QUESTION 1-Data analysis
The tool gives us the coefficient of the risks, and we decide to assign low weights to some risks, and then we calculate the entire index. From data we notice that Malaysia, Thailand and Russia are the best three options. Another thing we notice is that China has improved a lot over the past 7 years and became a contender on par with Russia. Therefore, we also take China into consideration.
Another aspect for analysis is geographical factors, and from the map we find that countries geographically close to suppliers are Russia, China and India. Of course India is not within our consideration due to its risk level is too high. Although the risk levels of Russia and China are similar, the significant risks of Russia such as inflation and corruption are somehow hard to control. So we also exclude Russia. Also, we see that China has direct access to the 3 major customers. And we see all these 4 countries (Thailand/Malaysia/Vietnam/Indonesia) have easy sea access to at least 2 of the major customers. However, we notice that the risk level of these 2 countries (Vietnam/Indonesia) is too high, thus making them bad choices. Consequently, after consideration we decide to choose China, Thailand and Malaysia.
We think Canada and UK both have naturally low risk levels, comparing with China, Thailand and Malaysia. However, they are too far away from their target customers, making the transportation costs too high if we assemble products in Canada and UK. So China, Thailand and Malaysia excel Canada and UK in this way.
QUESTION 2-Risk analysis/Mitigation
Basically, given the three countries of choice we have given, here we have 3 of the major risks that we have judged to the most important. First of all, it is human rights, which means the ability of government to enforce freedom and other specific rights for its workers. Another risk regard to natural disasters, which affect the population, the factories’ ability to keep operating.
Some of these can be mitigated, unlike corruption or inflation. If we are talking about human rights, we are not talking about acting on government level. Now we are talking about making sure that all the workers in the factory are treated the best in a humanity way. Some others related to natural disasters. In terms of storms and floods and seismic disasters, they can also be mitigated through planning where to build the hub, so the impact is lower when an earthquake or a flood occurs. Also, invest in infrastructures which are systems like flood gates and seismic infrastructure. And the third one is disaster training, which is, train the workers to react to these natural disaster, so we can lower the impact of disasters and allow the hub’s function effect at full degree despite of natural risks.
QUESTION 3-Solution development
As to improve our risk analysis based on Zurich risk room, we flag on 3 more areas. First, as to rivalry aspect, we need to research for the presence of competitors for each of the 3 locations. Because it will increase our availability of experienced staff, but at the same time add the risks of paying too high, as well as limit our flexibility of pricing.
Second, we also take management and governmental incentives into consideration in the process of adaptation. For multinational companies, it is always difficult to keep their mid-level managers because they often move to more lucrative locations. As to governmental incentives, for instance, if Chinese government can open more sales regions or release its sales caps, it will definitely help accelerate our adaptation process and benefit us more by setting a hub there.
Lastly, we consider the importance of environment for each of the 3 hubs. For example, island countries like Thailand and Malaysia are truly ideal choices, but they will still face difficulties in shipping if there are sea disputes or pirate threats. Also India is not quite ready to welcome RoboCanada yet, given its regime instability.
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