Jen-O-Mex Plant Facility in International Business - Case Study Example

Jen-O-Mex: A Study in Management and Culture Clash CASE OVERVIEW Jencraft Corporation was established in the year 1930 by Dan and Ralph Gitkin with the motive to produce venetian blinds. Shortly, Dan Gitkin’s son took over the responsibility of the company after his demise. Both the sons expanded the company, due to which, it became one of the biggest companies in the US for importing vinyl mini blinds. However, due to strong competition faced by the company, there was an increased pressure to create a new strategic plan and a dominant position in the market. Correspondingly, the company established a manufacturing unit in Reynosa, Mexico, in the year 1994, which helped the company in attaining a cost advantage with the virtues of certain supportive factors. Nevertheless, the plant managers could not speak Spanish and thus, the parent company had to face significant challenges to give a proper direction to the workers in the manufacturing unit. Consequently, the production plant suffered to a huge extent as the managers could not implement the organisational goals, as they were completely misguided owing to communications gap. Soon after four years, the unit gained back its stability, wherein there was a significant increase in the number of products manufactured (Edmonds, 1-7). IDENTIFICATION OF PROBLEMS FACED BY JEN-O-MEX PLANT FACILITY IN INTERNATIONAL BUSINESS Jen-O-Mex plant facility was placed in McAllen, Texas that is in United States (US). From a generalised point of view, it was observed that the manufacturing facility faced difficulties regarding the estimation of product requirements. Procuring appropriate inventories and meeting the schedule for production were also among the key difficulties faced by the company. Moreover, attaining benefits from economies of production was also quite problematic for the company during the earlier phase of the 19th century. It was also viewed that there was an increase in labour cost for producing mini blinds in Taiwan. There was ambiguity in the quality of products being imported from China along with its insufficient availability. Additionally, there was huge pressure for the company to increase its profit margin, as the cost of production was continuously increasing. Furthermore, it was observed that mini bind, one of its manufacturing products, reached to its maturity level before the forecasted time, due to which the company witnessed a significant reduction in its sales. Jen-O-Mex also lagged various opportunities in its manufacturing facility wherein the company could have enjoyed increased flexibility through direct imports of mini blinds that could have resulted in meeting the customer requirements reducing the problem of delays in its product delivery cycle. It can be revealed in this regard that the established production facility in Mexico could have certainly increased the opportunity for the company to produce mini blinds at a cheaper rate, as it was produced in China and Taiwan. The new production plant set up by the company in Reynosa, Mexico, could have also provided an opportunity for the company in improving its quality of products along with enhancing its distribution process to a considerable extent. Moreover, the label of packaging and instruction in these products was also printed in there different languages that included English, French and Spanish. If managed well, this would have in turn provided an opportunity for the company to increase its global market presence (Edmonds, 1-7). COMMON PROBLEMS FACED BY MNCs WHEN FIRST GOING INTERNATIONAL AND WAYS TO AVOID THOSE In the present day context, there are various problems or issues that a company might face in the process of globalising for the first time. For instance, conflicts of strategies due to cross-nation culture would create problems for an MNC (Wu, 169-70). Moreover, the culture followed in the country might not be as supportive as expected for the MNC. Unavailability of skilful labour can also be a major problem for the company while globalising for the first time (Lechner, “Globalization Issues”). Therefore, in order to avoid the problems of globalisation, it is considered that the MNC must recruit local personnel that would remove the problem of unsupportive culture (Bertucci and Alberti, “Globalization and the Role of the State: Challenges and Perspectives”). Conflicts of strategy can also be avoided by adopting the cross-nation culture in the MNC that is being followed in the host country (Ian, Jamie Weatherston and Wilkinson, “Globalisation, Challenges and Changes”). Likewise, skilful labour can be successfully obtained by assessing the labour market in the host nation, which would actually be productive for the company (Wu, 169-70). EVALUATION OF RON AND MERRILL GITKIN’S ABILITIES FOR IMPLEMENTING STRATEGIC PLAN OF JEN-O-MEX FACILITY Ron Gitkin and Merrill Gitkin took over the responsibility of the Jencraft Corporation after their father Dan Gitkin’s demise. It was viewed that the duo implemented a sound strategic plan for Jen-O-Mex manufacturing facility. The plan was mainly focused towards becoming a premier MNC for hard window treatments. Therefore, Jen-O-Mex started developing a new range of products, which included roller shades, cork products, shelving, café doors, lattice and roll-up blinds. Moreover, the company aimed for upscale market developed innovative window treatments along with introducing a new technology of Prisma blind products, which created a darkening effect in the room as preferred by the client. It was later decided by both Ron and Merrill Gitkin to outsource its manufacturing of products in China and Taiwan that resulted in improving the quality of products along with increased profits, as the decision was beneficial to reduce higher dependency on the manufacturing unit operations. The company also decided to return to its manufacturing business of vinyl and fabric verticals, which would be produced locally by Jencraft