Expanding Morning Woods Manufacturing Intl. to the Czech Republic Executive Summary
To continue providing the high levels of return on investment for our investors, Mornings Woods Manufacturing International should not pursue an expansion effort in the Czech Republic but should continue to look into international expansion in other countries throughout the world. We are confident that the use of the decision criteria to evaluate an array of countries will identify a more suitable candidate for the company’s expansion project. After careful analysis we have found that the Czech Republic does not have the proper access to the cost effective modes of transportation for large quantities of raw materials and finish goods to and from the facilities. Furthermore, the companies currently operating in the Czech Republic other than the international players like Mayr-Meinhof and Stora Enso are losing money at an alarming rate. We believe that this is because the market is flooded with competition causing a surplus that is driving prices down and costs up. Other issue we found to be a problem were passed legislation restricting foreign firms ability to purchase land and consume natural resources. Through this feasibility study of the Czech Republic as a location for international expansion we have concluded that the need for expansion to continue to growth and prosperity is there, but this is not the proper location to start the campaign. In the continued search for expansion opportunities, the following key attributes must be met to establish manufacturing or marketing operations in a foreign country. * Accessibility to rail systems and/or commercial use waterways. To maintain a competitive edge Morning Woods will need access to efficient low cost methods of shipping, capable of facilitating the transportation of large quantities of heavy and bulky materials and finish goods inherent of the lumber industry. * Favorable Legislation on import/exports, taxation, and foreign Enterprises. The location must have a stable and favorable set of legislation that will allow for trade and operation to be stable and predictable. * Low cost reliable supply of materials and labor. The availability of low cost unskilled labor and materials is a mandatory foundation for a manufacturing business. Contracts of reliable suppliers that can handle the capacity * Future demand projections need to be favorable for our desired market. A lumber markets in the desired country need offer enough demand for lumber products because of the investment costs involved. See exhibit A
The objective of the following pages is to explore the international expansion of Morning Wood’s saw mill and lumbers processing operations NAICS code: 321113 to the eastern European region based out of the Czech Republic. Each business activity recommendations proposed are to be considered on the criteria set out by our project team. These criteria are designed to show how well each expansion option align with the company’s Concentration diversification corporate level strategy as well as take into consideration what types of business level strategies each option requires and how well it fits the companies objectives. The five proposed recommendations for business activities for entering a new geographic market are as follows: * Do not pursue an expansion into the Czech Republic.
* Pursue a manufacturing operation only.
* Pursue a marketing campaign only.
* Pursue a manufacturing operation combined with a marketing campaign. * Pursue an export operation focused on the surrounding Countries. Our operation puts us at a point in the supply chain where our suppliers are the famers and commercial loggers that sell raw materials at market dictated commodity pricing. Our primary consumers are lumber yards and contractors that purchase in bulk and generally operate on a net 60 credit line for material purchases. With both ends of our...
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