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II. INTRODUCTION
Globalization and technology have been the biggest drivers of change in the location decision
process over the last thirty years. Location activity has been very high in recent decades because
corporate restructuring, mergers and acquisition. Being in the right location is a key ingredient in
a business's success. If a company selects the wrong location, it may have adequate access to
customers, workers, transportation, materials, and so on. Consequently, location often plays a
significant role in a company's profit and overall success. A location strategy is a plan for obtaining
the optimal location for a company by identifying company needs and objectives and searching
for locations with offerings that are compatible with these needs and objectives. Generally, this
means the firm will attempt to maximize opportunity while minimizing costs and risks.
A company's location strategy should conform with, and be part of, its overall corporate
for example, it must consider establishing plants and warehouses in regions that are consistent with
its strategy and that are optimally located to serve its global customers. A company's executives
and managers often develop location strategies, but they may select consultants or economic
development groups to undertake the task of developing a location strategy, or at least to assist in
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Getting a good location is very critical to the success of a business. Perfect and best position
geographically requires lot of research and decisions entrepreneurs make during the planning
electronics component manufacturer that has been in Singapore since 1991, suppling original
They construct a team of senior management to search a decision regarding the possible
location. Which they identified two candidates for additional location: Hong Kong (People’s
The committee has contracted the government of Singapore to elicit possible incentives t
o not relocate to another country. Singapore is offering a fiveyear exemption on taxes for ACM i
f the plant remains in Singapore. The government will also assist by partially subsidizing labor,
Committee members realize that the Singapore plant, which has been operating for years,
has already been amortized and opening a new plant would require additional capital c
osts. That said, opening a new factory would also provide an opportunity to upgrade production e
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This study aimed to answer the questions stated hereunder:
2. What are the reasons why the ACM company plan to move their operations elsewhere
in Asia?
3. What are the key points that the Senior Management team take into considerations to
4. What are the advantages and disadvantages if the management chose to remain their
5. What other relevant factors that are not mentioned in the ACM case that might play a
6. After weighting all the possible benefits and drawback, what will be effective step that
ACM company to take to maintain its global and high competitive in the Electronics
industry.
7. What are the alternative solutions in a way that ACM company will keep on the tract?
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Subject company the ACM is one of the leading electronics component manufacturer located
in Singapore. Suppling all the original equipment manufacturers with high standards. Engaged in
exporting of electronics components on all builders and contractors all over the world. Operating
since 1991 and giving the best quality products for almost 27 years and counting.
In the past several years ACM has experienced increasing pressures from the other
manufacturers located in other countries. In their present location, the Singapore labor remains
inexpensive and with steady costs which will give positive contribution in their sales. To add, the
utility costs which led the firm to contemplate moving operations elsewhere in Asia, is one of the
strategy to make ACM more competitive. The company remains profitable and has good path in
the industry. But the margins (difference between the seller's cost for acquiring products and the
selling price) have shrunk. That’s why the management is interested to ensure that the firm will
remain competing in the medium to long term against other component manufacturers.
To support and to make all things possible the senior management has formed a committee to
identify all deliberations regarding the decision of possible relocation. Which they come up to
choose Hong Kong (People’s Republic of China (PRC) and Kuching which is in Malaysia. Hong
Kong’s main attractions stem from the fact that since 1997, when its sovereignty was transferred
back to the PRC, labor costs have decreased as access to labor has increased. Hong Kong enjoys
a large seaport and very good transportation infrastructure, and this is important in moving
in raw materials and moving out finished components to customers. Senior management
believes that an increasing number of OEMs will move to the PRC in the next several
years, as has been the case in the past decade. And will only increases the attractiveness of
locating the manufacturing facility in Hong Kong. Kuching is in the Malaysian province of
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It is the fourth largest city in Malaysia and home to a population of around
650,000. Several points make Kuching attractive to the relocation committee. First
locating here would give access to natural resources and other production inputs.
