Esca Case

ESCA Group Discussion
·       What should he propose? (Where to locate the plant)
·       What are the arguments?
·       Context
o   We are in a crisis and therefore should be risk averse.o   ESCA bid for a sale, they won, and do not have the facility to produce what they need to.
o   Penalty
o   They need to execute profitably.
o   They have a 1-year time limit and 4-6 months ofconstruction.
o   The new project may require a good exit plan.
o   Market (wind turbine blades) declining in 5 years
o   Labor relations are tense and have a 1 year agreement (especially in themain plant).
o   Good at diversifying their product portfolio.
o   Experience in decentralization.
o   Turnover is constant but net profit fluctuates.
o   Plant Requirements
§  10000sq m
220employees (150 skilled/70 non skilled)
Environment

* Numbers
<Initial Year>

| (a)City | (b)Rural | Difference(a-b) |
Set Up Cost TTL | 11,750,000 | 12,342,500 | -592,500/year |Land | 250,000 | 100,000 | |
Building | 1,500,000 | 1,500,000 | |
Machine | 10,000,000 | 10,000,000 | |
Employee training | 0 | 742,500 | |
| | | |
Running Cost TTL | 9,440,000 |9,130,500 | +310,500/year |
Skilled | 7,177,500 | 6,682,500 | |
Unskilled | 1,963,500 | 1,848,000 | |
Indirect Labor | -150,000 | 0 | |
Utilities | 450,000 | 600,000 | |
| | | || | | |

Assumption for the Rural Option:
6months in for training unskilled employee
3 months of initial training
100% of skilled will move to join the new plant
Surveyresults are true

<4 year consecutive forecast>
Conclusion: Negligible?
| City | Rural |
7/2011 | | +592,500 |
7/2012 | | -310,500 |
7/2013 | | -310,500 |
7/2014 | | -310,500 |Total | | -649,500 |

* Risk
Potential salary increase in the city
Union strike in the city

<Pros/Cons>
City Rural
Pros | -more options to exit the building-labour...