Potential Benefits Of Doing Business In A Foreign Host Country

Abstract

This guide is going to give you insight of my five years experience with a manufacturing company that switched from doing assembly in the United States to Mexico. These are my real life experiences and opinions of how the company could have handled worker issues better. I will also detail additional costs that were incurred and the details and planning that took place over a two year period. In this paper, we will refer to the company as Acme Automotive, for example purposes.

ACME Automotive

Business activiteis in a foreign host country

Business Activities Background

This company started in the late 70’s with a scientist and his wife. He developed an energy efficient product, but didn’t have the resources to manufacturer and market the product. He found investors to help him develop his product line. His energy efficient products he developed are long lasting rechargeable batteries and solar products. When he would develop new products or run short on cash for new development he would look to seek out new investors. In the early 90’s he became partners with his solar division with Canon (The copiers/cameras), based out of Japan. He would stay on for continued development of the product. However, Canon took over all business decisions for the company. He only offered them his solar division, maintaining his battery division, majority owned by himself.

After Canon took over, they had plans for manufacturing changes. At the time Canon took over, all manufacturing was done in a suburb of Detroit, Michigan. To save costs and increase production they moved assembly to TJ, Mexico. This allowed space in the Detroit plant for more production machines. To achieve this they moved 10 people to San Diego Area to handling warehousing and custom issues. They purchased a building in the San Diego Area. The flow of production went from the manufacturing components in Detroit Michigan, then shipping all products across the country to San Diego Warehouse for inventory purposes. Then shipping to their newly purchased TJ assembly plant where they assembled the solar panels, then shipping the product completed back to San Diego for international distribution.

Advantages

By moving their assembly to TJ, Mexico, this created two big advantages for the company. First it opened up valuable manufacturing areas in their Detroit plant. Second, it allowed them to hire Mexicans at $.50 an hour to assemble the products. Third it allowed for greater manufacturing opportunities. A survey has been conducted and here are the findings of the experts in the international market. The benefits will be advantageous for success of the business.

Environmental Issues facing the workers

These unskilled workers were required to handle raw chemicals with no training. The components of the entire panel were shipped and the Mexicans assembled the products. When assembly was done in the Detroit Area, workers were given safety gear, we ran regular fire drills for explosions, had a safety inspector on site to ensure all chemicals were being handled properly. It was a shocking surprise to see these workers doing the same work as Americans with no training or safety precautions.

These issues were never resolved. When raised at company meetings the over all attitude of management was, they are Mexicans.

Canon realized it could not turn a “quick profit” as they had thought, and the increase in the supply did not increase the demand for the product. Canon pulled their funds and management. They renamed the company slightly and now another company has taken over.

LONG TERM EFFECTS

By moving these dangerous chemicals to across the country then to Mexico to save some money, in my opinion, was not worth the savings in labor costs. By having untrained labor handle dangerous chemicals with no safety gear to provide protection in case of a accidents, was not worth the risks put upon those workers. It was often, the manger of the Mexican facility would say, another accident had occurred.

The overall long term effects cost the company money, their focus from research and development when to manufacturing when the world was not ready to convert to this type of energy source. The other long term effect was people like me sought employment elsewhere after touring the Mexican plant. Words can’t describe what I saw. What amazed me was doing business like that was legal. When negotiating starting operations across the border the main thing the Mexican government was concerned about was that the company would provide transportation for workers to go to and from their homes. Not once over hearing a meeting did I hear any concern of the type of materials they were being required to handle.

Lessons Learned

The lessons we can learn is that these workers are human just like you and me. They deserve to have the same safety gear that we would wear if doing the same job. They need the same amount of breaks to ensure we can maintain high quality standards. They are not slaves. Their economy they live in may allow for company such as Acme to take advantage of cheap labor rates. However, they deserve the same standards we would put into place as if the company was operating within the United States borders.

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