EduNinja1. Rio Mobiliário (RM)
Rio Mobiliário (RM) is a Brazilian furniture manufacturer. It generates sales in South America, North America and Europe. It has successfully outsourced production and distribution facilities to North America.
Selected financial data for the year ended and as of 31 December 2015. All figures in millions of Brazilian reals.
Define the term outsourcing.
Outline two benefits for M M of outsourcing human resource management (HRM) (lines 51-54).
Explain the factors that DA would need to consider before deciding to outsource some of its production (line 110).
Su is considering two possible locations for the production facility (lines 51-52). Explain the factors (reasons) that Su may consider when deciding between the two locations.
Analyse the advantages and disadvantages for Kos Palouk of pursuing Option 2 (lines 150-152).
Outline two reasons why M M may relocate all of its operations to Bengaluru (lines 124-142).
Examine how changes in the external environment may impact upon The Imperial's operations.
Answer the compulsory question from this section.
While identifying a location for the new factory, Zylstra Industries (ZI), a large manufacturing company located not far from Location A, presented RDM with another possibility: a strategic alliance. Thus, RDM have two options to consider.
Option 1: Purchase land and build a new automated factory. The potential location is summarized in Table 1.
Table 1: Information on Location A
Location A is in an economically depressed area of northwestern Europe, where land values nevertheless remain high. Location A has an old industrial tradition with a long tradition of poor industrial/employee relations.
Option 2: A ten-year strategic alliance with Z I. Z I has proposed that RDM uses some of its vacant manufacturing space in exchange for assistance in transforming Zl's manufacturing process into a highly automated one using robots. Twenty RDM engineers and computer scientists would:
- transform ZI's current factory into an automated one
- train ZI engineers
- monitor the factory for the duration of the strategic alliance.
ZI would pay all capital expenditures and RDM would employ the twenty engineers and computer scientists. Average salary and other financial rewards of one highly skilled employee would be $ 150000 per year. In exchange, RDM would get free usage of factory floor space. RDM would buy its own equipment at a cost of $ 6000000.
RDM estimates that leasing space similar to what Z I is offering would cost $ 3000000 a year.
State two reasons for selecting a specific location for production.
In 2022, the global home water filter market was $14 billion.
SVT's product penetration in Europe and the United States of America (USA) is high and growing but low in the rest of the world. In 2022:
- SVTs total sales revenue from home water filters was $ 4.9 billion
- the average revenue earned per water filter was $ 20
- 90 % of SVTs home water filter sales were to Europe and the USA.
In 2022, SVT announced the closure of its European and USA water filter manufacturing factories. Water filter profit margins had fallen for three years, partly because of increasing costs of energy, rent and labour. SVT has since built a huge new factory in Asia to manufacture home water filters.
SVT's market research, using quota sampling, found that 80 % of households that purchased an SVT water filter:
- had an above-average income
- owned two or more cars.
In January 2023, SVT:
- launched an advertising campaign in Europe and the USA highlighting the lack of potable water for millions of people in less economically developed countries (LEDCs)
- announced a 5 % worldwide increase in the price of its home water filters.
SVT committed to use the revenue from the 5 % price increase to provide two million free WF15 water purifiers annually to charities in LEDCs. It costs SVT $10 to make a water purifier.
Some disagreement occurred among the board of directors regarding this price increase. Some directors felt it would highlight SVTs vision and commitment to helping people in LEDCs, but others believed sales might fall, impacting profits in SVTs Consumer Products Division.
Explain two factors that SVT would have needed to consider when deciding where to open the new factory in Asia.
ELE is continuing to focus on all three of its divisions.
Car rental division
In 2010, ELE owned 4.5\% of the European Union (EU) car rental market. In 2019, ELEs car rental division had revenues of EUR 0.9 billion in a market worth EUR 16.8 billion. Initially, ELE only provided car rentals in its gasoline stations in Belgium. By 2014, ELE had expanded the service to its stations in France, Spain and the UK. Giselle believes that maintaining high levels of customer satisfaction is an important factor in the car rental division's continuing success.
Zeat division
Zeat's MiniC production line, based in the UK, has 125 employees, most of whom have been with the business since 2000.
Currently, approximately 90 % of MiniC sales are to customers in the EU, and profit margins for the MiniC air compressors have fallen significantly due to rising costs in the UK. Lucas recommended to ELE directors that MiniC production be outsourced to a manufacturer in Hungary in the EU.
Gasoline station division
The gasoline station division accounted for 35 % of ELE's operating profits in 2021. Perrana PLC, a global supermarket chain, has offered to purchase all of ELE's gasoline stations. The offer significantly exceeds the current market value of ELE's gasoline stations.
Perrana would close the gasoline stations and open supermarkets on the sites. All ELE gasoline station employees would face redundancy. ELE's workforce will feel betrayed. Although Hugo is very unhappy about the proposal, Giselle has mixed feelings: she would need to find new locations for her 700 car rental offices, but the sale could help finance the expansion of ELE car rentals into India.
Explain two factors relevant to the Zeat division in its decision to outsource MiniC production to Hungary.