Week 1 Bloomfield Guitars Discussion.docx

Week 1 Bloomfield Guitars Discussion.docx - It is my...

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It is my recommendation to open up a new factory in China at a 200% capacity. The recommendation is based on running multiple scenario analysis with a 50/50 split on demand between USA and EU with regular inflation being considered. Brazil was eliminated due to its high total landed cost, instability with the local environments and ease of doing business rankings. Both USA and Poland did look viable candidates for the choice, however there are multiple reasons for this recommendation that I’d like to elaborate below 1) Total Landed Cost – China has the lowest total landed cost of production across all other nations in question. USA’s cost at 20-year mark is approx. 124% that of China (at 200% capacity operations) $1973 vs. $883 2) Low Inflation Rate – China has successfully managed to sustain low inflation rates over last 10 years. They have managed their rates from a high of 8% in 2008 to sustaining it under 2% since last 5 years (2012-2017) 1 . USA’s inflation rate for last five years has been increasing consistently and is now at approx. 2% for 2017.
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