Case Study #3
Sony de Mexico
It was a hot, dry afternoon in Mexico's northern Sonora Desert and Rey was in a sour mood. Rey Uribe, the nor¬mally energetic and optimistic president of Sony de Mexico, had just received the news that Sony's Mexican operations were to be shut down in a cost-cutting move. Corporate had decided that to remain competi¬tive, capacity should be shifted to Southeast Asia, where labor costs were a fraction of Mexico's fully bur¬dened hourly labor rates of $3.50. Of course, the news was not totally unexpected. Rey had been aware of the discussion that was taking place back in Japan, but he had hoped that the geographic proximity to the large and lucrative U.S. market would provide sufficient motivation to keep the Mexican operation running. Rey wondered whether there was anything that could be done to reverse the decision. Sony de Mexico had per¬formed so well for so long, and Rey loved the people he worked with. There had to be a way to turn things around-to change the destiny of Sony de Mexico. Could he find it?
The shared 2,000-mile border between the United States and Mexico had driven tremendous growth in the so-called maquiladora industry. The opportunity to use comparative advantage to achieve competitive advantage had not gone unnoticed by U.S. and other global companies. The huge U.S. consumer market was just across the border from an abundant source of high-quality, low-cost labor. And managing across the border was much easier than managing across an ocean. As a result, at its peak, approximately 3,000 maquiladora operations turned out everything from leather gloves to consumer electronics; from auto parts to semiconductors. Over 1.5 million people were employed and maquiladora operations were the sec¬ond leading source of foreign exchange behind oil. However, the maquiladora industry was under siege. The incredibly low-cost labor in China and throughout Southeast Asia was siphoning off foreign direct invest¬ment. In the...
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