Impact of Globalization on Sonoco:
Finding viable locations for operations throughout the world can stabilize financial performance in a changing global economy. Such is the case with Sonoco, a $ 4- billion- a- year industrial and consumer packaging company in Hartsville, South Carolina, with 335 locations worldwide in Australia, China, Europe, Mexico, New Zealand, and Russia. Its 18,600 employees provide innovative packaging solutions to a variety of customers in 85 nations. In Europe alone, where Sonoco has operated since 1923, it has 41 industrial product manufacturing facilities and 6 paper mills. These global operations resulted in international sales and income growth in 2007 while domestic sales were stumbling. Sonoco’s fourth quarter income increased 37 percent to $ 54 million, with an overall income growth of 10 percent in 2007. How did Sonoco do it? Locating operations in countries with favorable tax laws is one reason. Lower tax rates in Italy and Canada helped in padding the earnings margin. Another reason is a weak dollar, whereby a $ 46 million boost came from turning foreign currencies into dollars as Sonoco exported such items as snack bag packaging, and tubes and cores used to hold tape and textiles, to operations it owned in foreign countries. The exchange rate difference was more than enough to counter the added expense of increased raw materials, shipping, and energy costs in the United States.
With over $ 400 million cash on hand expected in 2008, Sonoco is looking to grow the business with large capital expenditures during the year. Even though lower sales volumes and higher costs are troubling in the short run, the future is bright because the overseas business is helping the company weather the current financial storm. Instead of catching a cold when the U. S. economy sneezes, firms with diversified global operations like Sonoco now consider foreign currency as chicken noodle soup for the bottom line!
Tasks:
Q1. Analyze the case study.
Q2. Using APA-style writing format, provide a written summary of the case study. Indicate the operations management technique that was used and recommend a technique that was not used and its potential outcome.