Scotts Micracle-Gro - Case Study Example

Finally, a number of alternative solutions will be discussed and the most potential solution will be recommended for the company. Background of the situation The Scotts Miracle-Gro Company, commonly known as Scotts, was formed through the merger of Miracle-Gro and the Scotts Company in 1995 (The Scots Miracle-Gro Company, n.d). The company is headquartered at Marysville in the Ohio. Through this merger, the Scotts became the largest organization in the North American lawn and garden industry.

The company rapidly grew to be a leader of lawn and garden care products as well as professional horticulture products. The company manufactures and sells various spreaders including drop spreaders, broadcast spreaders, and hand-held spreaders. As per the 2007 fiscal year annual report, the company achieved $2.7 billion net sales. Key Issues From the SWOT analysis, it is clearly identified that increasing labor rate and mounting electricity rates in California are the key threats to the Scotts.

This issue is likely to reduce the firm’s profitability over the next fiscal years. In addition, the Scotts currently employs temporary workers so as to manage the declining demand for labor. This situation would probably lead to the formation of an inefficient workplace environment. Finally, avoidable overhead costs and growing current liabilities significantly threaten the firm’s operational efficiency. . Alternative solutions One of the potential solutions for the company to curb this issue is to outsource the production of its spreaders to a low wage manufacturing country like China.

By doing so, the Scotts can take advantages of cheap rate labor in China and thereby reduce the total cost of production to a great extent. In addition, it is also advisable for the company to hire more skilled and cheap foreign workers. This option may allow the company to cut down its labor costs without closing the operation of its Temecula manufacturing plant. Selected solution to the problem While closely analyzing the alternative solutions identified above, it is clear that the process of employment of foreign workers would involve a series of difficulties, and this strategy may not often guarantee a competitive workplace environment.

Hence, I would choose the production outsourcing option. Setting of short term goals is vital for a firm to achieve its long term objectives (Strategy implementation). The case scenario clearly indicates that creation of an automated plant is the major short term objective of the Scotts. The Scotts management believes that automated operations would greatly assist the company to cut down its labor costs as well as landed costs. The company continuously improves its operational efficiency through process innovations and R&D activities.

Although labor costs in China are expected to increase noticeably over the next 10 years, it would be comparatively lower than that of the US. Hence, the outsourcing strategy would best fit the Scotts to trim down its labor costs in the short run. During the next ten years, Scotts may make its Temecula manufacturing plant fully automated and therefore the company can replant its production