marcia lee jeans

Choose a location for the new factory

1.Background

2.The introduction of the 4 countries and their advantages and disadvantages

3.The Final Decision

Group2

王楠

BackgroundBackground

Marcia Lee Jeans

It is based in New York

Jeans are made in the US by a number of factories on the East coast, none of which are owned by Marcia Lee Jeans.

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Marcia Lee Jeans - Competition


G-STAR


DIESEL

Marcia Lee Jeans - Expand

.Plan to expand in Europe and Southeast Asia.

.We have decided to build our own factory.

.Our company is considering four countries as a location for the factory.

The 4 CountriesThe 4 Countries

Country ACountry A

Growth rate: 2% per Growth rate: 2% per yearyear

Inflation rate: 5%Inflation rate: 5%

Unemployment Unemployment rate: 25%-30%rate: 25%-30%

The country has a lot of The country has a lot of debt and is trying to debt and is trying to modernize its economymodernize its economy

Interest Interest rates: 10%-rates: 10%-15%15%

Country ACountry A

Good rail network but poor roadsGood rail network but poor roads

Transport

New international airportNew international airport

The main seaport is in poor condition.The main seaport is in poor condition.

Country ACountry A

Unskilled labor available. A lot of training needed for jeans production

Unskilled labor available. A lot of training needed for jeans production

Labor

No unions in most industriesNo unions in most industries

Wage rates: very lowWage rates: very low

Country ACountry A

CommentsThe country has a military government. Bribery is common. Political problems: the people in the north want to become an independent state. The government will contribute 30% towards the cost of a new factory.

Country BCountry B

Growth rate: 1.5% Growth rate: 1.5%

Inflation rate: 0.5%Inflation rate: 0.5%

Unemployment rate: Unemployment rate: 3%3%

A modern industrial A modern industrial country with many country with many manufacturing industriesmanufacturing industries


Country BCountry B

Has a fully integrated road and rail networkHas a fully integrated road and rail network

Transport

International airportInternational airport

No seaportNo seaport

Country BCountry B

Not a lot of skilled labor availableNot a lot of skilled labor available

Labor

Strong unionsStrong unions

Wage rates: highWage rates: high

Country BCountry B

CommentsThe country has a stable government. It is a member of a large trading group. There are strict new laws on pollution. There are no tax incentives for building new factories. Business tax is very high.

Country CCountry C

Growth rate: 8% Growth rate: 8%



Currency exchange rate: Currency exchange rate: unstableunstable

Interest Interest rates: 4%-6%rates: 4%-6%

Country CCountry C

Good transport around the main seaportsGood transport around the main seaports

Transport

Small but well-managed airportSmall but well-managed airport

Road network needs investmentRoad network needs investment

Country CCountry C

Not much skilled labor availableNot much skilled labor available

Labor

Very strong unions in the clothing industryVery strong unions in the clothing industry

Wage rates: low but rising fastWage rates: low but rising fast

Country CCountry C

CommentsThe first free elections for a democratic government were held last year. There are limits on the profits which companies can take out of the country. Not much paperwork required for importing and exporting goods. There is a strong protest movement against international companies, which are accused of harming local firms.

Country DCountry D

Growth rate: 4% Growth rate: 4%



Government encourages Government encourages the privatization of the privatization of industryindustry


Country DCountry D

Road and rail network is in poor conditionRoad and rail network is in poor condition

Transport

Government has started a big investmentprogramme . It will take 5-10 years.

Government has started a big investmentprogramme . It will take 5-10 years.

Country DCountry D

Large supply of skilled workers, but they are not used to working long hours

Large supply of skilled workers, but they are not used to working long hours

Labor

Strong unionsStrong unions

Wage rates: lowWage rates: low

Country DCountry D

CommentsA lot of paperwork is required for new businesses. There are problems with air and water pollution. Profits are tax free for the first three years after a factory has been built. Companies must pay 5% of their profits into a fund for training their workers.

Final DecisionFinal Decision

Requirements

Keep cost as low as

possible

2000 local

workers

(skill, wage)

Import the raw materia

l

(transport, tax)

Comparison & score

To compare the economy, labor and transport of each country, then score them.

Economy & Policy

High unemployment rate. With a lot of debt. Bribery is common. Has political problems.

Government contribute 30% cost

Country A (4) Country B (9)

Low unemployment rate. With many manufacturing industries. Stable government. Member of a trading group.

Country C (5)Currency exchange rate is unstable. Democratic government. Limits on the profits. Strong protection of local firms.

Country D (8)Encourage the privatization of industry

Much paperwork is required.

Must pay 5% of the profits for training workers.

Color RED means: not good.

Labor

AA

BB

Unskilled labor availableNo unionsVery low wage rates

CC

DD

Not a lot skilled labor availableStrong unionsHigh wage ratesNot much skilled labor availableStrong unions (clothing industry)Low wage rates, but rising fastA lot skilled workers (short hours)Strong unionsLow wage rates

Color RED means: not good.

5

6

7

9

Transport & Tax

Pay attention:I : International \ : unknown H : high ↑: improving 3y: 3 years

Rail Road Airport Seaport Tax Score

AA Good Poor New, I Poor \ 6

BB Good Good I NoBusiness

(H)7

CC \ Not badSmall, good

Good No 8

DD Poor(↑) Poor(↑) \ \ Free(3y) 6

Overall

2323

Country A 20202222

1515 Country B

Country C

Country D

The Final Decision : The Final Decision : Country DCountry D