THE CASE OF SHUI FABRICS

THE CASE OF SHUI FABRICS
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Problem:
1. The Return of Investments of Shui Fabrics is low at only 5% in the past 3 years
2. The Chinese political and sociocultural had affected their assertiveness in growing their business, so Ray is faced with problem if he has to continue or shut down the business

Objectives:
1. Increase the ROI of Shui Fabrics which is aimed by Paul Danvers their president @ 20%
2. Decide whether to continue or stop manufacturing business of Shui Fabrics in China
3. To make a recommendation at the perspective of Ray Betzell on the plan of action in order to increase the ROI of Shui Fabrics

Methodology: ANALYSIS
What have been done by Shui Fabrics under the leadership of General Manager Ray Betzell : ANALYSIS
Believes that Shui Fabrics contributed to China economy by providing jobs to almost 3000 people
Shui had cut the Rocky River labor costs given the company access to potentially huge Chinese market/ Chinese labor cost is lower
Shui Fabrics had been careful to make no conflicts with the government policies on western/foreign corporation
Ray have not explored poential negotiations with the government for possible business considerations or arrangements
Ray had not yet explored other cities where they can get their labor costs lower or where foreign business policies are more considerate
Ray has not communicated to his deputy General Manager the real status of the company that Paul Danvers is not satisfied with 5% growth
Chiu Wai the Deputy General Manager is satisfied with 5% growth as not too small not too big and may not put them to hot waters by Chinese authority
Ray relatively lacks knowledge of the actual effects of automation to Chinese manufacturing plant and so he needs to educate the Chinese authority and technical staff of more opportunities

Chinese Political and Socio Cultural environment ANALYSIS
Considerable red tape slows down the business processes and operations
Government monitoring the business of Shui Fabrics to control the size of foreign corporations in the Chinese soil greatly impacts the controlled growth of the Shui Fabrics
Unemployment rate is high at 20%
China is potentially huge consumer market
Government has lack of appreciation of the fact that foreign corporation also help in developing their country and alleviate unemployment rate

MANAGEMENT CONFLICT
Paul believes that increased efficiency by introducing technology in the manufacturing plant will reduce labor cost
Paul believes that labor cost cab be reduced by laying off some Chinese manual labor workforce
Paul lacks international business environment intelligence including political because he acknowledges the pressures of government but did not consider the cultural impact of the idea of increasing business size of the company
Paul lacks international business environment intelligence including social vaues because he acknowledges that fact that labor costs of China is comparatively lower than American counterparts, but do not agree to increase more manual labor workers, and instead resorts to reducing manual labor by laying off Chinese workers while introducing automation
Chiu Wai the Deputy General Manager is satisfied with 5% growth as not too small not too big and may not put them to hot waters by Chinese authority

SWOT ANALYSIS

Recommendation:
Continue Shui Fabrics but must increase ROI rates by doing this plan:
Shui Fabrics to make a dialogue and negotiate and be transparent with Chinese authority by showing them the contribution of the company to the economy of the country while Shui Fabrics is facing a problem of shutting down if the target ROI rates are not achieved
Develop plans in order to negotiate transparently with Government to have special agreement with tax rates in order to save the company and eventually also save labor force who are also Chinese
Shui Fabrics must be able to show transparecy to the authority of the possible closure of the manufacturing that might affect almost 3000 workers and might affect the unemployment rate of the country. Once this has been shown, Shui can negotiate for either a lower taxation or a possible automation of the manufacturing plant in order to achieve the ROI goal of the company at 20%
Also, Improve operation costs by internally creating an efficient process in the company such as system of approval of documents, approval of projects that might only require few procedural interruptions and lower time and labor required due to efficiency and effectivity; create a task force by constantly checking and balancing processes

Alternative:
Discontinue operations of Shui Fabrics, if the Chinese authority and the Chinese labor force do not agree with the transparent scenarios being presented by Shui Fabrics, it would be better to just look for other options where the corporation can invest their resources for a higher returns

AGSB Management Dynamics Case Study:
Shui Fabrics

Submitted by:
Joe Marie Carandang