PONEGLYPH AND VOID INDUSTRIES, INC.

(P&V) – EXPANSION
AND LOCATION PLANNING

Poneglyph and Void Industries, Inc. was established in 1980 by Jason Todd as a
manufacturer of custom modification parts for cars. The company was founded with a
philosophy of providing car driving fanatics the best possible experience. The firm started in
a small back garage with Jason and his best friend Connor Kent. They started the business as
a small partnership with a modest amount of $10000 and were able to attract a lot of
automobile aficionados to their setup. They soon made their enterprise public by listing it on
stock exchange and rolling out an IPO. They set up their headquarters in Lawrence, Kansas
and initiated mass manufacturing of various modification parts like spoilers, chassis, sunroof,
hoods, alloys, rims, NOS cylinders, and alloys, etc.
The demand in NA was 6 million units per year and their plant in US could fulfil the demand
at full capacity. By 2000, they had increased their market share to the point at which they
covered various auto-shops in most of North America. The financial statements showed that
the firm had crossed an annual revenue of $200 million. P&V was on their way to glory when
a number of unforeseen aberrations hindered their consistent growth and success. The great
economic breakdown of 2008 for one, hit them directly at the core – their operations as well
as their customer base. The labour started demanding more wages and the suppliers’
bargaining power increased. The rising operation costs adversely affected the firm’s
profitability and simultaneously the demand from customers also declined which made it
harder to channel economies of scale. Their revenue fell by 27% and they started losing their
shares to big automobile players who started recognizing the need of custom modifications
and started those facilities for their own products and customers.
They were planning a number of options and needed to evaluate each one of those
alternatives, or a combination thereof, to come out of this pinch. One of the alternatives was
expanding beyond North America to Europe or Asia where the aftermath of the recession
was not as gruesome as NA and the market segment of automobile aficionados was on the
growing side. They selected three countries from each continent to set up plants to expand
their production and meet growing demand outside North America. The selection was done
on the basis of the statistics found for most motor vehicle producing countries around the
world. The construction of plant would be complete by 2010 end which meant that
production for excess demand could begin from 2011 itself. The projected demand for 2011,
2012 and 2013 were formulated for the purposes of ascertaining costs of both the continental
options.
Either of the two options (Europe/Asia) comes with its own expenses, investment
requirements, challenges and opportunities. The upper management of P&V have thus got
their work cut out for them.
 Exhibit 1: Motor Vehicle Production Levels Across the World (2010)

S.No. Country Production Level

1 China 18,264,761
2 Japan 9,628,920
3 United States 7,743,093
4 Germany 5,905,985
5 South Korea 4,271,741
6 India 3,557,073
7 Brazil 3,381,728
8 Spain 2,387,900
9 Mexico 2,342,282
10 France 2,229,421
Source: OICA 2010 Statistic

Exhibit 2(a)
Country Investment cost Efficiency Capacity (in
(in millions of U.S. rate(units/worker/hour millions of units)
dollars) )
Germany 4.5 9 3.5
Spain 4 8 2.5
France 3 6 2

Exhibit 2(b)
Country Average Hourly Shipping cost ($ Raw material cost
wage rate per unit) ($ per unit)
Germany 7.35 1.0 0.36
Spain 9.25 0.7 0.43
France 10.50 0.75 0.66
 Exhibit 3(a)
Country Investment cost Efficiency Capacity (in
(in millions of U.S. rate(units/worker/hour millions of units)
dollars) )
China 3 8 4
Japan 2.5 9 3
India 2 9 2

Exhibit 3(b)
Country Average Hourly Shipping cost ($ Raw material cost
wage rate per unit) ($ per unit)
China 1.25 1.3 0.65
Japan 5.45 0.8 0,76
India 3.55 1.5 0.83

Exhibit 4
Year Projected Excess Demand
2011 7
2012 7.5
2013 7.9