"Southern Missouri Real Estate"
Southern Recreational Vehicle Company The narrative and questions for this case is in the textbook on page 330. If you are using the old version of the textbook it is on page 317. Question 1 Southern RV’s factors that affect location decisions for region/community: Criteria Evaluation 1. Corporate desires – Big plus, S.R. wants to move ASAP 2. Attractiveness of region Very attractive. Taxes &Climate 3. Labor availability Adequate , lower cost, right-to-work state, no costs for training 4. Costs/availability of utilities Free water and sewage 5. Environmental regulations Clean industry, no problems expected 6. Government incentives Great 7. Proximity to raw materials– Not explained in case. and customers 8. Land/construction costs Existing building will be used. Free 2nd loading dock In summary from Southern RV’s prospective: No capital expenditure would be needed for new plant. Inducements paralleled main concerns of Southern RV management. Overall it appears to be an excellent offer. Concerns or Questions that Southern RV might have Where are their suppliers located? Is this a contract, or and understanding? Labor productivity in Mississippi? What will the taxes by in year 6? How long is water and sewage free? Are adequate transport facilities are available (Road & Bridges) (Railways) (Waterways)? Concerns or questions which city officials of Ridgecrest Mississippi might have: Will the surrounding area flourish with satellite businesses? How long is Southern RV required to stay? Will costs be recovered? How many jobs are they bringing, how many of their old employees will move to Mississippi? Is Ridgecrest giving away too much? What is the return on investment. The 50,000 bond encourages the company to expand, where is this money coming from? Inducement could mean higher taxes for citizens, Are they prepared for this? Question 2 Spouses’ jobs and schools for children Finding a New Spouse more difficult Culture shock -- cultural events, sports events, restaurants, entertainment Lack of airport and 4 lane roads. Health care Religious facilities Real estate – lack of higher level housing Recreational facilities – very few North Vs. South, different culture Pay scales are lower in MS Lower level of living, quality of life might decrease Very hot in July and August Shopping MBA programs Question 3 Reasons stated in the case (do not study) 5 years of declining profits 1 year of loss Spiraling production costs Increasing costs of labor Unreasonable labor unions Increase cost of raw materials Utility costs have gone up Taxes and transportation costs are increasing Justified? Yes or No Southern RV could ask for Union concessions in Missouri. When does the current union contract end? Southern RV could automate current plant with union assistance. Southern RV could ask Missouri for tax breaks and reduced utilities (Match Mississippi’s offer). The decision on labor should be made by looking at productivity not labor costs Southern should consider costs of raw material, will they be cheaper in Mississippi? Problems Lag time for employee training. It will take a few months to train the new employees in Mississippi. How to tell employees: pink slips, large meeting, tell supervisors? Question 4 Southern RV is responsible to many Stakeholders including: Stockholders, Employees, and the Community. Legally, Southern RV’s responsibilities depend on the union contract. They should provide: Assistance with unemployment claims Provide references to other employers Explanation of why they are moving The could provide, but or not obligated to provide: Severance Pay Help finding a new job They may not want to inform employees of the layoffs as soon as possible because of possible vandalism, violence, and the proximity to Christmas season. Southern RV could offer employees in Missouri relocation reimbursement for their moving costs, etc. But employees who moved to Missouri would be under new terms, no union contract. If the company goes out of business the employees would get nothing.