Steve Phillips, head of the Huxley Maquila project team, had to make a
suggestion about moving production to Mexico. After six months of investigation, a final report outlining the results was prepared and was given to Steve. His job now was to give some recommendation to board of directors about whether to establish the manufacturing plant in Mexico and if so, where and how.
Sub-Problems/Issues: • Increase in knowledge intensity of defence product, resulted in higher development costs. In other words, these rising costs are results of advanced technological complexity of almost all types of military system, and to the rapid pace of technological innovation. • Higher costs of research and Human Resources: • Filling requires high patience and precision and had been done by “females” only. • • • Even after training, people believe that they cannot master the skills. Hence, creating a high turnover rate. Working with metals and requiring physical strength made this job more unattractive. • Immoral working atmosphere.
Implications: Since there is a high turnover rate among workers, hence, it is very
important for company to keep their staff/workers satisfied. “The San Diego plant had a significant problem with high turnover rates because working with metals was a dirty job.” Besides, the company also pays very low wage rate which makes workers feel that they are getting exploited. In Mexico, it’s even
worse as average worker’s salary is only 10% of average American worker’s salary. Below is the chart showing the minimum wage for unskilled workers in 2000 in Mexico. Description Regional minimum hourly wage Annual salary (365 days) Christmas bonus and vacations Employer’s payroll taxes and state taxes. Average fringe benefits Total annual cost Fully fringed hourly cost Minimum Wage $ 0.51 $ 1,117.92 $ 64.21 $ 44.71 $ 254.69 $ 1,481.53 $ 0.68
They also have some confidence in their staff such as “with appropriate training, young Mexican women would perform these tasks better than their counterparts in the US since they are more patient”. So with this positive attitude, there may be a reduction
