1. If your company wants to start a manufacturing plant to produce 25 million to
ID: 443561 • Letter: 1
Question
1. If your company wants to start a manufacturing plant to produce 25 million tons of steel per year, how many employees would you need in 2012 assuming 500 employees per plant working 40 hours per week for 52 weeks (2080 hours per year in 2002) in each of these four countries? Show your computations.
2. Assuming an average hourly wage of $20 per hour in 2002, what would be your labor costs in these four countries in 2012? Show your calculations.
3. Based on cultural and economic factors, which country would you choose to locate your plant? Why?
4. Your company also wants to introduce a pay-for-performance (PFP) system in these four countries if it decides to open up a plant in the country of your choice (your answer to Q3). The PFP can be based either on individual productivity or group productivity. Discuss which of these countries would be receptive to individual or group productivity-based PFP systems? Explain in detail.
Please see the above tables to answer the questions. Thank you!
Explanation / Answer
Question 1
Year 2002
Total number of hours worked = number of employees* number of hours worked
= 500*2080
=1040000 hours
Labor productivity per hour = Total output/Total hours worked
= 1000000/1040000
= 0.96 pounds
Calculations for number of employees needed in 2012 for the four countries
Czech Republic
Labor productivity for 2012 = 0.96*2.044
= 1.96224 pounds
Number of employees needed = Total output/(Labor productivity per hour*Average number of hours worked)
Average number of hours worked in 2012 = 2080*0.998 = 2075.84 hours
Number of employees needed = 25000000/(1.96224*2075.84) = 6137.54
= 61378 employees
Italy
Labor productivity for 2012 = 0.96*1.006
= 0.96576 pounds
Number of employees needed = Total output/(Labor productivity per hour*Average number of hours worked)
Average number of hours worked in 2012 = 2080*0.931 = 1936.48 hours
Number of employees needed = 25000000/(0.96576*1936.48) = 13367.73
= 13368 employees
Korea
Labor productivity for 2012 = 0.96*1.728
= 1.65888 pounds
Number of employees needed = Total output/(Labor productivity per hour*Average number of hours worked)
Average number of hours worked in 2012 = 2080*0.905 = 1882.4 hours
Number of employees needed = 25000000/(1.65888*1882.4) = 3122.7
= 3123 employees
Singapore
Labor productivity for 2012 = 0.96*1.582
= 1.51872 pounds
Number of employees needed = Total output/(Labor productivity per hour*Average number of hours worked)
Average number of hours worked in 2012 = 2080*1.024 = 2129.92 hours
Number of employees needed = 25000000/(1.51872*2129.92) = 3234.8
= 3235 employees
Question 2
Labor cost = output per hour*total hours worked*unit labor cost
Labor cost for 2002 = 0.96*1040000*20
=$ 19968000
Calculations for labor costs in the four countries
Czech Republic
Output per hour = 0.96*2.048 =1.96608
Total hours worked = 1040000*0.96 = 998400 hours
Unit labor cost = $20*1.264 = $25.28
Total labor cost = 1.96608*998400*25.28 = 49622978.4
Cost in U.S dollars = 49622978.4*1.672
= $82969619.88
Italy
Output per hour = 0.96*1.081 =1.03776
Total hours worked = 1040000*0.835 = 868400 hours
Unit labor cost = $20*1.726 = $34.52
Total labor cost = 1.03776*868400*34.52 = 31109105.86
Cost in U.S dollars = 31109105.86*1.365
= $42463929.5
Korea
Output per hour = 0.96*1.908 =1.83186
Total hours worked = 1040000*0.952 = 990080 hours
Unit labor cost = $20*1.921 = $38.42
Total labor cost = 1.83186*990080*38.42 = 69675044
Cost in U.S dollars = 69675044*1.111
= $77408973.88
Singapore
Output per hour = 0.96*1.544 =1.48224
Total hours worked = 1040000*1.266 = 1316640 hours
Unit labor cost = $20*1.111 = $22.22
Total labor cost = 1.48224*1316640*22.22 = 43364029.24
Cost in U.S dollars = 43364029.24*1.433
= $62140653.91
Question 3
Choosing the best country to set the plantation basing on the cultural and economic factors
The total rating totals equals to 1
Total factor weight = %*Rating weight
The % factor = (factor value/total value for a factor for four countries)*100%
TW stands for Total weight
RW stands for rating weight
Country
Czech Republic
Italy
Korea
Singapore
Factors
RW
%
TW
RW
%
TW
RW
%
TW
RW
%
TW
Individualism
0.2
33.4
6.68
0.24
44.2
10.608
0.06
10.5
0.63
0.09
11.6
1.044
Power Distance
0.18
23.6
4.248
0.15
20.7
3.105
0.2
24.9
4.98
0.33
30.7
10.131
Uncertainty
Avoidance
0.23
30.6
7.038
0.22
31
6.82
0.28
35.1
9.828
0.04
3.3
0.132
Masculinity
0.18
26.6
4.788
0.21
32.7
6.867
0.13
18.2
2.366
0.22
22.4
4.928
Long-Term
Orientation
0.21
23.1
4.851
0.18
20.1
3.618
0.33
33
10.89
0.32
23.8
7.616
Total Score
27.605
31.018
28.694
23.851
Ranking
Country
Total score
Position
Italy
31.018
1
Korea
28.694
2
Czech Republic
27.605
3
Singapore
23.851
4
From the calculations, the best country to locate the plant is Italy. This is because Italy has the highest cultural dimensions and economic factors such as power distance which is necessary to support the development of the steel plant.
Question 4
From the calculations in question 3, it is evidenced that the percentages for individualism is higher in Czech Republic and Italy compared to Korea and Singapore. This means Italy and Czech Republic are likely to be receptive to individual productivity based pay-for-production system. On the other side, the percentage for individualism is very low in Korea and Italy. This means, the two countries are based on group productivity. Therefore when introducing pay-for-performance Korea and Singapore are likely to be receptive to group productivity based pay-for-performance system.
Country
Czech Republic
Italy
Korea
Singapore
Factors
RW
%
TW
RW
%
TW
RW
%
TW
RW
%
TW
Individualism
0.2
33.4
6.68
0.24
44.2
10.608
0.06
10.5
0.63
0.09
11.6
1.044
Power Distance
0.18
23.6
4.248
0.15
20.7
3.105
0.2
24.9
4.98
0.33
30.7
10.131
Uncertainty
Avoidance
0.23
30.6
7.038
0.22
31
6.82
0.28
35.1
9.828
0.04
3.3
0.132
Masculinity
0.18
26.6
4.788
0.21
32.7
6.867
0.13
18.2
2.366
0.22
22.4
4.928
Long-Term
Orientation
0.21
23.1
4.851
0.18
20.1
3.618
0.33
33
10.89
0.32
23.8
7.616
Total Score
27.605
31.018
28.694
23.851
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