IMAGINATIVE TOYS

I. PROBLEM STATEMENT

How will Imaginative Toys meet the demands of its consumers?

II. AREAS OF CONSIDERATION

A. PROCESS PLANNING
The process used to manufacture the three product lines could
be replicated easily. All three processes were labor intensive,
with plastic parts molding being the only skilled position.

B. PHYSICAL FACILITIES MANAGEMENT

Gerald Kramb, the founder of the company, and his staff
researched two alternative locations for expansion. One was in a
maquiladora in Nogales, Mexico and the second was in Europe.

C. PERSONNEL MANAGEMENT
Since the organization is labor-intensive, labor cost should be
taken into consideration. Also the availability of labor and how
people in a certain location act towards work. Where to get the
workers should be considered.

III. ALTERNATIVE COURSES OF ACTION

A. Locating to the US old site would only mean expansion. Doing

this would put much less pressure on the company’s already thin
management structure. Besides, there was not any suitable
space to be found anymore.

B. Locating in Mexico could mean shipping if ever skilled labor is

not available. On the other hand, the improving trade relations
and the projected relaxation of tariffs and duties made this an
attractive alternative. Labor cost also could be substantially
reduced. Labor/Manpower is not a problem here.

C. Locating in Europe would give comparable labor cost to those in

Seattle but transportation cost would be 10-15% higher on toys
shipped back to the US market. The projected single-market
program made this alternative attractive; this is designed to
bring free movement by people, goods, capital and services to
the European community by January 1, 1993.
D. Locating on both Mexico and Europe might be conceivable. Since
Mexico got the manpower and Europe got the facilities, joining
the two would be great if and only if the sales projections are
actually held because by then the demand would support a
three-plant network.
E. The company may acquire new machineries for the location.
They may outsource and find the cheapest machineries that
could render the same quality of work. Maintenance is the key
here.

F. Imaginative Toys, on the other hand, may buy spare parts and
assemble new customized machineries for their toys, of course
with the help of their technicians. Since it is said that innovation
of a continuous kind is one of the key to their success, so why
not make the machines more specialized so it can render high
quality toys right away?

G. If Europe location is considered, reducing the transportation cost

for the mean time is a necessity. The process of
manufacturing/producing such toys shall be strictly monitored
especially those of which that will be shipped back to the US.
They should be minimal for the first two years.

H. The company can offer willing current employees jobs when they
move to a certain location. This is a viable option since it can
save time and training costs because the employees are already
familiar with the process. In return, the company can offer
incentives and other benefits.

I. Since the job does not necessarily require a skilled position, the
company could train new employees for the job. In choosing the
location though, the company should consider the minimum
wage rates of the alternatives, if not the labor cost.

J. Imaginative toys can hire willing current skilled employees for

the added capacity then hire qualified applicants for the routinely
job. This way, the company could ensure the quality of work their
employees shall render.

K. If the company shall choose Mexico, shipping possibilities shall

be removed. They should find a skilled laborer to perform the
plastic molding. In this case, the company shall use product plant
strategy wherein entire products or product lines are produced in
separate plants.
 L. Whether in Mexico or in Europe, the company may focus more on
scientific and technical people as potential employees and look
for areas with high concentrations of those types of workers
enable to optimize quality assurance of products as well as the
workers themselves and their productivity.

M. Language is an issue among personnel when locating to a foreign

country. The official language of Mexico is Spanish while Belgium
has three official languages, Dutch, French and German. Most
people here are bilingual which makes it easier for the company
to overcome the communication barrier.

N. If the company located in both Mexico and Europe, they can

perform a demand leading strategy. They can accommodate new
or unexpected demand; provide quick response and delivery to
customers, low overtime for the employees and low
subcontracting cost. The bad side is that there may be a high
cost of unused capacity.

IV. RECOMMENDATION

In performing a location decision, we shall weigh the potential

benefits and the potential problems to be able to ensure that we
would not incur significant losses.

The most viable alternative for the company is to locate in Europe

and these are the reasons:

1. Since the facilities are already present, the personnel shall be

hired from Brussels, training cost would not be that high anyway
for the job does not require much skill, except the plastic
molding of course. With the language differences, since English
is a universal language and most people there take it as their
second language, it would not be that hard to hire people for the
job. Unlike in Mexico where Spanish is the official language, there
are but few who speaks English fluently. On the other hand, the
company can also send some of its workers whom it has
convinced to move to a foreign country and must make sure that
the employees they send abroad are familiar with local customs
and have a reasonable facility with the language of the host
country to eliminate culture shock and to be able to converse
properly.
2. It is often advantageous to produce labor-intensive products in
countries with low wage rates like in Mexico but the problem
here is that the productivity and quality of work may be so much
lower that the effective cost of the product is higher. Since the
 keys to success in the company were continual development of
innovative products and a high level of product quality, they
should be risk-averse because the quality of their product must
not be jeopardized.
3. The stability of a country’s government is a major factor too. In
Mexico, less than one-fifth of its labor force belongs to a union;
the majority of which are controlled by the government. Rather
than being aggressive advocates for workers, Mexican unions
have typically played a crucial role in supporting the
government-dominated Institutional Revolutionary Party. In
doing so, the unions are noted for their levels of corruption and
subordination to government influence.
While the service economy is growing rapidly in Belgium, the
country remains heavily industrialized, importing great quantities
of raw materials that are processed mainly for export. Such
industry gives Belgium one of the highest gross domestic
products in the world, despite its relatively small population.
4. Climate should be considered too because this can be a great
peril to the operations of the company also to the productivity of
its workers. Brussel’s climate is humid and mild as compared to
Mexico’s high temperature with moderate to low rainfall.
5. Since Europe is one to two years behind the U.S. market in a
trendy business such as toys, it is just rational to target them as
potential consumers. By January 1, 1993, the company will be
able to conduct full access to the European Community, which of
course will entitle them to a much bigger market share. Besides,
the European Economic Area is the largest free-trade zone in the
world, which means that it can give the company access to the
European countries which are its members. In contrast to the
North American Free Trade Agreement (NAFTA), the world’s
second largest free trade area which were composed of Canada,
Mexico and the United States.

V. ACTION PLAN

TIME FRAME A quarter of a year

ACTIVITIES Renovation of facility

Hiring of personnel
Start of operation

PERSONS INVOLVED Gerald Kramb

Workers

EXPECTED RESULT A much better organization with a very

effective added capacity yielding high
profits through satisfying and meeting up
with the demands of its consumers