Polaris Industries Inc. Harvard Case Solution & Analysis

Recommendations

The company is recommended to go for the option of shifting manufacturing abilities to Mexico. As described in the alternative parts, Mexico is the best suitable option for Polaris from the suggested ones. China provides low cost while US will give low transportation cost, but Mexico will serve both the demands and the company will not have to tradeoff between low labor cost and low transportation cost.

The comparison between China and Mexico also indicates that Mexico gives an additional benefit of closeness to US and very minimal difference in culture which will help the company to collaborate easily with the local workers in the manufacturing capacity. Low labor cost with not much annual increase in labor cost, close to the US, and several other benefits that the company can gain in China and in Mexico as well, puts Mexico at the top of the suggested alternatives. With this recommendation, the company also needs to redesign its supply-chain as well and can serve the growing European demand as well.

Implementation Plan

The company at first needs an action plan for moving capacity from US to Mexico. In the first, the company will assess the closeness of the manufacturing plant to the southern regions of the United States as they offer a current high demand. As a next step, the company should design a framework to assess the initial investment and to gain as low initial investment as possible. The next step talks about section of labor that has to be done. For this, the company should hire a team of local Mexican graduates who are well aware of the local market.

With static demand for the next five years, the company should start operations in order to meet the current demand and design marketing programs to generate brand awareness in Mexican and European market. The company should focus on serving the current demand in the US market and the growing demand of the European market while creating brand awareness in Mexican market. The action plan should focus on setting strong roots in Mexico. The company should seek growth with an aim to increase its production capacity and starting manufacturing in China as well as serve the potential growth of the Asian market. This approach will give the company a width in its operations and the company can serve the Asian and American markets separately in the future.

Analysis of Recommendations

The suggested recommendation advises the company to start manufacturing in Mexico instead of China and shift the production capacity from United States. Although the company had a brand image and labeled as made in America, but the future for the side-by-side segment offers great potential, and the company needs to capitalize on that. In order to stay competitive with growing and intense competition, the company needs to optimize its cost. Transportation cost or shipping cost which contributes a great deal in the overall product cost.

Moving production capacity to Mexico will keep the production closer to the US and the company can enjoy the similar shipping cost. The start-up cost will be $9.5 million in Mexico, which is half a million less than the start-up cost required in China. The shipping cost differs a great deal as well. The shipping cost from china will cost $190 per unit while in Mexico 26 units will take $2.3 per mile. The time taken for shipment is also very high in china accounted to be nineteen to thirty-three days while from Mexico the container will reach US in two to five days.

The cultural differences are high in china while in Mexico the culture is almost similar to the one in the US that gives the company an additional benefit of collaborating easily with the workers. On the other hand, no tariff on imports is an additional benefit for Polaris as Mexico is subject to charge no tariffs on imports under the provision of NAFTA. The initial labor required is almost same in both the countries with the figure accounted to be 60 labors in the initial phase. Although Polaris has to suffer from the severance cost of $20,000 per labor that will result due to the layoff in the current capacity, but will provide a long term benefit in the form of low transportation and labor cost. The best part of choosing this alternative is the vice president doesn’t have to tradeoff between transportation and labor cost......................................

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