TO: Board of Directors for Electrocorp
FROM: Yessica Alvarez, Chief Executive of Electrocorp
RE: Analysis of possible plant relocation
DATE: October 2, 2013
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 regulations. Many factors have contributed to the increase of production costs. For instance, the coalition that represents the workers in my plant facility formed a strike and as a result there has been an increase in salary and benefits for employees. In addition, new beginning employees are now entitled to a minimum pay of $15/hour. New safety and strict regulations also took effect inside our various plants that we must obey to that have caused extra time and expense. The company is now required to put its waste through an expensive process before placing it in a specific disposal facility. Shareholders have expressed their frustration and demand quick action. It is our due diligence to provide the best possible alternative/solution. I hired Martha Smith to investigate possible plant relocations in Mexico, Philippines, and South Africa. Smith has extensive knowledge and experience in companies that have moved their operations to foreign countries to cut down on operating and overhead costs. I will explain the findings of each individual country further in this memo by weighing their pros and cons. With Electrocorp having the duty to ease rising costs in labor and productions, a well-developed strategy for possible relocation is vital to minimize a bad reputation that will cost a negative impact and instead focus on maximizing the profits of our company that will continue providing on-board electronics for vehicles. ETHICAL DILEMMA:
Although the goal for all profit businesses is to gain money, ethics equally plays a huge role in a successful business. Business ethics commonly relates to a larger number of issues and aspects, because activities that occur inside a business directly affect more shareholders. Daily operations that undergo in a company affect employees, managers, customers, the local community and suppliers and as a result life’s of people all over the nation. The main dilemma Electrocorp has is what consequences it will face by relocating their plants overseas. We must determine moral and ethical problems in this situation including the consequences of the wrong decision.
There are many ethical issues arising from this situation, such as is a relocation of the companies plants ethical taking into account the loss of jobs U.S. Electrocorp workers will have, what about workers’ exploitation in foreign countries, what harm will Electrocorp have in foreign countries in regards to the environment, and differences in wages and living standards in other foreign countries. In my opinion the main two issues arising are the loss of Electrocorp workers if plants were to relocate and workers’ exploitation in the possible foreign countries. ALTERNATIVES:
Through detailed research and weighing out the pros and cons of relocation of our plants I have concluded possible alternatives to the two main ethical issues I think we must address. 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...
References: Karim, N., & Taqi, S. (2013). The Importance of Corporate Management Accountability. Journal
Of Managerial Sciences, 7(1), 59-73.
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