Plant Relocation Essay

851 Words Aug 6th, 2014 4 Pages
The Case of the Plant Relocation
The chief executive of Electrocorp, an electronics company, which makes the onboard computer components for automobiles, is facing increased production costs. Electrocorp’s production plants, use complex hydrocarbon solvents to clean the chips and other parts that go into the computer components. Some of the solvents used are carcinogens and must be handled with extreme care. Until recently, all of your production plants were located in the United States. However, the cost of production has risen, causing profits to decline.
A number of factors have increased production costs. First, the union representing the workers in Electrocorp plants waged a successful strike resulting in increased salary and
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The Electrocorp CEO has hired you, a consultant, to investigate the sites for possible plant relocation and to prepare a recommendation for the Board of Directors. You have several years of experience working with companies that have moved their operations to less-developed countries to reduce their operating costs. The choices available include: Mexico, the Philippines, and South Africa. Your preliminary research is summarized below. Mexico A number of border cities in Mexico would be cost-efficient relocation sites based on labor and health and safety/environmental factors. Workers in production plants comparable to Electrocorp's earn about $3 per day, which is the prevailing wage. There is frequent worker turnover because employees complain that they cannot live on $3/day, and they head north to work illegally in the United States. However, a ready supply of workers takes their place.
Mexican health and environmental laws are also favorable to production. Exposure to toxic chemicals in the workplace is permitted at higher levels than in the United States, allowing corporations to dispense to some degree with costly procedures and equipment. Mexico's environmental laws are less strict than those of the United States, and a solvent recovery system, used to reduce the toxicity of the waste before dumping, is not required.
The only identifiable business risk is possible bad publicity. The rate

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