Return to the Sleekfon and Sturdyfon data in Exercise 4. Management has estimated that demand in global markets is likely to grow. North America, Japan, and Europe (EU) are relatively saturated and expect no growth. South America, Africa, and Europe (Non-EU) markets expect a growth of 20 percent. The rest of Asia/Australia anticipates a growth of 200 percent.
a. How should the merged company configure its network to accommodate the anticipated growth? What is the annual cost of operating the network?
b. There is an option of adding capacity at the plant in the rest of Asia/Australia. Adding 10 million units of capacity incurs an additional fixed cost of $40 million per year. Adding 20 million units of additional capacity incurs an additional fixed cost of $70 million per year. If shutdown costs and duties are as in Exercise 4, how should the merged company configure its network to accommodate anticipated growth? What is the annual cost of operating the new network?

Data From Exercise 4

Sleekfon and Sturdyfon are two major cell phone manufacturers that have recently merged. Their current market sizes are as shown in Table 5-8. All demand is in millions of units.

c. If all duties are reduced to 0, how does your answer to Exercise 5(b) change?
d. How should the merged network be configured given the option of adding to the plant in the rest of Asia/Australia?

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Table 5-8 Global Demand and Duties for Sleekfon and Sturdyfon