Strategic Practice Exercise
From an ethical standpoint, I would suggest Zombie Savings and Loans stay in business. Keeping the doors open would allow them to accrue new customers to help with the issue of high interest rates putting them at a loss. Not only could they seek new customers, but they could also seek more stakeholder shares. Doing so would bring more capital to the bank to help make up for the loss it is currently seeing. They could also consider selling stocks and bonds to raise the additional money. I believe this is the best choice for Zombie S&Ls because high interest rates are only temporary. They rise and fall all of the time. If Zombie could ride them out they can keep the company, employees, stakeholders, and customers alike happier. If they choose to close they are leaving many people involved in a difficult situation.
The pros and cons involved with this decision making are simple. The pro is that if the company is able to pull through this difficult time they gain new high interest customers, please stakeholders, retain their current customers, and keep many people working. The cons of this scenario are that by taking on this high risk they are assuming to continue to operate while they stay in the red. This means that they will have more debt if they do have to close down at a later date. It is a high risk situation, but since they are the only S&L business in the immediate area and have several current customers they should take the risk.
If my solution works, it will have an overall positive impact on Zombie Savings and Loan. By taking this risk and enduring until interest rates drop again, they are proving their durability in the economy. This is something that customers will consider important when choosing a S&L. If my solution does not work, it is a dim fate for Zombie S&L. If it takes a long time for interest rates to lower, Zombie may not be able to continue to operate in the red and may end up closing...
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