Executive Summary
The essay seeks to analyze Whitewater West Industries Limited option to relocate its operations to a new site. The move to relocate is hinged in two main reasons; that is, outgrown capacity as well as complaints from residents. The residents are complaining of the bad odour that the company emits when undertaking fibreglass molding. The intention of this essay is three-fold. First, the essay offers a brief introduction of Whitewater West Industries Limited, and then it proceeds to examine and evaluate the significance and the importance of relocation plan to the company.
Secondly, the essay also explains the problem statements and the possible sub-problems or issues the company faces. In this case, the company is facing harsh, prevailing economic and social conditions that are becoming less favorable to the company, hence there is the need to relocate its operations. In addition, the essay analyzes the relocation move, as well as the possible alternatives for the company. The pro and cons of each option are enumerated. Lastly, the essay will provide an analysis of the reasons making each option, and as a way of highlighting the importance of the essay, it will provide the necessary recommendation for the company.
The recommendation includes the management of Whitewater West Industries Limited which should consider the second option- Kelowna Build. This will facilitate the establishment of a new facility that takes into account the requirements of the company, especially, expanded capacity. The establishment will save the company a lot of money, in that the company can decide to house all its operation in one building, hence easier and quicker communication. In the long-run, the company will save on the cost of rent which is normally high. This is because, though, the cost of erecting the building is substantial it is incurred only once. However, rent payment is done regularly as long as the business is still carrying out its operations.
Introduction
Whitewater West Industries Limited is a multinational company with its production and sales volume increasing significantly across borders. The organization opted for diversification and globalization of its operations due to high demand from the government and land developers. For the organization to meet the ever-increasing customer demands, the management adopted a strategy of setting up subsidiaries in different areas of the country. This was achieved through purchase of existing firms, as well as taking over those that were partially owned.
The company has distinct strengths that make them secure a considerable market share in the global market. The strengths include close contact with the clients which will enable the organization to understand the needs of the customer. The organization, in addition, has the ability to mould and design together with providing appropriate tooling that matches the expectations and demands of various classes of customers. As well, the organization possesses the ability to change its production aspects with the aim of meeting customer needs. These strengths have enabled the organization to survive in this competitive business environment.
The growth of the company in term of sales volume is commendable. However, the growth rate has been hampered by a limited capacity. The organization seeks for an alternative location so that it can realize optimal utilization of its strengths and resources for the realization of growth in sales. Currently, the company is facing two main challenges; that is the neighboring community has launched complain in relation to the smell that emanates from fiberglass production. In addition, the organization has reached its optimal production capacity. Based on this reasons the organization is considering relocating its operations to a different site. The resolution had to be made swiftly to complete the necessary arrangements and commence production.
Problem Statement
Sales and production are the lifeblood and engine of any organization’s success. Each organization’s focus rests in those options that improve production and sales revenue, as well. In this case, the success of Whitewater West Industries Limited is facing limiting factors such as complains from residents and limited facility capacity. In light to the mentioned factors, the manager of the company faces with the challenge of deciding which site can be the best location to establish its facility out of the available three options. The relocation decision should put into consideration certain factors such as economic growth, population density, and business activities, as well as agricultural productivity and competition. In practice, the prevailing economic and social conditions are becoming less favorable to the company, hence there is the need to relocate its operations.
Sub-Problems and Issues
The main problem facing the company is relocation. However, this problem has other underlying problems, which include; the exact site where the organization can situate its operation, and continue enjoying the present benefits coupled with the continuance of its objective of growing its sales volume. The other problem is that, a considerable number of employees are not willing to relocate to the new site, since only one employee was ready to move to the new destination. This implies that the business will have to use a lot of money in recruiting and training new work force. The move incorporates additional costs such as purchase and installation of new equipment, bank and legal fees, cost for terminating the existing lease, miscellaneous items, as well as revenue loss. These costs have to be met by the organization during the relocation process.
