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Exam 4: Comprehensive

Lay out your answers using numbers, letters, or bullet format as necessary. This question is a broader, more integrative question focusing on several aspects of the course. Part a) is worth 8 points, remaining parts are worth 4 points each. Be sure to give full, comprehensive answers with enough detail to convince the reader that you understand the concepts. Be sure that your answer demonstrates knowledge and understanding of the course and text. Use subheadings and bulleted lists as appropriate. 1. You are considering moving your assembly plant from the U.S. to Mexico. Your boss has asked you to provide a summary analysis of the relocation. Draw up your analysis in the following format: (Chapter 6, pp. 209-212, 225-230, 235) a) An analysis of the benefits and costs of moving the plant, and the affected stakeholders. The analysis may be presented in tabular form.
Benefits of Moving Assembly Plant Lower costs lead to higher profits Lower costs lead to lower prices Loss of assembly jobs at company in home country Loss of jobs at suppliers companies in home country or if key suppliers follow company in the move then similar loss of job at home Pay taxes in host country Costs of Moving Assembly Plant Stakeholder Affected Home country owners benefit Home country customers benefit Home country employees and unions lose Home country suppliers lose jobs, their owners lose profits- if they move with company, they may gain valuable international experience Host country suppliers gain, their owners gain profits Home country government loses taxes Host country government gains tax revenue Increased trade among nations helps international relations between countries Multiple stakeholders affected: Local community in host and home country Society in general in home and host country Government in home and host country

Assume parts are procured from local suppliers (in Mexico) at competitive prices: Creation of jobs at suppliers in host country Save taxes in home country

Positive ripple effects: Initial investment in assembly plant leads to ancillary investment in local area and in community development. If adequate infrastructure is not available, however, there can be costs like pollution, pressure on housing, deterioration of environment, etc.

Ripple effects on local economy and community. Those who lose jobs may be forced to move out of the town where the assembly plant was located severing ties with friends, neighbors, local ancillary businesses (restaurants, shops etc.) lose customers, school systems lose revenues, real estate


market gets depressed, etc

b) The strategic implications of moving there versus not moving. (Chapter 6, pages 209-212, Chapter 2, pages 51-52) Besides considering the various stakeholder interests, the strategic choice of this decision should be made looking toward the long term benefits to the company and with respect to its competitive position. If most competitors have already moved assembly operations to Mexico to reap benefits of lower labor costs, the company may be forced to follow to reap the same cost advantages and to signal to its competitors that it is not far behind. It is altogether possible however that this company has superior resources in terms of manpower, location which the competitors do not have. If manpower productivity of the home plant is higher than competitors, or if locational advantages can accrue cost savings in terms of lower transportation costs, or, even if employee relationships can weather lower wages paid at home, the strategic choice can well be not moving the plant at all. The strategic choice therefore will depend on the companys competitive position in the industry at the current time. c) Your intended stance towards social responsibility while there, including your rationale. (Chapter 2, page 37) The new assembly plant will follow the guidelines of Social Accountability 8000 below: Do not use child or forced labor Provide a safe working environment Respect workers right to unionize Do not regularly require more than 48 hour work week Pay wages sufficient to meet workers basic needs The company should also consider the international codes of conduct developed by the International Chamber of Commerce, the Organization for Economic Cooperation and Development, the International Labor organization, and the United Nations. These organizations have a broad set of recommendations for MNC conduct.


d) Some key factors about the culture and conditions of the typical Mexican factory workers in that area and what might motivate them. (Chapter 11, pages 406-408) According to Hofstedes research, Mexico ranks high on power distance, and on uncertainty avoidance, and ranks low on individualism. Family ties are central to Mexican society. Loyalty to family frequently determines employment, promotion, or special treatment for contracts. These cultural characteristics may, however, contribute to high absenteeism and turnover because employees have to tale care of family matters like taking care of sick relatives. Mexicans are warm and require a lot of face to face interaction and relationship building. In order to motivate employees in Mexico, the manager has to be a paternal figure who takes a personal interest in his employees life. Celebrating a birthday, providing Halloween candy, asking about the welfare of family members, are all ways of showing respect and concern for the employee and motivating him in his job. Direct commands are more effective at motivating employees than motivation through participative decisions. Rather than an impersonal wage scale, Mexican workers tend to think in terms of payment now for services rendered now. Therefore, a daily incentive system with automatic payouts for production exceeding quotas as well as daily/monthly bonuses works well in motivating employees.