Strategic Off Shoring Can Have Term Paper

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Since they are employing a labor pool from the Mexican economy, technological leakage could become a serious problem. This is a noted problem that has impacted major companies that have off shored or outsourced operations overseas. Boeing for instance lost some of its patented technology advantage to China and India due to their production facilities there in the late 1990s. Whirlpool must ensure that their core intellectual properties are protected institutional and security barriers.

By expanding on an international level, Whirlpool dramatically reduces their costs but also ensures additional competition in the long run. They have taken this step in order to decrease their upfront assembly costs, but it also invites competition from a globalization perspective. By leaving the country themselves, yet still targeting the United States market share, Whirlpool implicitly takes less pressure away from legislative protection of the U.S. marketplace to foreign goods. This is because the U.S. no longer has an incentive from an economic protectionist stance of protecting Whirlpool's market share once Whirlpool does not have direct employees within the United States. As a result, foreign competition, especially from China could very well subsume the entire market share of Whirlpool within a few years. Although they have moved their plant to Mexico, their production costs will always exceed that of Chinese and Asian competitors. This move could very well lose them both their credibility as an "American made" product line, while at the same time also lose out in a price inflation environment. From a global perspective, there are many different considerations for their public relations strategy.

An accurate budget for this planned move will involve very high upfront costs, and progressively lower costs as employee compensation is wiped from the books. Their upfront costs will be divided into three specific arenas. First, their compensation for employees in the form of a severance package.

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This severance package will include two types of overall compensation, short-term and early retirement. Short-term unemployment severances will run six months with full wages for employees. This will equal to costs of on average 25,000 dollars per employee with a match 25,000 in benefits matching. Since Whirlpool is planning to move the majority of their production facilities to off shore, they will have to compensate almost all of their base employees. This in total will cost them approximately 50 million dollars on the initial outset. The second form of compensation will be through early retirement options, this will increase their upfront costs in relations to their overall retirements packages. Such a cost will increase their overall compensation costs by around 75-100 million dollars over the next two years. Second, they have to implement a strong re-education strategy. This cost could be substantial if all employees use their re-education benefits. Per employee, they will need to provide pre-approved credits for re-education at a university, trade school, or other institution. Per employee this will factor on average to be 5000 dollars, and will in the long-term cost the company 10 to 15 million dollars within the first year. Finally, cost of shutting down facilities and the move of equipment and personnel to Mexico. Through total projections, this cost figures to be substantial for several reasons, first they will have to institute basic production facilities, hire workers as well as compensate the government for this enormous economic project. In total this figure could be anywhere from 150 to 200 million. This total cost figure will mean that their budget for the move will be at the 500 million dollar mark. However, this cost figure will substantially reduce once the compensation packages are off the books within the next two years, and….....

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