White Water West Industries Lmt: - Case Study Example

9th November Case Study – White Water West Industries Limited Executive Summary The case study deals with the relocation plans of the company “White Water Industries limited.”The company is located in Kelowna and is engaged in the business of producing fiber water slides for the customers. The company has grown tremendously over the last few years and is aggressively looking for further growth opportunities. The company has historically depended on its parent company in order to get business but is has now started looking for more business outside. In order to achieve this it needs a bigger space to conduct its business. The present location has become unsuitable due to protest from the people about foul smell. The demographic profile of Kelowna has also undergone a change and the area is now a tourist place as well as a sprawling residential complex with little space for industrial expansion. Keeping these things in mind the case study deals with Whitewater’s dilemma in finding a new place for their factory. Three prospective sites have been identified. The case analysis tries to find the pros and cons of each of these sites along with the financial analysis and tries to suggest the best alternative out of the three available to White Water Industries limited. Problem Statement The main problem being faced by Whitewater Industries at present is to find out a new site for the production facilities. The present site is located in Kelowna. This area is now sprawling with various residential complexes. The area is also gaining popularity as a tourist destination. Polyester resin is used in the manufacture of polyester resin which contains styrene, a volatile liquid which has a very pungent smell. The residents of the area have a problem with this smell and are protesting against the plant which is in residential area. The residents had also complained against the company to the city. Thus the main problem which is discussed in the case study is the problem of relocating the plant to a different location and the selection of this location Sub problems The other problems along with the problem of relocation are – Increase in the business of the company which required a site that would allow for continued growth opportunities Finding a land which is not adjacent to residential area so that similar problem does not rises again Most of the employees of the company are from Kelowna area and are reluctant to move to the new site if it is too far away from their homes. Large number of costs associated with shifting of the entire operations elsewhere Analysis of the problem and sub problems Micro environmental factors or the stakeholder analysis is an important concept of marketing which can be applied in this case. While taking a decision the company has to ensure that all its stakeholders are satisfied with the company’s decision. Sometimes it is not possible to please all the stakeholders; the company then needs to prioritize according to the vision and the objectives of the company. In the context of Whitewater Industries the important stakeholders is the community surrounding the plant which is opposing the foul smell emissions from the plant? Apart from this employees and suppliers are also an important factor. The supplier of the company is supportive and has agreed to maintain the same rate in supplying goods even when the company shifts plants. However the company will face a lot of problem with employees. They are not willing to move away from Kelowna. So the company faces the option of either shifting to a location which is close by or paying a severance package to a large number of employees. New employees will bring with them learning costs and will also take a lot of time to settle in the job. The biggest stakeholder – the shareholders i.e. the parent Whitewater Company is the most important stakeholder. It wants the supplier company to search for more business; in order to achieve this objective the present plant is not satisfactory as it limits growth opportunities. Alternative Analysis Kelowna- Hiram-Walker plant The advantages associated with this location are as follows – Plant is likely to be completed in 8-9 months which will ensure that the relocation will be completed before May 1996 which is the target date set for the expansion. The land adjacent to this plant is not used for any residential purpose. This is extremely essential for the company as it will prevent any protest that may take place due to foul smell as was the case with the plant at Penticton. The building has been made up of non-combustible material which will be very helpful in case of any mishaps and fire accidents. The plant also has sprinklers , fire hydrants and 2 face access for fire fighting This land will also provide several options for future expansion of the plant. This is an important consideration as the company is looking forward to expand its business in the near future. One of the biggest advantages that the site provides is that it is not far from the present site of the plant. This means that there will be no increase in freight costs of the company. There will also be very few employees who will separate from the company. Employee co-operation is absolutely essential for the company at this stage; unrest among the employees may hamper the growth opportunities that the company is looking forward to exploit. Disadvantages of the location – Increase in heating bill due to height of the building Lack of access to sanitary sewers. Financial Costs associated with the plant – Cost of Warehouse -$ 1653500 Land and building preparation costs - $1321555 Shifting of equipment - $250320 Fixed costs (new equipment, legal and bank fees, termination of lease, loss of revenue and miscellaneous items) - $1480000 Cost of Land - $422500 Total costs - $5127875 Kelowna Build Option Advantages of the Option This plant will be located at the present location of Kelowna. This will provide a major advantage to the company – there will be no dissent or turnover. The company will not have to spend extra money for training and recruitment of new employees. Disadvantages of the option The total time for the project is likely to be around 1 year. This means that the target date of May 1996 set by the company for relocation will be missed There will be problem is finding a suitable site in Kelowna which is fir for industrial use as the locality is largely residential. There will be limit of future expansion in this area as land will not be available for the purpose. Financial Cost of the plant Land cost - $1500000 Site Preparation cost -$ 2964425 Fixed Cost (as described in alternative 1) - $1480000 Total Cost - $5944425 Abbotsford Site Advantages This site presents the company a better penetration of Vancouver , Seattle and Portland markets There will be major savings in operating the plant from this location which are listed in the financial section. Disadvantages Building has been made of wood. This can be the cause of major hazards even though fire fighting measures are present. Wood building can be damaged easily and will cause more loss of life and property. There is no possibility of expansion at the site. Environmental audit is required at the site which is an additional cost for the company. The site is very far away from the present location i.e. Kelowna .This can become a major cause of dissent among the employees. The company will also have to pay a severance package to the employees who decide to discontinue service due to shift in location. Apart from the severance package the company also has to bear the cost of recruitment and training of new employees at the site. The freight cost for the company for recreational vehicle manufacturers will also increase. Financial cost of the plant Cost of the land - $750000 Cost of buildings - $1326000 Severance Package - $240000 Equipment Moving - $275320 Recruitment and Training - $153600 Savings- 225(average number of trucks) * 500 = $112500 Total Cost - $5070420 Recommendations By analyzing the advantages and disadvantages which are mentioned above for all the alternatives; we come to the conclusion that the best possible solution for the company will be to go with alternative 1 i.e. Kelowna – Hiram-Walker plant. This decision has been arrived at by analyzing all three options. The weakest option among the three has been the Abbotsford site. Even though it turns out to be the cheapest option financially but there are many disadvantages associated with the plant which cannot be ignored. The financial gains may also be nullified by the increase in freight costs. The build option has three major disadvantages – it has high cost; no possibility of expansion and the timeframe for this option is very large – 1 year. Taking these factors into consideration the build option was rejected. Thus the best option available to the company is the alternative 1 which provides numerous benefits. The disadvantages presented by this plant are not huge and can be easily surmounted by the company. The implications of this shift will be tremendous. The company will benefit a lot in the long run .All the departments of the company will be at the same place which will provide better coordination .the Company will also have space to expand in future if the need arises. The biggest advantage in the short term will be limited employee turnover .The company will also not be forced to pay and severance package as the plant is not moving too far away from the present location. If we compare the financial cost of shifting; alternative 1 comes out to be $5127875.This is a large some money and the company will have to look for ways in order to obtain this cash. They will have to either take a long term debt or give equity share to some other partners. We recommend giving out equity shares rather than taking up debt. The new partners should be such that they also help in the expansion of company’s business. Many companies which make water parks may like to do backward integration. Equity can be given to these companies to generate cash for the relocation. Works Cited Haywood-Farmer, Andrew Fletcher and John. "WhitWater West Industries Limited." 1994. Read More