UNIT 11 NEW BUSINESS

Is a U.S.A company based in New York City with wide recognition and acceptance throughout the country

CHOOSE A LOCATION FOR A NEW FACTORY

• Background

Marcia Lee Jeans

- Is a U.S.A company based

in New York City with wide

recognition and acceptance

throughout the country

- It industries Clothing

Marcia Lee Jeans has its own stores

but does not own any factories

Marcia Lee Jeans- Competitors

1 G- STAR

Marcia Lee Jeans- Competitors

2 DIESEL

Competition in this segment of the

market is strong, so the company

has to keep costs as low as possible in other to remain profitable

• Expand in Europe and Southeast Asia

• Decide to build its own factory in an

overseas country.

• Our company is considering four countries

as a location for the factory: code-named

A, B, C and D.

Based in New York

upper Fashion conscious people aged 15-40

Kept low Europe and South-east Asia 2,000

Imported from several countries

CHOOSE A LOCATION FOR A NEW FACTORY

• Background

II Advantanges and Disadvantages

The criteria used to decide whether or not

to invest in one country will be based on 3

main aspects: economy, transport, and

Country A Economy: general lot of debt, trying to modernise

Other comments: business good government grants

general military government, bribery, political

problems (independence for north)

low

very high

very low

Country B Economy: general modern

Other comments: business member of trading group, strict

pollution laws, no tax incentives, high taxes

very low

lowgood road and rail, airport, no seaport

high

Country C Economy: general unstable exchange rate

Other comments: business limit on profits to be taken out of

country, not much paperwork, strong protest movement against foreign business

general first free elections last year

high high

yes low but rising

Country D Economy: general government encouraging privatisation

Other comments: business lot of paperwork, pollution

problems, tax-free profits for first three years, part of profits into training fund

-average high

yes, but short hours

• CHOOSE A LOCATION FOR A NEW FACTORY

• Background

3 The Final Decision

To compare the economy, labor and transport of each country, then score them.

IN SUMMARY…… Country A Country B Country C Country D

Economy: general lot of debt, trying to

modernise modern unstable exchange rate government encouraging

privatisation

inflation average very low high average

interest rates high high average high

unemployment very high low high high

Transport good rail but poor roads and

seaports, new airport

good road and rail, airport,

no seaport

good near ports, good airport, bad roads

bad road and rail, but ten-year investment plan

Labour: skilled

workforce no no no yes, but short hours

Wages very low high low but rising low

Other comments:

business good government grants member of trading group,

strict pollution laws, no tax incentives, high taxes

limit on profits to

be taken out of country, not much paperwork, strong protest movement against foreign business

lot of paperwork, pollution problems, tax-free profits for first three years, part of profits into training fund

general military government,

bribery, political problems (independence for north)

Stable government first free elections last year -

Economy & Policy

- General: lot of debt , trying to

modernise.

- Growth: low

- Inflation: average

- interest rates: high

- Unemployment: very high

- Government contribute 30% cost

Country A (4) Country B (9)

- General: modern

- Growth: low

- Inflation: very low

- interest rates: high

- Much paperwork is required

- Must pay 5% of the profits for training workers.

- Limit on profits, strong protest

movement against foreign business

A B

Unskilled labor available

No unions

Very low wage rates

C D

Not a lot skilled labor

available

Strong unions

High wage rates

Not much skilled labor available

Strong unions (clothing industry)

Low wage rates, but rising fast

A lot skilled workers ( short

hours )

Strong unions

Low wage rates

Transport & Tax

Pay attention:

I : International \ : unknown H : high ↑: improving

3y: 3 years

Rail Road Airport Seaport Tax Score

A Good Poor New, I Poor \ 6

B Good Good I No Business (H) 7

C \ Not bad Small, good Good No 8

D Poor(↑) Poor(↑) \ \ Free(3y) 6

The Final Decision :

Country D

FOR LISTENING