MOD003497: Kojo Furoa is a Japanese multinational manufacturing company with a large base of operations located in the city of Cardown in Northeast England: Managing International Business Assignment, ARU, UK

ASSESSMENT CRITERIA

1. Knowledge and understanding of the key issues of international business activity in the context of contemporary globalization
2. Knowledge and understanding of multinational enterprises’ responses to external influences
3. Ability to critically assess the activities of multinational enterprises in terms of both business interests and wider socio-environmental impacts.

Scenario

Kojo Furoa is a Japanese multinational manufacturing company with a large base of operations located in the city of Cardown in Northeast England. Within the wider British manufacturing sector, the corporation is considered one of the most successful enterprises, based on its long history and impressive revenue. Kojo Furoa has been operating in Cardown since opening its first plant there in 1980. Today, aside from the factory, the city also hosts the corporation’s European headquarters. The company has consistently enjoyed strong relations with the local community.

The Cardone plant employs more people than any other part of the UK operation. Kojo Furoa has received formal recognition for its standard of working conditions and local corporate social responsibility (CSR) activities. The main factory has enjoyed particularly good local relations with citizens and government and has often been rated as one of the most desirable workplaces in the region.

Relations with local suppliers have also tended to be positive. However, in recent years, pressures relating to foreign competition, decaying infrastructure and tax rates that are high relative to other countries have contributed to rising tensions along the domestic supply chain. Nevertheless, community and labour relations remain on good terms. Domestic supplier relations began to worsen under the previous factory manager when she decided to shift purchases of various parts to foreign companies. This manager has now moved to the European headquarters after being promoted to the chief operating officer (COO) at Kojo Furoa.

The UK division’s revenue has remained strong, but over the past decade, profitability has started to decline, primarily because of increased foreign competition. Most expert commentators are in agreement that many comparable factories overseas are currently subject to considerably less government regulation and scrutiny with respect to health and safety, worker’s rights and environmental standards, etc. Local wages in Cardown are marginally higher than in other parts of the UK and much higher relative to the developing world. On the other hand, worker productivity and skill level in British factories tend to be world-leading. In general, the Cardone plant continues to offer higher quality manufacturing, but Kojo Furoa’s global market share has been diminishing as consumers have looked for less costly products.

In recent years, environmental issues have also emerged, provoking nationwide controversy. Environmental and labour activists have increasingly launched protests against the company, arguing that multinationals tend to flout their ethical responsibilities for their local environment, in order to solely focus on profit maximisation. Other analysts have suggested that such groups do not represent local interests and instead are part of national anti-corporate advocacy networks. The most contentious local issue currently involves a former supplier to the Cardone factory that Kojo Furoa acquired after the enterprise went bankrupt. Thanks to the takeover, many job losses were averted. Sadly, the business had suffered from years of mismanagement prior to the acquisition.

Kojo Furoa’s recently-promoted COO is determined to move a large proportion of Kojo Furoa production abroad, with the Cardone plant one of the main facilities in line to be wound up. According to the COO, information about the drive to offshore manufacturing will only be made public once a clear decision has been made. Several expert commentators continue to maintain that the highly skilled local labour force, coupled with current tax incentives and marketing concerns make Cardown the optimal site for production. Aside from any perceived strengths of the current production regime, cautious observers are also quick to point out that any major transfer of activities across borders entails unforeseeable risks and challenges. Conversely, others remain adamant that for the corporation, prospective savings from offshoring production vastly outstrip any and all benefits to be drawn from remaining in Cardone. Many even maintain this position in the hypothetical event that further concessions could be extracted from labour, domestic suppliers and the government.

Responding to the variety of pressures being applied by global management, in light of the international competition facing Kojo Furoa, the current regional manager has decided to conduct a stakeholder negotiation exercise with representatives from local labour, suppliers, government and the environmental movement, so as to address holistic cost issues at the Cardone plant. It is hoped that together, these groups can formulate a compromise position that continues to serve their interests and respect their concerns, while also enabling the corporation to attain a stronger position in the market. The Kojo Furoa plant’s significance to the community was a prominent feature of the most recent election campaign, wherein all major parties signalled their support for continuing strong relations between government and the plant. Despite occasional tensions with labour, formal relations between management and workers have historically been amicable and productive and labour representatives have reiterated their desire for constructive engagement in order to overcome the pressures of international competition.

Answer

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