Analysis
The move by Whitewater West Industries Limited to relocate its operations is prudent. This is attributed to the economic changes that are being experienced in Okanagan Valley. The area is blessed with booming agriculture in both ranching and tree fruits. In addition, tourists have considered the area in the last few decades as a prominent winter and summer destination. As a result, several individuals and companies are investing in recreational business. There is also an increase in light manufacturing, apart from the valley being a preferred destination for a considerable number of retirees. These factors favor the location of the facility in this area because there is a ready market, and the customer base is sufficient. Any business decision considers such factor in order to establish the viability of the undertaking. When demand for a product is high, it implies that supply will increase, hence translates to high sales revenue.
The valleys’ population has grown significantly with the rate of 3.27 percent per annum. This considerable growth in population, as well as a rise in tourist visitors to the valley, adds to the target customer base for the organization. In addition, the availability of different options to select from leaves the organization with a chance of deciding on the best possible alternative. The alternative will be weighed in relation to the company’s objectives.
Alternative analysis
Kelowna-Hiram-Walker Plant
The first alternative that is available for Whitewater West Industries Limited is the plant that is being closed by Hiram-Walker. The plant is situated north of Kelowna and occupies approximately 64 hectares with 22 warehouses in the site. WhiteWater option was to purchase a warehouse that is 6,040 square metre. This option will benefit the organization in a number of ways, which include the cost of the warehouse is far below the market value, and the opportunity provides for future expansion and purchase of other property. Moreover, the topography of the land allows fibreglass molding, and there is absent of residential houses in adjacent land. However, there are certain limitations such as the current heating bill will rise due to high ceilings, and there is the lack of and access to sanitary sewers. In addition, the organization will have to incur additional costs in developing a satisfactory water supply. The other limitations include the costs that will be incurred in dismantling, transporting, and installing manufacturing equipments will be large, as well as the time spent to complete the move is slightly high (Grasby, 2004).
Kelowna-Build Option
The second option is for WhiteWater to build its facility at Kelowna that satisfies the company’s requirements. This option is perfect since it will embody the necessary design and capacity that the company requires. The design will take into consideration any requirements that will facilitate future expansion of the facility. This means that all the processes of the business will be housed under one roof, hence easier communication and lower cost of transportation. In addition, erecting a business facility will save the company costs that are incurred in paying rent. On the other hand, the complexity in finding a piece of land zoned for industrial development, and the high cost of erecting the facility, purchasing land, and preparing it for production purposes are some of the limitations accompanying this option.
Abbotsford Site
This is the third option, and it includes two buildings, and the site is a few distance from the highway. The estimated cost for both buildings and land is fair given its capacity and location. In addition, the company will save considerable amounts in every truckload it manufactures each year. The company will also penetrate into new markets such as Seattle, Vancouver and Portland. Conversely, the option has the following limitations; the site lacks a possibility for future expansion, and an environmental audit ought to be conducted before commencing the operations. In addition, the building and land need upgrade that will be costly to the company, and employees who will not move to the new site which will require severance package, as well. The company will incur other additional costs in respect to recruitment and training, as well as equipment moving. Despite an increase in the target market, the company will absorb the costs that it will incur in selling recreational facilities to manufacturers in Kelowna (Grasby, 2004).
Recommendation
The management of Whitewater West Industries Limited should consider the second option- Kelowna Build option. This will facilitate the establishment of a new facility that takes into account the requirements of the company, especially, expanded capacity. The establishment will save the company a lot of money, in that, the company can decide to house all its operation in one building, hence easier and quicker communication. In the long-run, the business will save on the cost of rent which is normally higher. This is because, though, the cost of erecting the building is substantial it is incurred once. However, rent payment is done regularly as long as the business is still carrying out its operations. Again, rent is paid even if production levels are far below the profitable limits. In essence, the liability base of the company will be reduced in the long-run.
Conclusion
The financial aspect of the company should be considered before selecting the best suitable alternative. The company should have the necessary resources in order to make this strategic decision of relocating its operations. The management should in discussion with consultancy firm consider the possible benefits that the company will gain from relocation.
Reference
Grasby, E. (2004). Business Decision Making: Text and Cases. 7th ed. New York; Nelson Thomson Learning.