Eldora Company
Eldora Company
Introduction
Eldora Company (EDC) is the largest and the most profitable bicycle manufacturer in the United States of America located in Boulder, Colarado. It perceived Quality as its greatest strength along with the unconventional location strategy of having its corporate office and manufacturing unit both at the same location.
Advantages of Location Strategy
a) Boulder, Colorado is considered as bicyclists Mecca.
b) Communication and knowledge sharing was easy .
c) All marketing staff, engineers, designers and manufacturing personnel were working under one roof, this made cross functional interactions better.
d) Changes in styles, production plan could be made quickly and efficiently.
Current Scenario
The current bicycle market in US is approaching saturation and the company's senior management is facing the dilemma of choosing between setting up manufacturing facility in Asia and outsourcing the production to companies in Asia or other countries.
Opportunity Cost
a) China consuming 20% of the bicycles produces in the world, India and Japan sharing 15% and 4.5% respectively of the same.
b) Cheap labor available in Asia, which is close to 15% of the labor charges in the US.
c) 20% of the production cost is labor cost, which can be reduced by automating all the manufacturing processes.
d) Additional transportation cost and excise duties to sell the bicycles in the external market.
Options
a) Manufacture in China/ Singapore / Taiwan. Based on demand and other facilities available.
b) Outsource production to Asian countries.
c) Shift manufacturing operations to locations like Mexico where wage rate are similar to Asia and many other risks minimized. However transportation charges are to be added to deliver the bicycles to other countries.
Recommendations
a) Keeping the growing demands in Asian countries in mind EDC should plan for outsourcing the production on a short term basis, to companies located in Asia.
b) However on a long term
Introduction
Eldora Company (EDC) is the largest and the most profitable bicycle manufacturer in the United States of America located in Boulder, Colarado. It perceived Quality as its greatest strength along with the unconventional location strategy of having its corporate office and manufacturing unit both at the same location.
Advantages of Location Strategy
a) Boulder, Colorado is considered as bicyclists Mecca.
b) Communication and knowledge sharing was easy .
c) All marketing staff, engineers, designers and manufacturing personnel were working under one roof, this made cross functional interactions better.
d) Changes in styles, production plan could be made quickly and efficiently.
Current Scenario
The current bicycle market in US is approaching saturation and the company's senior management is facing the dilemma of choosing between setting up manufacturing facility in Asia and outsourcing the production to companies in Asia or other countries.
Opportunity Cost
a) China consuming 20% of the bicycles produces in the world, India and Japan sharing 15% and 4.5% respectively of the same.
b) Cheap labor available in Asia, which is close to 15% of the labor charges in the US.
c) 20% of the production cost is labor cost, which can be reduced by automating all the manufacturing processes.
d) Additional transportation cost and excise duties to sell the bicycles in the external market.
Options
a) Manufacture in China/ Singapore / Taiwan. Based on demand and other facilities available.
b) Outsource production to Asian countries.
c) Shift manufacturing operations to locations like Mexico where wage rate are similar to Asia and many other risks minimized. However transportation charges are to be added to deliver the bicycles to other countries.
Recommendations
a) Keeping the growing demands in Asian countries in mind EDC should plan for outsourcing the production on a short term basis, to companies located in Asia.
b) However on a long term