Polaris Case Study Solution
Polaris Company was established in 1954 as a power sports vehicle company. The company’s product line includes Off-Road Vehicles (ORV), on-road vehicle, All-Terrain Vehicles (ATV) and side-by-side vehicles, Snowmobiles, Motorcycles, and Global Markets vehicles, including Work and Transportation and military vehicles. 85% of the customers of Polaris are in America and have European customers as well. Foreign markets were important for Polaris because sales revenue growth was 21% in 2010 and expected to increase in 2011. Most of the manufacturing is located in the northern Midwest. Its corporate headquarters in Medina, Minnesota.
In this case, Suresh Krishna has to make the decision to setup a new plant in China, Mexico or The United States on the bases of cost-saving and other factors.
Discussion of Issues
Evaluation of Cost Savings by Alternative Locations.
If China is selected as the location of a new plant, low costing is possible but the labor cost has been rising in manufacturing. Moreover, transportation length and cost will also increase. If Polaris operates in China, it has to hire 60 new employees which will increase the capital expenses, equipment moving cost and starting up new setup costs by a one-time charge to $10 million. Also, Polaris has to pay 5% tariffs in importing in the US on all products and transportation costs. Side-by-Sides from China would be transported to the US on container vessels, with each container will be containing 26 vehicles. The cost of shipping one vehicle to the US from China is $190 per unit or $4,940 per container. Shipping company’s reaching time is 20 days but shipping time could be highly variable with a range of 19 to 33 days………………………
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