Mid Term Case Essay
Eastern Waves Inc. is a steel manufacturing company located in Kuantan, Malaysia. In 2009, Eastern Waves’ cash on hand was 188 ringgits (RM). In the previous year, they had an even lower cash balance of RM188. Without cash, Eastern Waves are unable to purchase raw materials from local raw material suppliers. Eastern currently has a joint venture relationship with Jinan & Iron Steel Corp., which enables Eastern to buy scrap steel on credit from the Jinan plate mill operation. This scrap steel is crucial to Eastern’s success given the market price of the purchased raw steel billets. However, the scrap steel is of a lower grade than the standard raw steel billet.
The new …show more content…
Also, Eastern is having difficulty with the governmental labor department. The domestic workers are protected under very strict labor laws and are generally difficult to manage because of the worker-friendly laws. There is a large supply of local workers; however, it is hard to terminate them. Meanwhile, the workers are free to resign or quit at any time they feel necessary. The local workers demand to be paid in full each month whether they work or not. Eastern’s difficulty in controlling their labor situation makes it very difficult to adjust to the demand fluctuation of angled steel.
Due to the increase in steel prices in Malaysia, Eastern has been researching alternative sources or a billet substitute. One suitable substitute is the trimmed sides of the steel plates, which are waste by-products. However, the qualities of these sides are lower than the billets and the cost of these scraps are also increasing. Eastern China started a joint venture with Jinan Iron & Steel Corp. As one part of the joint venture agreement, Jinan Iron & Steel has agreed to provide trimmed sides at a favorable price. However, there are several difficulties remain. First, the scrap steel that Jinan provides is of a lower grade. Another problems is that, if Jinan is not producing at a high level, Eastern will not be receiving enough raw materials to increase their