Multimedia University

BMG8014 ADVANCED MANAGEMENT

Lecturer: Dr.I.LOURDESAMY

CASES ANALYSES

MEXICAN PLANTSouthren Discomfort

Student Name: Abdulla Saeed Alhamad

Student ID: 1111800065

MMUBMG 8014 ADVANCED MANAGEMENTAbdulla Alhamad (1111800065)

Southern Discomfort

Mexican Plant

Question: What do you see as the central management issue in the case “Southern

Discomfort”? If you were Jim, What would be your recommendation to Ripon

(CEO)? Justify your decision.

Summary

Jim Malesckowski received a call from his boss, who wanted him to go to Mexico and

determine some figures for their manufacturing company.

Their present plant is in Oconomo, Wisconsin, where they employ 520 people.

Oconomo is a small town of just under 9,000 people and jobs are limited, so the

company provides some help to their poor economy.

Jim’s boss is thinking about moving the plant into Mexico where he could cut costs

dramatically, saving the company millions of dollars each year.

The workers of the company are part of a labor union that negotiates wages and duties

with the company.

The union does not want its workers to earn lower wages or become cross-trained to

do many different jobs.

Jim is stuck between a rock and a hard place because his boss wants him to report the

findings in Mexico yet Jim knows if he does then the plant will most likely move into

Mexico.

The company will save a lot of money in production and labor costs if they move but

it will take away 520 full time jobs from the people of Oconomo.

Jim needs to figure out what to tell his boss when he meets with his boss the next day.

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MMUBMG 8014 ADVANCED MANAGEMENTAbdulla Alhamad (1111800065)

The central management issue

The greatest force that drives the company to look for change is its high operational

cost.

The operational cost in the plant is very high, the company has been incurring losses

instead of making profits; the management is anticipating changes so that the

company will make profits in the future. In order for a company to run successfully, it

should realize some returns from the investment made at the plant. Having invested in

the company, shareholders also expect return for their investment. It is important for

the company to make enough money for the satisfaction of shareholders and the

existence of the company in the market.

One difficult situation the company faces is the unionized labor; the company does

not have a choice of less price labor, the company also faces the problem of having

the current employees performs more duties to reduce cost due to union labor

agreements.

If you were Jim, What would be your recommendation to Ripon (CEO)

The recommendation will be:

1. Opening a new plant in Mexico.

2. Reduce the operations in Oconomo plant by 50% keeping the third generation

employees only as a preparation for shutting down the plant.

Justification

Analyzing the case of Southern Discomfort, some of the issues facing Malescowski

and Lamprey, Inc. are the high cost of labor, the ability to compete against companies

in the same industry as far as price and the product quality of their goods produced at

that particular facility.

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MMUBMG 8014 ADVANCED MANAGEMENTAbdulla Alhamad (1111800065)

One of the major issues is that if the company decided to look at the option of opening

a new plant in Mexico and cease operations in the town of Oconomo. This small town

in Wisconsin would suffer greatly the lost of lamprey, Inc.  The town has a population

of just over 9,000 people and the plant employs about 520 local workers. Some of the

workers are a third generation employees of Lamprey making Jim feel guilty about

the project.

The reasons Lamprey should move its operations elsewhere that the new location

provides better opportunity to reduce cost, as opposed to expansion of an existing

plant, Lamprey can take advantage of the market conditions in Mexico and the other

movements that will be taking place with the move to be more competitive. There

comes a point when in some situations it costs less to start over in a new more

affordable place than to repair the current facilities. Further, there are newer

machines, new processes and new plant layouts that may improve productivity and

quality of the products.

This entire situation can make a new facility look like the best choice.

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