Suppose a company in the United States was trying to decide whether to locate th

Question

Suppose a company in the United States was trying to decide whether to locate their manufacturing facility in the United States or in Southeast Asia. Consider the following information in answering the question below: Presently, this US company, which makes only one type of finish good, sells 40% of their product in the United States, 10% of the product in Mexico, 15% of their product in Canada, and 35% o of their product to the rest of the world. The product this company produces is presently tariffed heavily when imported into the United States. The product consists of about 150 components of which 75 components are imported from Southeast Asia. 40 components are imported from Mexico, and 35 components come from US suppliers. List and explain five reasons why it would be favorable to locate the new manufacturing facility in the United States rather than in Southeast Asia.

Explanation / Answer

Resons are as follows:

1. Proximity to markets - by locating the facility in United States this company will be

locating finished goods near 65% of its customers those are served in US, Canada, and Mexico.

2. Benefiting from NAFTA - 65% of this company's products are sold in either the United States, Mexico, or

Canada. NAFTA allows product to flow freely between these three countries.

3. Utilities - the infrastructure of United States is among the best in the world. It is highly

likely that all your utility requirements would be met by most US locations.

4. Quality-of-life issues - if this company is headquartered in United States and would like

to maintain American management, it is likely that many of the employees would prefer

the new location to be in United States. These employees are most likely comfortable with

the government stability, housing, health care, culture, and public safety they are

accustomed to two in United States.

5. Lead times - lead times associated with purchases made from US and Mexican suppliers

would most likely be quite favorable.

6. Labor force - The US labor force is considered among the most productive, well-trained,

and well-educated labor forces in the world.

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