Manufacturing that was under the subsidiary of Jen-O-Mex. However, the senior managers could not exhibit the planning and organisational functions of reducing the cost of production by manufacturing in China and Taiwan that would help diminishing the cost of per unit produced along with availing cheap labour cost. This is because the production was not controlled effectively and their efforts were completely misguided. This resulted in termination of the plant managers along with supervisors, as they did not have enough experience in implementing the planned goals (Edmonds, 1-7). ORGANISATIONAL CHANGES THAT SHOULD HAVE BEEN MADE BY RON AND MERRILL GITKIN FOR ENSURING THE SUCCESS AND PROFITABILITY OF JEN-O-MEX Observably, Ron and Merrill Gitkin should have initiates few organisational and managerial changes for obtaining profitability and success of the company. At the foremost, anticipation for achieving the desired goals had to be brought within the plant managers by providing them enough encouragement and support to carry their production process. It would have also been quite important to develop an action plan for the managers that would have helped them in keeping track on their performances. Performance chart was also required to be developed that would have provided the managers and supervisors an understanding regarding the performance of their worker and therefore, gain a degree of better control on the efficiencies of the manufacturing unit. Developing an action plan and performance chart for the workers would have also helped the manufacturing unit in improving its performance along with enhancing the quality of products. It was also important for Ron and Merrill Gitkin to bring changes in the manufacturing unit of China and Taiwan that would have made the plant managers understand the economic conditions in which, the unit was operating. In addition, Ron and Merrill Gitkin had to bring changes that would have made its subsidiary and managers to understand the socio-economic environment in the operating nation along with its political situation. Therefore, it can be asserted that if these changes were initiated in Jencraft, there would have been a huge possibility that Jen-O-Mex could obtain profit consistently, followed by its success (Edmonds, 1-7). NAFTA’S ROLE THAT RESULTED IN JENCRAFT OPENING A PLANT IN REYNOSA, MEXICO AND ITS IMPACT ON FOREIGN DIRECT INVESTMENT (FDI) North American Free Trade Agreement (NAFTA), in the year 1994, provided an approval to Jencraft for FDI in Reynosa, following which the company decided to establish a manufacturing plant in the particular location. This fact provides evidence that NAFTA played a huge role that resulted in Jencraft establishing a manufacturing unit in Reynosa. With this approval, it was observed that Mexico became a manufacturing hub for various US companies. It was witnessed that in the year 1994, the Mexico-US border became a place for assembling various parts related to TV’s, apparels, automobile components, appliances and stereos. It was also decided by Jencraft to establish its manufacturing unit at McAllen, Texas wherein Jencraft alderfly had a warehouse and vertical production facility. In the year 1994, NAFTA however amended the Mexican law that had a huge impact on the FDI policies of the nation, generating a huge inflow of foreign investment in Mexico. It was viewed that the amendment resulted in providing 100% foreign ownership to Jencraft and energy could be availed at a cheaper rate than before. The amendment also provided proximity to the existing facility of Jencraft in Texas that resulted in providing a reasonable rate for initial start-up of the business. Thus, these factors made Reynosa an ideal place for Jencraft to initiate a new manufacturing unit, benefitting it with relatively cheaper cost of production and no tax implied on the products manufactured by the unit. Likewise, finished products was quickly delivered into the US market and the overall distribution of the products were improved (Edmonds, 1-7). EVALUATION OF JENCRAFT DECISION TO ESTABLISH A MANUFACTURING UNIT IN MEXICO As Jencraft decided to establish a manufacturing unit in Reynosa, Mexico, it was believed that the company made the right decision. It is fundamentally because; Jencraft was able to avail cheap start-up cost in the nation, as it already had a warehouse and production facility in that region. Jencraft plant at Reynosa was the ultimate decision that the firm could ever make, because it facilitated the manufacturing units to deliver the finished products into the market of the US at a relatively quicker rate, as compared to before, wherein it took almost 90 days for the finished product to enter into the UK market. It would be worth mentioning that this plant provided the opportunity to the company for developing products, which were labelled in three different languages; namely — English, French and Spanish. This in turn helped the company in improving its global market presence. It was also observed that there was huge zest within the parent company regarding the establishment of a manufacturing plant at Reynosa. Overall, it can be affirmed that it was quite beneficial for Jencraft to decide on establishing a manufacturing unit in Mexico although its managerial deficiencies to forecast the underlying problems had cause disruptions in its initial stage of operational expansion (Edmonds, 1-7). Works Cited Bertucci, Guido and Adriana, Alberti. Globalization and the Role of the State: Challenges and Perspectives. n.d. Web. 10 Apr. 2014. Brooks, Ian, Jamie, Weatherston and Graham, Wilkinson. Globalisation, Challenges and Changes. n.d. Web. 10 Apr. 2014. Edmonds, Robert G. Jen-O-Mex: A Study in Management and Culture Clash. Case Study (n.d.): 1-7. Print. Lechner, Frank. Globalization Issues. 2001. Web. 10 Apr. 2014. Wu, Jianlian. “An Analysis of Business Challenges Faced by Foreign Multinationals Operating the Chinese Market.” International Journal of Business and Management 3.12 (2008): 169-174. Read More