Management Discussion
There are various method of improving efficiency and effectiveness in an organization. One, an organization must learn how to reduce its costs and increase productivity. Two, an organization must have employees that are forecast. For the manufacturing company to move from Canada, it may improve its productivity but risk destroying its image in return.
Transportation costs from Colorado to Toronto must be analyzed. The costs of relocation will be very high. Considering the fact that land itself will cost seven million dollars, the costs of relocation are bound to be very high. The management of the company must therefore brace themselves to fork out huge amounts of money to relocate. The customers that the company will lose in the period of relocation are also gone be very many. This is because it is unrealistic to think that the company will relocate to the United States and immediately start production. Setting up another plant will be much costly.
Putting in mind that the main reason why the management of the company wants to relocate the company is due to higher production costs and taxes, the risk associated with relocation are much higher. The costs and benefits will be analyzed later in this paper. Nevertheless, what the management should concentrate on is how to improve its profits in the face of all these challenges. The company already has a good customer base. Therefore, it will not be easy and will not be profitable. Raising the price in a little measure is not likely to hurt the company’s profit base. Moving back to the United States will not be easy and profitable at all.
The NAFTA makes it easy for products to be transported in and out of America and makes the trading between Canada and the U.S very easy. However, the damage that this company will have in the face of relocation back to the United States is likely to have more adverse effects than anticipated.
Background
Relocation of business
The changes that must be made
Approaches in the current location
Structure
Advisors
Employees
Marketing
Maintenance of current market
Competition
Search of new market
Financial Analysis
Forecast of cash flow
Forecast of loss and profit
Forecast of balance of sheet
The above plan can be carried out in the 12 months. The plan can be carried out at the discretion of the management. The costs and benefits of relocation must be examined carefully and decisions made. The decisions of the management must put the best of the company into perspective so that the company will not go at a great loss.
The transportation costs from Colorado to Toronto will in most cases depend on the costs of fuel. Since Toronto is the major market for the pharmaceutical products, there must be adequate means of transport. The products will in most cases be transported using the company trucks and by air. The company must therefore get the means to do this cheaply. By air, the products will reach Toronto faster. By road, the re is likely to be delay. Therefore, the expiry and the urgency of the products in Toronto must be considered. It takes 12 hours to fly from Colorado to Toronto. On average, a person who is taking an airbus will spend about 582 dollars on passenger airlines.
Cargo planes charge up to 300 dollars from Colorado to Toronto. Given this fact, it will be more convenient for the manufacturing plant to remain where it is. NAFTA policies cannot be relied on to make apt decisions for the manufacturing plant. This is because in as much as the company’s management is relying on the policies to maintain its market in Canada after relocation back to the United States, even if the plant is located in Canada its market will never be affected. Putting in mind that the main reason why the management of the company wants to relocate back to the United States is to reduce running costs and escape high taxation, when the company’s plant goes back to America it will; still have to undergo taxation and high taxation.
Many may argue that labor costs in the United States are lower than in Canada, nevertheless, the long term picture must be considered as long as relocation is concerned. As seen above, a lot of resources will have to be incurred in transportation of the products from Colorado to Toronto. Excluding the 7,000,000 million dollars needed to be incurred for the new location in the United States, other costs like building materials, manual labor costs, materials and much more must be calculated. In actual sense, the company may have to fork out over 30 million dollars to relocate. While this will be happening, other pharmaceutical companies, who are competitors, will be busy grabbing the market left unattended. therefore, it is clear from the analysis of the costs and benefits of relocation that the costs exceed the benefits of relocation back to the United states. Therefore, the management should let the current location of the company to be and forget the relocation decision. The costs outweigh the benefits. Let the company fork out the needed taxes and the increased labor costs and transfer the costs to the customers. The price increase will not be as high as anticipated. When costs of production increase, businesses increase prices. And prices are never constant. Basic economics also teach that prices in an economy never go backwards, but always rise at small margins.
Works Cited
Drucker, Peter F, and Joseph A. Maciariello. Management. New York, NY: Collins, 2008. Print.
Mercurio, Bryan. International Business Law. South Melbourne, Vic: Oxford University Press, 2010. Print.
