Introduction
Recreational Living Limited (RL) is a boat manufacturing company that specialises in building fibreglass for boats and canoes that are powered by outboard motors. They also manufacture sailboats that are up to eight meters high.
James MacPherson, the CEO of Recreational Living Limited (RL), is currently facing a dilemma of whether he should relocate the company’s canoe and leisure manufacturing operations to a different location. Two reasons have mainly contributed to him being in such a situation;
A residential neighbourhood that was developed around the company's site and enclosed the company's physical premises. The residents of these neighbouring houses have since grown to be unhappy with the plant being located in their neighbourhood as they claim that foul odours are emitted from the plant.
The plant being meant that expansion of the facility within the current location was impossible. Since the plant is now running at close to its full capacity, James MacPherson has to consider relocating from the area or building a new facility at a different location or even buying an existing plant (Shaw & Grasby, 2013).
Discussion
With the aid of DCSF Inc., a real estate broker, James MacPherson has identified three new places that could answer his dilemma. He, however, faces a new dilemma as a survey conducted among his employees indicated that only a few of his 57 employees would move with the business to its new location (Shaw & Grasby, 2013). James MacPherson would thus have to undergo the process of hiring and training new employees if he were to move the plant to a new site which would be an extra cost to the relocation plans.
James MacPherson has thus identified the following three available options as being the best and is debating on which one to choose;
Option 1: Construct a new plant in Chatham - Kent
Option 2: Construct a new facility in Sarnia - Lambton.
Option 3: Purchase an existing plant in Windsor – Essex.
A detailed examination of these options has revealed the following;
Option 1: Construct a new facility in Chatham - Kent
An immediate advantage of this option is that James MacPherson will be spared the cost of hiring and training new employees. Other benefits are that the team spirit and goodwill among employees will not be severed as almost all employees will continue working for the company and friends will not be separated. The area is also easily accessible via a major highway and is in proximity to three major border crossings in to the United States (Shaw & Grasby, 2013).
The disadvantage of this option is that the area could be developed in a few years’ time thus creating expansion problems if the company were to expand again (Code, & Petty 2006). The company will also continue to incur the current costs of acquiring raw materials from Sarnia.
The financial costs associated with adopting this option are as follows;
Option 2: Construct a new plant in Sarnia - Lambton.
An immediate disadvantage of this option is that James MacPherson will incur the cost of hiring and training new employees. Other disadvantages are that the team spirit and goodwill among employees will be severed as most of the employees will stop working for the company hence friends will be separated.
The benefit of this alternative is that the firm will also be spared the costs of acquiring raw materials which were previously obtained from this location. The area is also in proximity to the U.S. border.
The financial costs associated with adopting this option are as follows;
Option 3: Purchase an existing plant in Windsor - Essex
An immediate disadvantage of this option is that the company will incur the cost of hiring and training new employees (Shaw & Grasby, 2013). Other disadvantages are that the team spirit and goodwill among employees will be severed as most of the employees will stop working for the company hence friends will be separated.
The advantage of this location is that the area has a large market size and is in proximity to the U.S. border.
The financial costs associated with adopting this option are as follows;
Conclusions
References
Dave Shaw and Elizabeth M.A. Grasby. (2013). Recreational Living Limited. Retrieved from: https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=3&cad=rja&uact=8&ved=0ahUKEwjC7_Hkqv3OAhXLPRoKHdD_Cy0QFggpMAI&url=http%3A%2F%2Fwww.ivey.uwo.ca%2Fcmsmedia%2F547846%2FRecreational-Living-Case.pdf&usg=AFQjCNG1EJ1HtxhLnzhhYUYRiJVv13mZHQ&sig2=AbXEs-yHb2jZ-b6qHxzlvw
Mike Code, J. William Petty. (2006). Financial Decision Making. New York City New York: Pearson Education Publishers.
