BA 240_THQ. OPERATIONS MANAGEMENT Group 10.

Ancuna, Joyce, Burkley, Maria Andrea, del Pilar, Karlo, Ranada, Maria Kristina CASE 6. INTERNATIONAL DECORATIVE GLASS Situation: In 1996, there is an increasing demand for decorative glass mostly contributed by the US market with promising projections from $2Bn to $4.5Bn within 5 years. Due to the fragmented local suppliers in the US, it is strategic for IDG to increase its capacity to meet this demand. Capacity Expansion Options: Expand Delta plant, China plant, or construct new plant in Vietnam Location Strategy Method: We shall use three location strategy methods to help us assess which is the ideal expansion program for IDG. Given its high capital requirement, the assumptions focused on long-term implications within a 3-5 year horizon. 1. Factor-Rating Method was used to have a wide variety of factors in the decision. In this method we determined relevant factors in the decorative glass manufacturing industry and assigned weights according to their importance. Given the table below, we can see that Vietnam is favored garnering the highest weighted score, next to China then Delta option. This is mostly contributed by its low cost yet skilled labor.

BA 240_THQ. OPERATIONS MANAGEMENT Group 10. Ancuna, Joyce, Burkley, Maria Andrea, del Pilar, Karlo, Ranada, Maria Kristina CASE 6. INTERNATIONAL DECORATIVE GLASS

2.

Location-Breakeven Analysis: We need volumes on this. We need Ms. Kristys expertise on this. Center-of-Gravity Method

3.

Recommendation Although Canada has low capital investment of $30,000 and enjoys operational advantages such as proximity to the US market, stable political and economic conditions, ease of doing business and trade incentives, high labor cost seems to be the prevailing disadvantage. Furthermore, even though IDG has strong ties with local partners in China, it is plagued with operational disadvantages such as lack of manpower skills as seen in its high in-process breakage and losses, limited trade incentives, high additional overhead and capital investment. With the aid of the location strategy methods above, it is conclusive that Vietnam is the best location for the expansion initiative of IDG. Determining factors include: 1) Lower Labor Cost versus both Delta and even China, 2) Lower Logistics Cost versus China, 3) More qualified skilled labors versus China, 4) Better political and trade agreements versus China, 5) spreads the risk of a single supplier in China. Haiphong or Da Nang is a potential expansion in Vietnam. Both have high supply of silica deposits with numerous glass manufacturing plants surrounding the area. Although Haiphong is only a 2 hour drive from the state capital Hanoi, Da Nang is more lucrative. It has a port harbor and a container dock that can accommodate various shipments to Canada and US. Furthermore, the entry strategy of a Joint venture agreement with Dan Kim is recommended. Besides its underutilized capacity and available skilled manpower, a local counterpart can strengthen political and government ties much needed in a country where political risk and corruption is extensive.