Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 62

New Manufacturing Facility, Strategy Julius Brooks, plant manager for ICL, Inc., a manufacturer of auto parts, has been successful in recent years because of the very high quality of his products and the speed of delivery. A growing market for ICL is automakers who want it to participate in the design of the car and to design certain parts. The ICL design team supervised by Julius has developed an excellent reputation among the automakers for quality designs, which have reduced warranty and service costs for the automakers. The result has been that a substantial part of the plant’s revenues are now from design work, and sometimes ICL subcontracts the actual manufacturing to other manufacturers. Nevertheless, competitors continue to cut prices, and Julius is finding it more difficult to cut costs to meet the competition. Working with top management, he has helped design a new, automated factory in Georgia to take advantage of the tax breaks allowed by the State of Georgia and the local community.

Required Discuss the strategic aspects of the plan for the new factory.

Step 1 of 2

Case Introduction

The plant manager of ICL, JB, proposes to build up a new plant to reduce the costs by taking advantage of the tax benefit in the state. The strategic aspect of this is based on controlling costs and remains consistent with the market prices or the prices offered by the competitors. The new plant will help them become more cost effective by reducing the tax burden.