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Pittman’s Fireplaces Percy Pittman recently took over the family business. Pittman’s Fireplaces has been in business since 1922. It was started by Percy’s grandfather and then passed on to Percy’s father. The business has thrived. They install fireplaces throughout the United States. In addition to the fireplaces, Pittman’s Fireplaces sells all the accessories you can imagine to make your fireplace the centerpiece of your room.Percy wants to take the business to the next level and go international. The reputation of Pittman’s Fireplaces is excellent. They have installed many fireplaces in the homes of diplomats who are representing their countries in the United States. Furthermore, many international businessmen who keep homes in New York, Los Angeles, Chicago, and other large U.S. cities have purchased Pittman’s fireplaces and accessories.As Percy ruminates about how to proceed with his business expansion, he considers the following points. One, he would need to consider labor. What skills must a worker have and what skills can Pittman train them on? Another consideration is wages. Percy believes in paying a fair wage for a fair days work; however, labor costs are a huge expense in any business. Materials are another critical factor for Pittman’s Fireplaces. Percy sources the finest wood, marble, granite, and other types of stonework for their fireplaces. The final consideration is the local environmental laws. Pittman’s Fireplaces sells gas-burning fireplaces, wood-burning fireplaces, and electric fireplaces. The rules, regulations, and laws are often different in cities, counties, and states. Percy assumes he will encounter the same situation in foreign countries.Percy decides he will investigate three countries—United Kingdom, Germany, and Finland. His initial criteria for his weighted factor model are labor costs, weather (cold winters), environmental laws, and trade agreements with the United States. However, as Percy continues to ponder the best factors, he isn’t yet sure which are the best ones to use as location selection criteria. The wrong set of criteria could result in selecting the wrong country for his foreign expansion.Discussion QuestionsPercy is investigating several tools to help him make his decision as to which country he should expand into first. He thinks that these tools may also guide him in deciding which specific factors he should use to evaluate the three countries—United Kingdom, Germany, and Finland. Percy is reviewing both the 2016 Global Competitiveness Report and the 2016 World Competitiveness Yearbook. Clearly, in both documents the three countries are rated significantly different. Obviously, this is a critical decision for the future of Pittman’s Fireplace. As a businessperson what is your opinion regarding the two references Percy should use? Explain your answer.Percy has decided that he will not have more than five factors as part of his weighted factor model. Currently, he is thinking of four factors—labor costs, weather, environmental laws, and trade agreements with the United States. However, when he was originally pondering the situation he thought along these lines—labor-skill set, labor wages, material sourcing, and environmental laws. Based on the case, do you believe the final four are the absolute best four for Percy to select, or should he go with his original four, or some different ones? Explain why you agree or disagree with him. Justify your views either way. In addition, what should be the fifth factor?Assume that Percy has selected Finland as the best location to begin his international expansion. Now, Percy begins to put costs together. He forecasted 7,000 fireplaces per year. Calculate the breakeven points for the three countries. Should Percy still go with Finland or should he select another country? If the forecast was 5,000 should Percy ignore the weighted factor model? Explain why or why not.LOCATIONANNUAL FIXED COST ($)UNIT VARIABLE COST ($)Finland$550,000.00$180.00Germany$450,000.00$200.00United Kingdom$400,000.00$220.00Quigley Global Transportation Queenie Quigley is a very successful entrepreneur. She grew up in an ocean port city and loved the sea. Her father was a commercial fisherman and often took her with him during the summer. Her love for the sea triggered an interest in international shipping. Queenie knew that an ocean transportation business would provide services that would always be needed and she eventually created a large, successful ocean transportation company.Queenie understands that her transportation company has to be located at major shipping ports to get the best contracts. Often her clients want to board the ship and look around to see how their cargo will be handled and stored. While those types of clients are not frequent shippers, they are willing to pay a premium price to ensure their goods get to the distant locations undamaged. A brief tour aboard one of the Quigley Global Transportation vessels appears to instill confidence and trust.Quigley Global Transportation currently has ships stationed in the following ports—Hong Kong; Rotterdam, Netherlands; Los Angeles, USA; New York-New Jersey, USA; Santos, Brazil; and Ambarli, Turkey. These ports were rated as number 5, 11, 19, 23, 39, and 48 out of the top 50 worldwide in 2015. Queenie believes her selection of these ports was a crucial factor in her company’s success. As the old adage goes, it is all about location, location, location. These ports gave Quigley Global Transportation a set of locations that enabled her company to serve all major areas of the world—North America, South America, Europe, the Middle East, and Asia. However, Queenie knew there were still many opportunities for business if she could expand into other major ports.One key criterion was the 20-foot equivalent unit or TEU. The TEU is a common unit of measure, even though it is an inexact unit of measure. The unit basically describes the common shipping container that is 20 feet × 8 feet × 8 feet. Ports are rated by the volume shipped through them each year, in millions of TEU. Obviously, from the perspective of potential business Queenie’s company could obtain, total TEU handled per year is her number one criterion for selecting the next port. In the past, Queenie’s expansion strategy was based on opportunities that gained her access to a major continent. She had sought out contracts that she knew would lead to a foothold in a port. However, now that Quigley Global Transportation was on solid footing, Queenie wants to develop selection criteria that are more robust. She decided to use the weighted factor rating model as her selection tool for the next port. She is still convinced that TEU should be the number one criterion. Although she has four other factors shown in the table below, Queenie has not decided on their importance. Queenie thought if she looked at her current ports through that criterion it would help her decide on how to weight the criteria going forward.COUNTRYPORT RANKING BY TEU ()EASE OF DOING BUSINESS BY COUNTRYGDP GROWTH BY COUNTRY—2016GETTING CREDIT BY COUNTRYENFORCING CONTRACT BY COUNTRYBrazil39123–3.3%10137Hong Kong, China541.4%2021Netherlands11281.7%8271LA, USA1981.6%220NY, USA2381.6%220Turkey48693.3%8233Discussion QuestionsQueenie has a very challenging task ahead of her. As stated, she didn’t use any selection system for the first six ports except that she secured a contract with a client and then built that into a foothold in that port. Queenie wants a more effective selection system moving forward. Her first criterion is still TEU and she plans to weight it at 30 percent on a scale of 0–100%. No two criterions can have the same weighting; Queenie wants some sort of distinction between each one. What is your recommendation for weighting the other four criteria? Why did you weight each one as you did? Explain the logic of your weighting.Queenie wants to expand her business into Africa. Based on her initial analysis there are no ports large enough in many African countries to make them viable by themselves. However, transporting goods from another port to African ports would be a sound business move. Queenie had her staff provide a list of five ports that could be used to serve Africa. Using the recommendation you provided Queenie for the weighting-factor model and the chart below, select the best port for Quigley Global Transportation.COUNTRYPORT RANKING BY TEU ()EASE OF DOING BUSINESS BY COUNTRYGDP GROWTH BY COUNTRY—2016GETTING CREDIT BY COUNTRYENFORCING CONTRACT BY COUNTRYUnited Arab Emirates44282.3%10125Sri Lanka281105.0%118116Saudi Arabia361471.2%82105Malta491324.1%13958Spain33853.1%6229Review the locations of the ports listed in question 2 (the World Fact Book can help). Keeping the TEU as criterion number 1, which of the other criteria would you change to enhance the selection process? Think in terms of the African question. What factors would be better criteria from a business and supply chain perspective? Explain your reasoning.
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