Section A: Case Study Analysis CHANGE AT INTERNATIONAL INDUSTRIES The atmosphere in the room is tense. Ted Jones-Mason, CFO for International Industries has just finished his presentation. President Brenda Wood, sits quietly making notes. After a pause, she breaks the silence. 'From what you have shown us, Ted, it seems that we face the following problems in Australia. Our plant is not competitive when benchmarked against international best practice or against our other plants in China, Germany and the United States. Our production costs are the highest in the world. Our low productivity and high labour costs are killing us. In short, we must either cut our Australian losses and expand elsewhere or make our Australian operations more competitive." Ted looks directly at Brenda. 'Brenda, that's it in a nutshell. Our Australian operations are bleeding badly. Worse, their financial performance is now affecting the group's overall profitability and ability to grow. If we don't do something quickly about Australia, we risk being taken over by Mega Manufacturing of China. If that happens, the Australian plant will certainly be closed. You are all aware that our share price has dropped 20 per cent in recent months and that it is rumoured in the financial media that we are now a potential takeover target if we don't do something about stemming the losses in our Australian operations." Brenda nods in acknowledgement then turns to face Steve Jaworski, vice-president of manufacturing. 'Steve, what do you think?' Ted is right. The point I wish to make is this, if we could achieve 90 per cent of best practice figures for productivity and labour costs our Australian plant would be among the most profitable in the company. It's basically that simple. Our performance is appalling. We have rotten production figures because our plant and equipment is archaic and we don't have any labour flexibility. Excessive penalty rates make it uneconomical to operate the plants seven days a week, absenteeism is ridiculously high, our workers are not motivated, we constantly face fights with the unions over demarcation, our workers show more loyalty to the unions than they do to us and the safety record of the Australian plant is the worst in the company. Yet, our pay and conditions of employment are among the best in the industry. Our labour turnover is low-no one ever leaves. It's just that no one works either.' 'I don't know if you realise it or not, interrupts Ted, but according to the US Bureau of Labor Statistics, Australia is the least efficient manufacturing country in the world. '165