of this labor union in your company? Why?
Q4. Answer either Option 1 or Option 2, depending on the choice that you have made in Q3.
Option 1. If you have decided to let the union be formed, the union will demand an X% increase in
pay raise. It is also likely that the company will actually have to implement a company-wide pay
raise that is close to X%. In this case, what are some methods that the company and the union
can work out together to maintain the current profit level (or to minimize the loss in
profitability)? Assume that lowering the pay increase amount is not an option.
Option 2. If you have decided to prevent the formation of this labor union in your company, what
are some actions that you will take? But your actions have to be within the legal boundary. For
example, killing employees who are trying to form a union should not be your option.