| Abstract | For the past two decades global enterprises have become ubiquitous in almost all
industries. This, along-with some other factors, has dramatically increased the complexity of the
decision making as well as the intensity of the competition. Yet, global plant location, which can
potentially have a detrimental effect on the cashflows of an organization, has received limited
attention in strategic planning literature as well as in strategic decisions by international
enterprises.
Corporate decision making process, usually, emphasizes quantitative factors like transport
costs, exchange rates, taxes, labor cost, and other cost-based variables. Important qualitative
factors such as regional infrastructure, knowledge imbedded in the work-force, capabilities of the
suppliers, and cultural compatibility of the host country, that are likely to provide longer-term
competitive advantages, are usually under-estimated.
This paper deals with the global plant location decision by a Norwegian autoparts
manufacturer, Raufoss Technology AS, for its Air Brake Fitting System manufacturing plant.
After the preliminary screening, the company had identified two most attractive locations:
Malaysia and Thailand. The author was than asked to proceed with this study, and to suggest
which of the two countries would be the best location. Because of the reasons mentioned above,
an effort has been made to give just importance to the qualitative factors as well as quantitative
factors, in this paper.
Decision factors discussed in the report were finalized after review of the relevant
literature, and discussion with the company's International Director for Business Development,
keeping in mind the resource limitations of the study.
One of the main purpose of this report is to serve as a guide or a 'sort of a handbook' to the
company sponsoring this research. This is the reason that, besides discussion of the decision
factors, a significant portion of the report has been devoted to presenting the importance of East
Asia in global trade; and historical, political, cultural, and economic environment of the two
countries. Overview of the economies and manufacturing sectors of both the countries is
presented in detail.
The comparison of the various facts presented in the report reveals that, although both the
countries are not very far apart as far as their attractiveness to the foreign investor is concerned,
Malaysia leads Thailand in most of the factors discussed. And hence is a better plant location for
the manufacture of the Raufoss Air Brake Fitting Systems. |