Second,the transportation infrastructure is good, and the city hosts a deepsea port for moving
raw materials in and finished good out. That said, the port is not as large or accessible as those of
Hong Kong or Singapore, and several committee members have expressed concern about
the frequency of ship visits toKuching. If the port does not receive regular service from container
ships, transportation costs to ship components to oems will doubtlessly stable and inexpensive in
Malaysia.
Having a thorough discussion of its advantages and disadvantages the team compiled facts.
if stay: 5-year of tax exemption, subsidizing labor, water and energy cost for 5 years, no need
Disadvantages would be: Increasing of labor and utility costs, old plant/factory which is less
Malaysia: Easy access to raw materials and vast natural resources, Inexpensive labor,
transportation infrastructure is good and has a deep-sea port for moving in and out the goods.
Disadvantages: concern with frequency of ship visits as Kuching port is not as ‘well -known’
Hong Kong: Consistently cheap labor, good transportation infrastructure (busiest port).
Difficulties might be: need to build the plant/factory on an expensive land as Hong Kong is
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But on top of these, there are still some areas that they need to ponder, which are
Education of the workforce (both current workforce and future generations). This includes labor
talent and attitudes towards the work. Political stability of each country. Exchange rates and
currency risk.
In reference on the above statement, and to stay ACM on its market position, we
recommend pushing and adding branches in Hongkong. Since this will take time and money ACM
must take on step at a time, when the time comes that their second company drives up and gain
huge amount of sales and revenue and if that will be evident they can now start to pursue to give
Malaysia the services that they are offering in Singapore and Hongkong to add on their list their
Malaysia branch. Keeping their original company in Singapore, continuing its mission and striving
Our team discussed about other alternative solution that ACM may acquire. First, they
should empower and promote their products in Singapore to encourage other big manufactures to
try and choose ACM as the only electronic manufacturer. Second, Business market, and bench
marketing this will help them to provide niche competition if they know their competitor’s
weakness. Third, continue to give incentives and promotional products and high-quality service
V. CONCLUSION
indicative/strategic decision about the future direction was made on top management level, based
on specific factors for this manufacturing location. The following consequence evaluation and
definite decision focused on the capacity and lead-time fulfilment for both organizational and
competence aspects of the location decision. In addition, it was also clear that the impact on the
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production system performance, i.e., the utilization of manufacturing resources and the level of
quality in relation to the production volume, was considered during the location decision process.
Despite the potential for improvements, the findings suggest that the case study company
has a high degree of tacit knowledge regarding the production location decision and its
implementation. A post-follow-up revealed that since the company has a high awareness of the
risks and challenges related to relocation projects, checklists have now been established, risks are
Accordingly, to Randhawa and West (1995), the facility location problem can be
approached by considering the location search space as continuous or discrete. Continuous space
allows facilities to be located anywhere in the two-dimensional space; it normally assumes that
costs are proportional to some distance measure between the facilities. Though easy to solve, the
continuous approach may yield impractical results. The discrete space approach limits the number
of possible locations to a finite set of predetermined sites, and the transportation costs are not
necessarily function of distances. For this case study, four common types of technique can be
considered. By using factor rating method, we can suggest arriving on a decision to which country
should ACM should put up their new branch. Factor rating method attempts to take a range of
considerations into account when choosing a location. This technique starts by identifying the
relevant factors, then assign a weight to each factor that indicate the importance compared with
other factors, given that all the weight sums up to one. Scores then have to be given by decision
makers to each factor for all location alternatives. The total weighted scores for each location
alternative are then calculated by multiplying the factor weight by the score for each factor and
sum the results for each location alternative. The alternative with highest score is chosen unless it
fails to meet the minimum threshold, if there is one (Stevenson, 2007). Factors like quality of
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living and labor attitude are intangible factors and hard to quantify. Greasley (2009) suggested an
approach to compare the tangible and intangible factors by conducting an ‘intangible factors only
assessment’ by the method, and then determine if the difference between the intangible scores is
worth the cost of the difference in tangible costs between the location alternatives.
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