Imaginative Toys

IMAGINATIVE TOYS I.

PROBLEM STATEMENT How will Imaginative Toys meet the demands of its consumers?

II.

AREAS OF CONSIDERATION A. PROCESS PLANNING The process used to manufacture the three product lines could be replicated easily. All three processes were labor intensive, with plastic parts molding being the only skilled position. B. PHYSICAL FACILITIES MANAGEMENT Gerald Kramb, the founder of the company, and his staff researched two alternative locations for expansion. One was in a maquiladora in Nogales, Mexico and the second was in Europe. C. PERSONNEL MANAGEMENT Since the organization is labor-intensive, labor cost should be taken into consideration. Also the availability of labor and how people in a certain location act towards work. Where to get the workers should be considered.

III.

ALTERNATIVE COURSES OF ACTION A. Locating to the US old site would only mean expansion. Doing this would put much less pressure on the company’s already thin management structure. Besides, there was not any suitable space to be found anymore. B. Locating in Mexico could mean shipping if ever skilled labor is not available. On the other hand, the improving trade relations and the projected relaxation of tariffs and duties made this an attractive alternative. Labor cost also could be substantially reduced. Labor/Manpower is not a problem here. C. Locating in Europe would give comparable labor cost to those in Seattle but transportation cost would be 10-15% higher on toys shipped back to the US market. The projected single-market program made this alternative attractive; this is designed to bring free movement by people, goods, capital and services to the European community by January 1, 1993.

D. Locating on both Mexico and Europe might be conceivable. Since Mexico got the manpower and Europe got the facilities, joining the two would be great if and only if the sales projections are actually held because by then the demand would support a three-plant network. E. The company may acquire new machineries for the location. They may outsource and find the cheapest machineries that could render the same quality of work. Maintenance is the key here. F. Imaginative Toys, on the other hand, may buy spare parts and assemble new customized machineries for their toys, of course with the help of their technicians. Since it is said that innovation of a continuous kind is one of the key to their success, so why not make the machines more specialized so it can render high quality toys right away? G. If Europe location is considered, reducing the transportation cost for the mean time is a necessity. The process of manufacturing/producing such toys shall be strictly monitored especially those of which that will be shipped back to the US. They should be minimal for the first two years. H. The company can offer willing current employees jobs when they move to a certain location. This is a viable option since it can save time and training costs because the employees are already familiar with the process. In return, the company can offer incentives and other benefits. I. Since the job does not necessarily require a skilled position, the company could train new employees for the job. In choosing the location though, the company should consider the minimum wage rates of the alternatives, if not the labor cost. J. Imaginative toys can hire willing current skilled employees for the added capacity then hire qualified applicants for the routinely job. This way, the company could ensure the quality of work their employees shall render. K. If the company shall choose Mexico, shipping possibilities shall be removed. They should find a skilled laborer to perform the plastic molding. In this case, the company shall use product plant strategy wherein entire products or product lines are produced in separate plants.

L. Whether in Mexico or in Europe, the company may focus more on scientific and technical people as potential employees and look for areas with high concentrations of those types of workers enable to optimize quality assurance of products as well as the workers themselves and their productivity. M. Language is an issue among personnel when locating to a foreign country. The official language of Mexico is Spanish while Belgium has three official languages, Dutch, French and German. Most people here are bilingual which makes it easier for the company to overcome the communication barrier. N. If the company located in both Mexico and Europe, they can perform a demand leading strategy. They can accommodate new or unexpected demand; provide quick response and delivery to customers, low overtime for the employees and low subcontracting cost. The bad side is that there may be a high cost of unused capacity. IV.

RECOMMENDATION In performing a location decision, we shall weigh the potential benefits and the potential problems to be able to ensure that we would not incur significant losses. The most viable alternative for the company is to locate in Europe and these are the reasons: 1. Since the facilities are already present, the personnel shall be hired from Brussels, training cost would not be that high anyway for the job does not require much skill, except the plastic molding of course. With the language differences, since English is a universal language and most people there take it as their second language, it would not be that hard to hire people for the job. Unlike in Mexico where Spanish is the official language, there are but few who speaks English fluently. On the other hand, the company can also send some of its workers whom it has convinced to move to a foreign country and must make sure that the employees they send abroad are familiar with local customs and have a reasonable facility with the language of the host country to eliminate culture shock and to be able to converse properly. 2. It is often advantageous to produce labor-intensive products in countries with low wage rates like in Mexico but the problem here is that the productivity and quality of work may be so much lower that the effective cost of the product is higher. Since the

keys to success in the company were continual development of innovative products and a high level of product quality, they should be risk-averse because the quality of their product must not be jeopardized. 3. The stability of a country’s government is a major factor too. In Mexico, less than one-fifth of its labor force belongs to a union; the majority of which are controlled by the government. Rather than being aggressive advocates for workers, Mexican unions have typically played a crucial role in supporting the government-dominated Institutional Revolutionary Party. In doing so, the unions are noted for their levels of corruption and subordination to government influence. While the service economy is growing rapidly in Belgium, the country remains heavily industrialized, importing great quantities of raw materials that are processed mainly for export. Such industry gives Belgium one of the highest gross domestic products in the world, despite its relatively small population. 4. Climate should be considered too because this can be a great peril to the operations of the company also to the productivity of its workers. Brussel’s climate is humid and mild as compared to Mexico’s high temperature with moderate to low rainfall. 5. Since Europe is one to two years behind the U.S. market in a trendy business such as toys, it is just rational to target them as potential consumers. By January 1, 1993, the company will be able to conduct full access to the European Community, which of course will entitle them to a much bigger market share. Besides, the European Economic Area is the largest free-trade zone in the world, which means that it can give the company access to the European countries which are its members. In contrast to the North American Free Trade Agreement (NAFTA), the world’s second largest free trade area which were composed of Canada, Mexico and the United States. V.

ACTION PLAN TIME FRAME

A quarter of a year

ACTIVITIES

Renovation of facility Hiring of personnel Start of operation

PERSONS INVOLVED

Gerald Kramb Workers

EXPECTED RESULT

A much better organization with a very effective added capacity yielding high

profits through satisfying and meeting up with the demands of its consumers