Suppose a company in the United States was trying to decide whether to locate their manufacturing facility in the United States or in Southeast Asia. Consider the following information in answering the question below: · Presently, this US company,
which makes only one type of finish good, sells 40% of their product in the United States, 10% of the product in Mexico, 15% of their product in Canada, and 35% of their product to the rest of the world. · The product this company produces is presently tariffed heavily when imported into the United States. · The product consists of about 150 components of which 75 components are imported from Southeast Asia, 40 components are imported from Mexico, and 35 components come from US suppliers. List four reasons why it would be favorable to locate the new manufacturing facility in the United States rather than in Southeast Asia.
1 . Proximity to markets - by locating the facility in United States this company will be locating finished goods near 65% of its customers (US, Canada, Mexico).
2 . NAFTA - 65% of this company's products are sold in either the United States, Mexico, or Canada. NAFTA allows product to flow freely between these three countries.
3 . Utilities - the infrastructure of United States is among the best in the world. It is highly likely that all your utility requirements would be met by most US locations.
4 . Quality-of-life issues - if this company is headquartered in United States and would like to maintain American management, it is likely that many of the employees would prefer the new location to be in United States. These employees are most likely comfortable with the government stability, housing, health care, culture, and public safety they are accustomed to two in United States.
5 . Lead times - lead times associated with purchases made from US and Mexican suppliers would most likely be quite favorable.
6 . Labor force - The US labor force is considered among the most productive, well-trained, and well-educated labor forces in the world.
7 . Right to work laws - there are number of states in United States that now allow workers to choose whether or not they want to join/support the union. This allows the US company to hire skilled and educated workers at somewhat reasonable wages.
8 . Free trade zones - This company may have the capability of placing a facility within a free trade zone that would allow the company to assemble the finished goods that it would ultimately be exported to foreign customers.
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What will be an ideal response?
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