Manufacturing plant location selection and strategic factors

¶ … Human Resource Management class focus area. Here questions: 1. Your company plans build a manufacturing plant undecided locate .

New manufacturing plant

The opening of a new manufacturing plant in a different location is pegged to a series of uncertainties and risks. In order to minimize these risks, it is necessary for the economic agent to consider a wide array of elements in making the final decision of the location. At this level, a notable role is played by the purpose of the new location. The two more common reasons for opening new manufacturing plants are either a desire to expand production, or a desire to cut costs and as such support profitability.

In the first scenario then, more emphasis in choosing the location would be placed on the identification of a new site that possesses some comparative advantage in the field of manufacturing. This advantage could refer to skilled labor force, easier access to natural resources necessary in the production process (with the subsequent reduction of logistics costs and operations) or superior technologic advancements. In the second scenario however, the economic agent would place more emphasis on the locations which can bring it cost savings. At this level, they would consider factors such as the cost of the labor force, and then compare it with the costs of the labor force in the original location.

Another reason for the decision to open a new manufacturing plant could be represented by the desire to launch the products of the company onto a new market place. In other words, the products created in the new plant would be delivered to nearby regions in order to increase operational efficiency and reduce logistics efforts. In such a setting, the focus would fall on the appeal of the selected customer market (their demand for the company's product, their purchase power and so on).

Aside from the costs of labor, the manufacturing advantages or the features of the customer market, the selection of a new location where to open a manufacturing plant should also consider the legislations applicable in the country / state, the barriers to entry or the culture of the region.

2. Minimum wage

The minimum wage is a federally established sum of money which has to be paid by the employer to their employees, as remuneration for the work they completed. The debate over the usefulness of the minimum wage is still ongoing, with some parties arguing that it prologues poverty for the economically disadvantaged categories and harms the employers, whereas other parties argue that it forces the companies to ensure minimum incomes for the population (Schmidt, 2009).

Another issue of debate regarding the minimum wage is represented by the possibility of increasing the minimum wage at both the state level, as well as the federal level. Currently, the United States Government does not impose minimum wages applicable at the level of the entire country, but allows each state to establish its own minimum wages. In Georgia for instance, the minimum wage is of $5.15 per hour, whereas in Washington it is of $9.04 per hour. Where the state wage differs from that suggested by the federal institution, then the applicable norm is the higher one (United States Department of Labor, 2012).

Currently, a question is being posed relative to the possibility of increasing the minimum wage at both federal and state level. Raising this wage at the level of the entire country would have the benefit of increasing the wages of the entire population living on minimum wage (the impact on other categories of employees would be decreased). In other words, the socio-economic advantages of a minimum wage increase would be felt at the national level. In the case of a minimum wage increase at the state level, this would be rather discretionary and would allow the states to set their wage rates based on state specific elements, such as their more prolific industry or the general level of their economic activity. Such a solution would be more economically and regionally sound, and it is therefore the preferred option to raising the minimum wage.

3. Union membership

As the world evolved, the employees came to enjoy more rights and protections, including the possibility to become part of labor unions that safeguarded their rights. Such unions are highly popular in Europe, yet they have revealed a different evolution in the United States. Here, the largest percentage of the workers belonging to unions was registered in 1983, when 20 per cent of the employees belonged to unions. Since then however, a constant trend of descent has been observed, and by 2010, only 11 per cent of the employees were part of labor unions.

The higher rates of union membership are observed among the more mature population, whereas the younger employees are less likely to belong to unions. This is explained by the fact that the youth tend to find employment in sectors with low membership rates, such as sales or food service occupations. Union membership is rather similar across genders, yet it is significantly lower in the private sector, compared to the public sector. New Jersey nevertheless is one state with the highest rates of labor force participation to unions (International Labor Organization, 2012).

The general trend of decreasing union membership is due to a series of elements, such as the increasing pressures of the American corporations towards non-membership (revealed at the level of low participation in the private sector as opposed to higher participation in the public sector). Aside from the fact that private employers in the U.S. then discourage their employees from joining unions, another explanation is constituted by the economic recession, which led to the downsizing of millions of Americans, leading subsequently to their exit from labor unions.

"Last year's drop in union membership stemmed partly from large-scale layoffs in several sectors with many union members, most notably construction, manufacturing, teaching and local government. Another factor that has pushed down unionization […] is that companies have grown more ideologically opposed to unions and more aggressive about resisting organizing drives" (Greenhouse, 2011).

5. Changes in human resource management

The bases of the modern day labor force reside in the massive population exodus from the villages to the towns and cities which took place during the Industrial Revolution. The former peasants had been looking for a better life and left the work of fields to become employed in the factories. Still, upon arrival in the cities, they were faced with difficult living conditions, in crowded and unsanitary places, in unsafe working conditions, long hours, exploitation and underpayment.

These initial employees struggled to gain more rights and achieved them in blood baths. Gradually however, more and more laws were created to protect the employees, such as laws promoting equal employment rights, human rights, anti-discrimination laws, civil rights and so on.

Aside from the changing laws and regulations, the perception of the employers also changed towards the employees. Progressively then, the staff members metamorphosed from the force operating the machines into the most valuable organizational assets. This change in the role of the employees have been due to a series of elements, such as intensifying competition among economic agents (for both customers, as well as the most talented staffs), or the increasing role of services in the detriment of manufacturing and agriculture. Within the United States for instance, nearly 80 per cent of all GDP contributions are generated by the services sector (Central Intelligence Agency, 2012). Subsequently, in a setting in which the economic agents were not selling material products, but services, the satisfaction of the customers (and subsequently the organizational revenues) was directly pegged to the quality of the service delivered by the employees. The staffs as such became critical in the attainment of organizational success and this led to changes in HRM approaches.

At the level of the human resource management discipline, this has also suffered modifications throughout the past recent decades. These changes resulted from the elements previously described and the HRM filed has been well able to integrate the new features and translate them into organizational strategies. For the future, the field of human resource management is expected to further develop and continue to adapt to the changes in the micro and macro environments.

References:

Greenhouse, S. (2011). Union membership in U.S. fell to a 70-year low last year. The New York Times. http://www.nytimes.com/2011/01/22/business/22union.html?_r=0 accessed on December 19, 2012

Schmidt, P. (2009). Minimum wages and employment -- theory and empirical evidence with a special emphasis on Germany. GRIN Verlag.

(2012). Union membership in the U.S. International Labor Organization. http://www.ilo.org/washington/ilo-and-the-united-states/spot-light-on-the-us-labor-market/union-membership-us/lang -- en/index.htm accessed on December 19, 2012

(2010). The world factbook -- United States. Central Intelligence Agency. https://www.cia.gov/library/publications/the-world-factbook/geos/us.html accessed on December 19, 2012

(2012). Wage and hour division. United States Department of Labor. http://www.dol.gov/whd/minwage/america.htm#.UNFt6eSTyuo accessed on December 19, 2012

International business management in today's economy. University of Notre Dame. http://www.notredameonline.com/international-business-in-todays-economy / accessed on December 18, 2012