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Tanaporn Prachantasen
MIB
Melody Chan
Tanaporn Prachantasen
MIB
Jordan
Advantages:
close to Israel, English speaking country, low average hourly manufacturing wage at
$1.05.
Disadvantages:
there might be some problems regarding to religion believes between Jordan and
Israel, since they must send Israelis workers to Jordan to train the employees, and this could create
some conflicts.
Singapore
Advantages:
free-market economy, qualified workforce, exceptional infrastructure, highly
industrialized, industry 21 program, and already established machines and logistic center.
Disadvantages:
high cost of living and high average hourly manufacturing wage at $9.19.
China
Advantages:
government tax stimulus and other benefits, low production costs, engaged private
sector and a market economy with very competitive industries and international trade activities.
Lowest average hourly manufacturing wage at $0.50.
Disadvantages:
government control, language barriers, Chinese yuan not fully convertible.
4.1) What recommendation would you give K&S management regarding the location choice?
They should definitely consider to invest in China, especially in Suzhou, and the reasons
behind this are first it has low cost of living. Second, K&S is close to its existing customers. Third, the
country has qualified infrastructure thanks to the partnership between Singapore and China, which it
offers good transportations. Last but not least, it has availability of labor supply, and it is close to a
metropolis which is Shanghai. This gives them the opportunity to take advantage of the convenience.
If the company chooses to invest in China, they will have a higher capacity to satisfy their
customers needs and have a higher profitability margin, due to very cheap labor and production
costs. Chinas regulatory and investment environment is developing and becoming more transparent.
4.2) What implementation challenges do you foresee?
There is a high cost of investment in China at $6.5 million dollars. And it will take time to
break-even, so they might not see any profits in the short term, even though they have the cheapest
labor and production costs. Cultural differences and communication barriers with local suppliers and
partners might affect and decrease the performance of the business. Another challenge is
Government regulations by inquiring the tariffs that they might impose, and that the company might
not have the same protection and benefits as local businesses. Also, the lack of expertise in Chinese
market about potential suppliers and partners, which means that the company will inquire more
expenses and time consuming to conduct operations efficiently.
4.3) How would you address those challenges?
Before entering to China, they need to research to get to know the market overview such as
limitation, culture, politics and economic growth. They can hire a local manager that can provide them
with accurate information and how to do business in China, to ensure that they can take advantage of
the great opportunities this market can offer and also increase their business performance.