CASE STUDY: ACM ELECTRONICS COMPONENT MANUFACTURER 1
CaseStudy: ACM, Electronics Component Manufacturer
Advantagesand disadvantage does each potential location offer
Oneof the reasons that would prompt a company’s managerial decision torelocate is to reduce costs of production. Fewer costs and lessrestrictive regulations make companies decide to relocate such alocation.
HongKong as a potential location for the electronic manufacturing plantprovides many advantages. For instance it will provide banking,distribution and purchasing functions for the plant. The workforce atHong Kong is relatively cheap because it takes advantage of the lowlabor costs in China. Hong Kong is also ahead of Singapore in termsof industrialization having taken advantage of the Chineseopportunity for cheap labor and wide markets due to seaport. ACMbeing an electronics components manufacturing company will have anadvantage in Hong Kong because Hong Kong is more inclined topackaging and assembly activities.
Howevergiven all these, Hong Kong is disadvantaged in that it is not focusedon technology whereas globally, electronics companies are inclined tomore technology intensive products. This means that ACM Company maynot thrive well in Hong Kong due to their laxity in innovations intechnology, moreover, Hong Kong has land shortages, inadequateelectronics infrastructure and other firms and counties do not haveeasy entrance in Hong Kong.
Malaysiaenjoys unique trade benefits through Generalized Systems ofPreferences, unilateral trade agreements, infrastructure,technological expertise and most importantly manufacturing diversity(Swamidass,2000). Itis geographically dispersed and richer in resources than Singapore.With these it is advantageous to the ACM Company relocation toKuching given that Malaysia is also one of the largest exporters ofconsumer electronics and Kuching is the main gateway of travellers atthe Island. The government of Malaysia also offers attractive taxincentives like investment tax allowance and abatement for exportsand deductions operations and training.
Theonly drifting point of Kuching Malaysia is the fact that it is notoften accessible and this may cause delays in shipment of finishedgoods.
Otherfactors that may play a role in the teams decision
Someof the other factors that the team may need to look at include theoperational capital of the location which is a long term decision.This may mean they will have to consider how the business will stayafloat during the tough times. The team may need to also look at thecultural or language barriers that a new location may present.
Whyis transportation infrastructure important in this decision?
Atan aggregate level, bad transportation infrastructure increases thecosts of production and the transport sector is important dueincrease in mobility of people, goods and information. Accessibilityto markets, additional investments and employment is made better bynetworks and efficient transport systems.
Whatfactors might change in the next 10 to 20 years?
Inmaking long term decisions, one must also look at the possibleeffects of the decision in the future. Some of the factors that maychange include the skills intensive, high value added industries andtechnology intensive. For instance the wage policy may change fromlabour intensive to capital intensive manufacturing. This in any casehas to be considered in making the decision to relocate.
Whatalternative would under which circumstances?
Vietnamin its circumstances has low labor costs and the economy of thecountry is favorable to technology. Vietnam’s geographical locationand especially to china makes it easier for them to integrateexisting supply chains, it is also less prone to the naturaldisasters like earthquakes as compared to other countries (Williamson2013). In any case, circumstances of Vietnam offer a good supply ofelectrical supply, good transportation infrastructure and the countryis politically stable.
In Williamson, P. J., In Ramamurti, R., In Fleury, A. C. C., & InFleury, M. T. L. (2013). The competitive advantage of emergingmarket multinationals.
Swamidass, P. M. (2000). Innovations in Competitive Manufacturing.Boston, MA: Springer US.