I. Background of the Study
Southern Recreational Vehicle Company of St. Louis Missouri announced its plans to relocate its manufacturing and assembly operations by constructing a new plant in Ridgecrest, Mississippi. The firm, a major producer of pickup campers and camper trailers, had experienced five (5) consecutive years of declining profits because of spiraling production costs. The costs of labor and raw materials had increased alarmingly, utility costs had gone up sharply, and taxes and transportation expenses had steadily climbed upward. In spite of increased sales, the company suffered its first net loss since operations begun in 1982.
When management initially considered relocation, it closely scrutinized several geographic areas. Of primary importance to the relocation decision were the availability of adequate transportation facilities, state and municipal tax structures, an adequate labor supply, positive community attitudes, reasonable site costs, and financial inducements. Although several communities offered essentially the same inducements, the management of Southern Recreational Vehicle Company was favorably impressed by the efforts of the Mississippi Power and Light Company to attract “clean, labor-intensive” industry and the enthusiasm exhibited by state and local officials, who actively sought to bolster the state’s economy by enticing manufacturing firms to relocate within its boundaries.
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II. Definition of the Problem
The spiraling production costs
Rapid growth of labor and raw materials costs.
Utility costs had gone sharply
Increasing transportation expenses
Increasing taxes expenses
Unacknowledged net loss since the operations begun and up to the present
III. Areas of Consideration (S.W.O.T)
Strengths:
Established name in producing pickup campers and camper trailers
It is producing high quality products
Weaknesses:
POOR Management skills
III. Areas of Consideration (S.W.O.T)
Opportunities:
To lessen the production costs
Favorable condition given by the state of Ridgecrest as to payment of taxes (lower tax) and privileges
Threats:
Case that might be file against the company by their previous employees (St. Louis Missouri) Problems would the company experience in relocating its executives from a heavily populated industrialized area to a small rural town.
IV. Alternative Courses of Action
1. Relocation
Advantages:
Possible more savings (since Mississippi’s local government offers a lot of inducements)
Possible more profits (in relation to savings that the company will get)
Can put the company on track
Disadvantages:
Success is uncertain
Environment adaptation will take sometimes on the part of executives Additional costs
IV. Alternative Courses of Action
1. Relocation
Disadvantages: (con’t)
Risky
2. Financial assistance that it has to give to its previous employees and activities that would help for the “adjustments” of executives before its operation to new location Advantages:
Labor cases will be avoided
For the better of the management
Disadvantages:
Additional costs
V. Recommendation
Both alternatives should be done. Since relocating to another place creates intangible problems on the part of the management (work related) and financial assistance and others that the company should give to its previous employees. And of course, to relocate to a place where the company could get many government inducements and a good location that will help them to cut down their production costs.
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VI. Plan of Action
1. Human labor of the company should conduct a meeting with its previous employees to address their sentiments about the sudden decision of the company to cease its operation and relocate. For its management/executive, which eventually be relocated to the new work environment, some activities should be organized to help them get familiar with the place and with their work adjustments. 2. Relocation is the only option left.
VII. Potential Problem
1. Human relation staff and the company’s previous employees would not arrive at the same decision about the benefits and (how much) compensation they will get. 2. Company’s expectations will not achieve.
VIII. Contingent Plan of Action
1. Persistent, constant, and continuous communication with them should be maintained. Until two parties will arrive in an agreement. 2. The company should make an internal evaluation because maybe the main reason of the company’s continuous loss is its ineffective management skills. And the cost efficient method should be use, maintain, and upgrade if the problem still comes from the production operations.
