Read the case study on: "North American Expansion for Threads Apparel" Questions:
1. What are some labor-related factors that Threads should consider when comparing Mexico and Canada?
2. What are some labor-related factors that would favor Canada as the location of the new facility? Mexico?
North American Expansion for Threads Apparel
As Heather Johnson, CEO of Threads Apparel, prepares for the next board of directors meeting, the company's expansion plans weigh heavily on her mind. Threads Apparel manufactures women's ready-to-wear clothing for several large chain department stores. The company has experienced tremendous growth over the past 15 years, and is now positioned to grow even more as it has just secured a contract with a major department store that has locations throughout North America.
Thread's reputation for producing high-quality clothing is based, in part, on its human resource management practices. It has a talented staff that is committed to consistently meeting its quality standards. In addition to effective management practices, Threads provides competitive compensation and benefits to its nearly 1,500 employees and as a result, the company experiences a relatively low turnover rate.
In order to meet the increased production requirements of the new contract, Threads will need to open a new manufacturing facility. The company currently operates ten manufacturing facilities in seven different states. As it considers a location for the new facility, Heather plans to recommend moving beyond the borders of the United States to ease the distribution of its products throughout North America. In addition to its new contract, NAFTA has allowed it to expand the distribution of its products into Mexico and Canada through several smaller stores. Therefore, opening its new facility in Mexico or Canada makes sense due to its expanding markets in these countries. It has located property options in both Mexico and Canada and must now begin discussions on which country it should select for its first international facility.
The board of directors will be making a decision on where to locate the new plant based on Heather's recommendation. The board is in agreement with Heather on opening its next plant outside of the United States. At this point, it is looking for a recommendation from Heather on whether it should expand to Mexico or Canada and it is also looking for data to support her recommendation. In addition to many location considerations such as the availability of transportation and local tax laws, Heather must also understand the labor markets within Canada and Mexico in order to make her decision. Heather has set up a meeting with the director of human resources at Threads to gather information on labor-related considerations for the new facility.
What are some labor-related factors that Threads should consider when comparing Mexico and Canada?
What are some labor-related factors that would favor Canada as the location of the new facility? Or Mexico for that matter?