Electrocorp Case Study Summary

TO: Board of Directors for Electrocorp
FROM: Yessica Alvarez, Chief Executive of Electrocorp
RE: Analysis of possible plant relocation
DATE: October 2, 2013
INTRODUCTION:
The purpose of this case memo is fully administer an investigation in detail to determine if it is Electrocorp’s best interest to relocate outside of US borders to solve the current decline in profits due to increases in production costs. Investigations will take into account ethical issues that may arise in domestic and global business environments to assure the best possible solution to keep Electrocorp profitable.
FACTS SUMMARY:
Electrocorp profits have continuously dropped due to rising costs of production, union concessions, and strict environmental
First I would like to share what Martha Smith found with her research and my own findings in regards to the three possible countries to relocate to. Mexico and the Philippines are the most cost effective, as workers will be receiving $3 and $1 per day. However, these wages are insufficient for the standards of living in both countries. Furthermore, Mexico would be out of question since it will raise suspicion when it is discovered that people work for less money and more birth defects are happening because their regulations are less strict. On the other hand, the Philippines will be more favorable because there has been no public complaints regarding environmental hazardous and/or illnesses. In South Africa, conditions are less favorable with regard to the economy; employees there are entitled to $10 a day. In addition, their environmental regulations and safety requirements are similar to the U.S. regulations, but are less costly. Therefore, taking into account Ms. Smith’s findings, the first possible alternative/solution is to keep the plants in the U.S. to avoid the ethical issue of Electrocorp employees losing their jobs if the company were to relocate. Most companies would say you have to separate business from personal relationships, but care ethicists for instance would suggest that
and perhaps increase financial risks for the company or to choose one of the possible countries for outsourcing and relocate production operations to this country. Regardless of the decision the company makes, it will affect many groups that are part of Electrocorp, internal and external shareholders. In addition, if the company decides to relocate it will also be affecting the people in that country. In my opinion I suggest you take the first alternative, keep all activity within the U.S. borders to prevent possible liability from any foreign country. By keeping the plants located within the U.S. the company will have faster access to monitor plants for possible irregularities; opposed to having plants overseas that will take a longer time to act upon. With having new plants overseas you will have to train new management and employees for them to expedite the onboard computer components for automobiles correctly and efficiently. I recommend Electrocorp to first consider its social responsibility to avoid damage to the company’s image. Bad publicity in relocating to other countries may cause the company to lose clients throughout the process. To address the ethical issue in avoiding any Electrocorp employee to lose its job, I would suggest you close down the smaller facilities and consolidate operations into a larger facility reducing the amount the company spends in overhead costs.