Polaris Industries Inc. Global Plant Location Case Study

Polaris Industries Inc. Global Plant Location Case Study

Polaris is an organization that is structured to manufacture products for motorsport. It is embarked on its activities in 1954. The products that it produced were like, snowmobiles, ATVs, and side by side (Chopra et al. 2017). The company faced competition at the time from several companies such as Honda, Harley Davison, Yamaha, and many others. The total market for all the companies that were manufacturing motorsport items was about $10 billion; however, Polaris share was about $2 billion. Most of the company’s consumers (about 85%) were residing in North America. Yet, its global market had started rising.

However, over time, the organization rose to dominate the ORV market by the year 2010 and managed to generate about 69% of the total sales from Polaris. Thus Polaris assumed an increase in its revenue with a promising rise of 8-10% in 2011. The brand victory of the organization was the main reason behind its success. Therefore, Polaris chose to invest in other countries where the cost of producing its products will be economical. Thus the company sorted to some options for its investments.

The Most Important Findings

Therefore the organization came up with three leading alternatives for investment purposes. Remaining in North America was the first option of the organization since it would have the advantage of the low cost in terms of transportation since it will be close to its consumers. Furthermore, the products of Polaris had a high demand in the American market. The second option was establishing its activities in Mexico. Due to the nearness of Mexico to the United States, it was identified that it would have significant advantages since most of the things were almost similar, starting from the culture of the two countries. It also had a disadvantage of bordering the United States of America since it would have prevented the organization from growing its sales in the international market (Chopra et al. 2017). The last option was going to China since it was considered to be economical due to the low cost; however, the cost of labor was found to be high hence may not sustain the organization for an extended period. However, China had a high potential for the growth of the company’s market overseas.

The major strengths and weaknesses of Polaris methods of managing operations.

Restructuring the supply chain of the tradeoffs was the primary aspect of operation by Polaris. The organization had strategized to carry its service in markets with the most economic labor costs, which could realize significant savings for the company. However, unfortunately, the cost of labor is where the company had projected its operations were on the rise, and the North American labor was very costly. Furthermore, the price of oil was hiking, and therefore operating close to the consumers will minimize the cost of manufacturing the items.

Recommendations for improvements that could bolster Polaris operations.

The senior executives of Polaris were in a dilemma on where to establish their operations so that they can yield high profits (Chopra et al. 2017). However, from the assessment that they carried on, they came up with some recommendations over the three options. For instance, establishing their business in China would be a great idea, but there was a great hindrance to labor issues that was rising with time. There were also issues on how the organization would relate with the Chinese branch over differences in time zones cultural disparities. Another constraint was on shipping logistics and employing new workers if they were going to China; therefore, the chines affair was thought to be costly.

In Mexico, there were several benefits. First, Monterrey was not far from the United States, and therefore the cooperation between the Polaris main factory to that in Monterrey will be more comfortable. The Polaris official had the motif that fast development was to come from Mexico and near the united states despite their perception of the long term development coming from the Asian country, particularly china (Nagle, & Müller, 2017). They also realized that establishing a factory in Mexico would need 60 new employees like in China with other expenses like startup capital, cost of equipment, NAFTA, and many miscellaneous expenditures. The last option was to remain in America, where they had a higher number of customers with everything installed. Therefore doing the business remains in North America due to the low cost of labor and production when compared to the other two countries.

Which location provides Polaris the greatest advantage?

The United States had the most considerable advantages since employees were there and no need to employ new staff; everything had been installed; therefore, there was no need for startup costs. Furthermore, the organization was close to its consumers, of which it had performed very well in the American market.

What factors should be considered in making this decision?

The main factors that were required in making a decision were like, the distance of the factory, which would require the collaboration of Polaris and the workers, the cost of installation and movement of the materials for the new industry (Nagle, & Müller, 2017).  Employment of 60 staff workers in a newly established factory and payment of business tariffs like NAFTA in Mexico and taxes for the case of China or any foreign country.

What conditions would need to change for you to select another location? Explain your rationale.

For an organization to start a business in a foreign country, there is need to have cheap labor cost, production cost and taxes should be low with a promising market for the industry for high returns in the long run of the business.