Making decisions about where to place manufacturing is a difficult task. Numerous decision-makers do complicated analyses for

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Making decisions about where to place manufacturing is a difficult task. Numerous decision-makers do complicated analyses for large-scale industrial initiatives. FDI is usually the most expensive foreign entry method when it comes to building or acquiring a foreign factory. Managers locate factories in locations that optimize organizational advantages when resources are constrained. The most effective method for deciding on a place. Assume you work for a firm that manufactures bathroom fixtures such as sinks, bathtubs, and shower systems (e.g., American Standard). With these products, your company hopes to get into the massive European market.

The European Union is particularly appealing due to the concentration of more than 500 million affluent consumers in a small area. To better service this region, international corporations construct or purchase manufacturing facilities. that you work for a company that makes bathroom fixtures, such as sinks and shower systems. Examples include American Standard, Kohler, and Crane. The products made by such companies enjoy big demand – every household needs them. Your company wants to enter the huge European market. With more than 500 million mostly affluent consumers in a concentrated area, the EU is the world’s most attractive market for consumer goods. To best serve this market, your firm’s management has decided to establish a manufacturing plant in Europe. Production costs in Western Europe are high, and thus, management wants to establish its factory in Eastern Europe because of the low cost and high quality of labor there. Now try to identify the best country in Eastern Europe for establishing a manufacturing plant.

Look the research to identify the most promising country by researching the variables listed below. Management would research numerous variables from both secondary and primary sources. In real-world situations, the process is time-consuming and costly. Much of the data can be obtained only by buying it from a professional market research firm or by visiting the countries under consideration.

The task is to research the following variables:

• Extent of government intervention

• Political risk

• Intellectual property protections

• Quality and education level of workers

• Cost of labor

• Presence and nature of labor unions

• Level of labor productivity

• Quality of infrastructure Research these variables for each of two Eastern European countries of your choice. Among Eastern European countries you might consider are: Bulgaria, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia, and Ukraine. Write a report in which you identify the best country for establishing a factory, by researching and analyzing the variables given above for each of the two countries. Using the data that you have collected, fill in the cells in the table. After analyzing the entries, decide which country is the best location for the firm’s factory.

The report should include your conclusions and the completed table. Your report can be the form of a memo. Be sure to explain the rationale, as supported by the table, for your choice of the top country. Country 1 Country 2 Extent of government intervention Political risk Intellectual property protection Quality and education level of workers Cost of labor Presence and nature of labor unions Level of labor productivity Quality of infrastructure Keep in mind this type of analysis forms only part of the total research that the firm would undertake in the real world. For example, in addition to collecting the above data, management would visit the most promising countries to personally examine critical decision factors, such as quality of labor, existing plants available for acquisition, and local infrastructure. A more useful way to approach the exercise is to use a standardizing and weighting approach, as explained below:

1. Assign a value from 1 to 10 to describe the level of each variable. For example, you might assign a value of ‘3’ to a low-political risk country and a value of ‘10’ to a high-political risk country. This amounts to standardizing the data. You could also standardize on a 1-5 scale. Standardizing is useful in situations like this where the variables are given in different units (e.g., raw numbers for Cost of labor, Level of labor productivity, etc.). Standardizing allows the researcher to compare the data more consistently and objectively. After standardizing the data, you next calculate the total score for each country by adding up the values that you determined above. The most attractive country will be the one with the highest total score. You will have to invert the score on some items. E.g., a high number is good for Level of labor productivity, but a low number is good for level of Political Risk.

2. Next you might want to establish a weight for each variable based on its importance, and then multiply the weight value by the value of the variable, in order to arrive at a more specific, total value of each variable for each country. For example, on a weighting scale from 1 to 5, the researcher might assign a weight of 5 to ‘Cost of labor’ and a value of 3 to ‘Quality of infrastructure’. This approach is especially useful because some variables are more important than others. For example, high technology firms consider ‘Presence of knowledge workers’ more important than ‘Inflation rate’ when researching potential manufacturing sites. Standardizing and weighting data in this way produces the most accurate, objective results.