Professional Documents
Culture Documents
Group No 8, Section C
Submitted to: Dr. R Jagadeesh
Date of Submission: 25/11/2014
Submitted by:
Anshul Goel (14020)
George Joy (14056)
Kaushik Bandopadhyay (14068)
Nitesh Anand (14093)
Sameep Suriya (14135)
Simoni Parmar (14153)
Executive Summary
Case let1:
all the factors to decide upon which location to shift their production to.
Statement of the Problem
Case let 1:
A European based company is considering developing a new textile facility
principally for ladies and children clothing. The management has
identified 5 international locations to set up their plant. The countries are
China, England, France, India and Mexico. The management has identified
5 critical factors upon which the location strategy has to be implemented.
The 5 factors are Productivity of the work force, the construction cost,
labour cost, Proximity to its clients and proximity to its suppliers. The
strategic importance of each of these factors to the company has also
been identified by calculating the weight factor for each. Each factor has
different numerical values associated with each nation. The higher the
numerical value, more favourable the site is. The management has to do a
weighted factor analysis to find out which site is the most favourable one
to set up the plant.
Short term problems facing the management are
Case let 2:
Holger Company which started out its production by manufacturing small
machine tools later shifted to large machines and automobile parts. The
company suffered a mishap during the Second World War when its
manufacturing facilities were bombed. But it recovered and achieved
impressive growth until the 1980s. By the late 1980s competition was
high and Holger Co was struggling to control its manufacturing costs. It
now wanted to shift its production base from Germany. The company
identified 2 locations based upon different factors. One was at New Castle
in England and the other at Incheon in South Korea. By the late 1980s
Germany had become the hub of machine and automobile manufacturers.
The heightened competition forced Holger to control its manufacturing
cost to stay competitive in the market. As the demand for its raw
materials has gone up, the prices also would have shot up in Germany
which has probably forced Holger Co to shift it manufacturing facility.
Short term problems facing the management are
The
The
The
The
The
Cons
Cons
Criteria
Productivity
Construction Cost
Labour Cost
Proximity to
Customers
Proximity to
Suppliers
Weighted Score
Weighing
Factor
3
2
3
China
70
55
90
Englan
d
85
35
55
India
65
60
75
Mexic
o
70
60
80
France
80
25
45
1.5
50
90
60
50
100
0.5
50
30
55
45
60
640
657.
5
667.5
605
10
690
Based on the given facts, China is the most preferred location for the new
manufacturing facility for the textile facility. Mexico comes second in
terms of the most favoured location for the facility.
Labour
Cost
45
50
55
60
65
70
75
80
85
90
95
100
Weighted
Score
605
620
635
650
665
680
695
710
725
740
755
770
Justification:
China has been textile
hub for long mainly
because of its cheaper
labour cost and its
productivity.
Because
most
other
textile
majors have also set up
their
facilities
in
China, the resources like
information and talent
are
high
in
China
compared to other
nations.
Companies
always like to locate
near their competitors
leading
to
Clustering.
This
clustering
will
eventually lead to information spill overs, which is beneficial for the
industry.
2. Illustrate the sensitivity of the weighted score for France according
to the numerical value of the labour cost by a graph for the
numerical values of the labour cost from 45 to 100 in increments of
5. Assume the weighted score of other sites remain constant. What
would have to be the numerical values for France in order that it
breaks even, that is its weighted score is same as other sites?
The factor rating for France as Labour Cost changes from 45 to 100 has
been represented in the table given at the side.
The scatter plot formed from the table, has been given below.
Weighted Score
900
800
700
f(x) = 3x + 470
600
500
400
300
200
100
0
40
50
60
70
80
90
100
110
Engla
nd
56.67
India
62.50
Mexic
o
65.83
So at these values of labour costs will equalise France with other sites.