CASE ANALYSIS REPORT ON SHUI FABRICS

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PORFERIO A. SALIDAGA, JR. Dr. George Fong Management Dynamics April 20, 2012

Problem The minimal Return of Investment (ROI) of 5%. Objective To increase the ROI from 5% to 20%. Analysis of Relative Facts The joint venture between Ohio-based Rocky River Industries and Shanghai Fabric Ltd is a manifestation of companies and managers going into a global market, engaging in a business across borders. In the case of Rocky River Industries, it engages itself in international business in order to broaden its market potential by selling coat fabric to both Chinese and international sportswear manufacturers. However, an organization which operates internationally must also be ready to be exposed in different economic, legal-political, and socio-cultural milieu to succeed. In this case, there is a difference in perspective between the two businesses in joint venture due to different economic, legal-political, and socio-cultural backgrounds. While the Rocky River Industries is not satisfied with the annual 5% ROI and looks at considerable red tape and high labor cost in China as contributors; Its Chinese counterpart, on the other hand, has a different point of view--- he considers the return as just the right level of profit.

Alternatives 1. To reduce workforce. Pros: (a) The labor cost will reduce; (b) Profit will increase. Cons: (a) The withdrawal of support by the Chinese market to the product; (b) It takes away the source of living of its workers; (c) Nonfulfillment of corporate responsibility by contributing to unemployment in the community. 2. To promote or encourage innovation to improve the product. Pros: (a) Sales increases; (b) Profit increases; (c) workers will not be affected. The tenure of

Cons: (a) There is uncertainty that the increase of sales would really transform into an increase of profit considering that another variable is entered into the production, that is, the cost of innovation; (b) The uncertainty of whether or not such innovation can catch the interest of the market. 3. To increase production by the same number of workforce through empowerment (i.e. trainings, delegating) and closer implementation of managerial control. Pros: (a) The efficiency of workers improves; (b) Sales increases; (c) Profit increases; (d) The demand for raw materials from suppliers will also increase thus contributing to the economic development of the country as a whole. Cons: (a) The negative response of workers towards changes as it would mean for them to go out of their comfort zones. Solution Alternative 3 is recommended.