To move or not to move, that is the question.

A manufacturing company is faced to consider relocation to another country in the face of increasing production costs and declining profits.  The primary cost drivers are those associated with labor–wages and benefits–and pollution control and safety requirements driven by stringent U.S. regulations.  A consultant hired by the company has provided three relocation options with varying labor rates and environmental and safety regulations (all less stringent) which are more attractive to the bottom line than doing business in the U.S.  The company, a major employer in several communities, is well aware that closing shop in the U.S. will have a major economic and social impact in those communities.

 

The three relocation options are Mexico—low wages, high turnover, low level of safety and environmental regulation, the Philippines—even lower wages, similar environmental and safety  regulations as Mexico, or South Africa—better wages than Mexico and the Philippines, reasonable environmental and safety regulations.  The Philippines would be the best choice for the company’s bottom line.

 

First, would you relocate?  Second, if you choose to relocate where would you go and why?

The original case study can be found here:

<a href=”http://www.scu.edu/ethics/dialogue/candc/cases/relocation.htm” >The Case of the Plant Relocation</a>

M. Duquette

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One Response to To move or not to move, that is the question.

  1. greenmba2008 says:

    If I were at the reigns making this decision I would first offer up that I would need some help.

    That said, I think the decision would come down to crunching the numbers and looking at alternatives to do more with less here at home. Some layoffs or down sizing would be inevitable.

    For example, consider offering choices to employees….
    1) like reduced pay and benefits as opposed to no job at all
    2) A 4 day work week instead of a 5 day week
    3) Cut overtime
    4) Trim around the edges where ever possible to find the balance

    When faced with these options some employees might self select and move on to a different job minimizing the need to initiate layoffs. Operations would scale down in the US but not secream to a halt.

    I would also consider pairing this approach with sending some work out of the country and keeping some here at home. Imagine a US based company with some operations out-souced to save money on labor. Out of country labor policy would need to beresponsible and fair and environmental strategy consistant or above standard with the countries policy.

    Is this a sell out? Partially, however, as a leader of the company I would make it a goal to bring the business back to a highly competitive and profitable level. Part of the strategy would be to strive for bringing the jobs back to the US over time.

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