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.
Southern RV’s factors that affect location decisions for region/community:
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.
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
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?
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.
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
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?
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?
Southern RV is responsible to many Stakeholders including: Stockholders, Employees, and the
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:
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.