This summary is about a case study of the Scotts Miracle-Gro Company (Scotts), the largest company in North America’s lawn and garden industry. It was founded by Orlando McLean Scott in 1868, and located in Ohio. Miracle-Gro was founded by Horace Hagedon in 1951 and merged with Scotts in 1995. Miracle-Gro is a leader in lawn and garden care chemical industry before the merger, while Scotts was known for its grass seed, fertilizers and fertilizer spreaders.
Bob Bawcombe was the director of operations of Scotts’ Temecula plant for 5 years and have to justify why the company does not outsource a contract manufacturer of Scotts’ spreaders to China to cut expenses and increase production volume, instead of continue manufacturing them in their own plant in Temecula, California. There are obvious advantages and disadvantages of outsourcing to China. The main cost drivers of Temecula plant are raw materials, labours, electricity and overheads.
Scotts is facing high labour and electricity costs. Outsourcing to China would significantly lower costs in labour, electricity (with Government subsidy), and overheads. However, extra shipping costs would be needed, and lead time would increase since products have to be shipped from China to company. Extra administrative costs would be needed for hiring supervisors and implementing new systems for quality control in plant in China, because the company would like their products to meet their quality standard.
Company image is also another important thing to look at. Outsourcing to China might have a negative impact on Scotts’ image since products that are manufactured in China do not have a good reputation. What’s more, it may costs more for the company to shut down the production line in Temecula, since they will have to lease out the plant, sell equipments for production, and compensate their labour for laying them off.
The Essay on Multinational Company China Market World
PRACTICAL INSIGHT What kind of market can attract a multinational company What can a multinational company bring to a new market, to a new country How can a multinational company improve the lives of the citizens of the new market and profit in the interim What kind of market can foster such a lucrative proposition What kind of an impact can a multinational enterprise generate In fact, China is ...
Therefore, I suggest that the company should continue to manage their business at the plant in Temecula even though it may cost them more. They could reduce some cost by training production line workers to improve workforce production volume, so as to make land cost more comparable to China. Also they could automatize their plant to cut labour cost in short run and machinery cost in long run.
