Issue to be solved:
Nick Stevens, the vice president of manufacturing at AT&T Consumer Products, was considering selecting a site for a new answering systems manufacturing facility. He had a few options to choose from. However, there were more significant factors other than cost that needed to be taken into consideration while making the final decision. AT&T had to think about those factors because of the company’s mission of being concern about its role in society. Case Background:
Until January 1984, AT&T had been the largest employer in US employing one million people and representing 2% of the US GNP with annual revenue of $70 billion. AT&T was having a kind of monopoly on telephone equipment business until the Carterfone ruling went into effect in 1980. AT&T was charged with monopolizing the market for telephone equipment and long-distance services. Following a divestiture in January 1, 1984, AT&T was divided into two major sectors - AT&T Communications and AT&T Technologies. AT&T Consumer Products belonged to AT&T Technologies. AT&T Consumer Products (CP) had never designed its telephones to be marketable. There was always demand for its products. The company was facing a new situation of tough competition, declining revenues and unacceptable profit levels. AT&T had to react to this new situation. AT&T invested tens of millions of dollars to upgrade and automate their production facility to decrease costs and become more competitive. This, however; did not help because the company found that their labor costs were still so high. During 1985 – 1986, CP began to transform its very inelastic production to a highly flexible. “Business Passion” and “Shared Values” were two primary CP mottos established as the new foundation. “Business passion” signified their commitment to “Be the Best” for their owners, customers and people and “Shared Values” reflected to create an environment of caring, trust, love, integrity and respect on an individual level and quality, innovations and excellence on business level. The company began to move its plant to locations outside of the U.S. This was not taken well by the U.S. society as it would be expected. AT&T; however, made sure that their lay-offs employees got sufficient benefit packages. AT&T opened manufacturing plants in Singapore and Thailand. The next decision to be made was where new manufacturing facility should be located for a new product, the answering systems. Mexico, Singapore, Malaysia and Thailand were taken into consideration in addition to the US. Countries in Asia like Malaysia and Singapore provided significant experience with them. Wherever they go for selecting the facility, AT&T needED to consider different factors, such as, wages and benefits, sourcing of components, the profile of its work force in terms of gender, age, educational background and other related issues. Location Consideration:
One of the considerations was Mexico. The country was holding a border industrialization program called Maquiladoras. The Mexican government through this program allowed foreign corporations to establish wholly-owned subsidiary operations in Mexico, import machinery, raw materials and component parts to be used in processing or assembling goods in Mexico duty free. However, under Maquiladoras, exporting back to the home country was quoted but only for value of the produced product that was added in Mexico during manufacturing process. Because of the program Mexico became the second largest industry. There were; however, costs associated with Maquiladoras program. First, the hazardous wastes generated by manufacturers had harmful impact on the environment. Compliance to the law for the treatment of this hazardous waste had been significantly low so it allowed many of the manufacturers to abuse that. Studies showed that primary sources of drinking water have been...
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