Plant Location
PLANT LOCATION PUZZLE
BY AJAY SHARMA
GLOBAL SUPPLY CHAIN MANAGEMENT
DR. BURAK KAZAZ
GSB - 486
Problem:
This particular case study deals with a bicycle manufacturer named The Eldora Company (EDC). It is faced with a situation where it has prospered in the local marketplace but is suffering from stagnant growth potential. Much of their problem is due to heavy low-cost competition and a saturated marketplace. Management is therefore burdened with the decision to manufacture offshore (i.e. China, Taiwan, Mexico, etc.) and penetrate a new target market.
EDC’s success is credited to their corporate flexibility and service. They have been able to adapt quickly to changing demand and optimize the time of product introductions. Located within a high demand market segment has also facilitated the winning criteria of service and flexibility.
Prior to defining EDC’s strategy for growth it is important to work towards the corporate mission. The case does not distinguish between a global or domestic mission for Eldora. For the sake of further analysis, we will assume EDC’s mission is to become a global corporation. This assumption is supported by EDC’s joint venture with an Italian manufacturer, Rinaldi.
Conclusion:
China has an established base of skilled laborers (available with other bicycle manufacturers in the area). They have also been quoted to “out compete other places”.6 Attaining a wholly owned subsidiary also ensures that EDC’s technology remains with them. This is vital in this highly competitive industry. This strategy will prevent the birth of new competitors (such as Giant).
China has also prospered via increased manufacturing and growth in the past century (Appendix 1). They have also increased value added work by providing complete assemblies to the bicycle industry (SIC 3592). Six out of seven competitors studied have manufacturing locations offshore. Some are joint ventures while others are wholly owned subsidiaries (WOS).
BY AJAY SHARMA
GLOBAL SUPPLY CHAIN MANAGEMENT
DR. BURAK KAZAZ
GSB - 486
Problem:
This particular case study deals with a bicycle manufacturer named The Eldora Company (EDC). It is faced with a situation where it has prospered in the local marketplace but is suffering from stagnant growth potential. Much of their problem is due to heavy low-cost competition and a saturated marketplace. Management is therefore burdened with the decision to manufacture offshore (i.e. China, Taiwan, Mexico, etc.) and penetrate a new target market.
EDC’s success is credited to their corporate flexibility and service. They have been able to adapt quickly to changing demand and optimize the time of product introductions. Located within a high demand market segment has also facilitated the winning criteria of service and flexibility.
Prior to defining EDC’s strategy for growth it is important to work towards the corporate mission. The case does not distinguish between a global or domestic mission for Eldora. For the sake of further analysis, we will assume EDC’s mission is to become a global corporation. This assumption is supported by EDC’s joint venture with an Italian manufacturer, Rinaldi.
Conclusion:
China has an established base of skilled laborers (available with other bicycle manufacturers in the area). They have also been quoted to “out compete other places”.6 Attaining a wholly owned subsidiary also ensures that EDC’s technology remains with them. This is vital in this highly competitive industry. This strategy will prevent the birth of new competitors (such as Giant).
China has also prospered via increased manufacturing and growth in the past century (Appendix 1). They have also increased value added work by providing complete assemblies to the bicycle industry (SIC 3592). Six out of seven competitors studied have manufacturing locations offshore. Some are joint ventures while others are wholly owned subsidiaries (WOS).
Bibliography: 2.Asia Pulse, 990127, January 27, “China to Eliminate Excess Production Capacity”. 5.Chicago Tribune, p3, 000114, “Brunswick to Follow Bike Path to China”. 7.Financial Times, London Edition, 971024, p16, ISSN:0307-1766, “The Global Company: Taiwanese Bikes – Made in the Netherlands, Designed in the U. S.”. 8.Hajewski, Doris. Milwaukee Journal, Sentinel, p1, 1998, n98-55454, “Trek Streamlines Bike Production Plan Could Halve Manufacturing Time, Cost Few Jobs”. 9.India Business Intelligence, n68, 960918, p16, “Hero Plans Overseas Manufacturing Plants”. 10. Rohan, Thomas. Industry Week, v214n3, Aug. 9, 1982, p42-48, “Fighting Imports: How Some Firms Staged Comebacks”. 11. Romero, Christine. Daily Camera, Boulder, Co., 980616, ISSN:0746-8733 “Schwinn Counting on Its American Icon Status to Recapture Bike Business”. 12. Verespej, Michael. Industry Week, v237n3, Aug 1, 1988, p34-35, “Pedaling Success”.