Eastern Waves, Inc.
Case 10: Eastern Waves Inc.
George Stipe
Arkansas State University
Author Note This assignment is being submitted on February 1st, 2013, for Dr. Mello’s 4123 MKTG: Organizational Purchasing course.
Case 10: Eastern Waves Inc.
Introduction
(Benton 2010) Mr. Patton, the situation in Malaysia is not looking good. “In 1997 Malaysia was hit by the Asian financial crisis.” One of the most effected areas was the manufacturing sector. “In order to rescue some of the largest state-owned companies, the government has imposed several strict trade barriers on certain goods. Included under law in these protected goods are the steel billets, the raw material for use in the downstream steel industry.” The government has also put into effect new labor policies for both domestic and foreign labor in order to protect the domestic workers. The Malaysian steel industry is forced by the government to buy more expensive local steel billets because of the restrictions put on imports to protect the local economy. With falling steel prices, domestic steel prices are getting higher and the foreign prices are getting cheaper. The local billets are priced at RM760 metric ton (MT), while foreign prices are between RM600 and RM680 per MT F.O.B. This 15 to 20% price difference is continually dropping the profits of Eastern Waves Inc. located in Malaysia. Eastern has done research and found that scrap steel can be used as a substitute, but not without its problems. (Benton 2010) There is also a problem with the price of labor for Eastern Waves Inc. in Malaysia: The domestic workers are protected by the government by a new labor policy for workers who make less than or equal to RM1,500 per month to assure economic progress and a good investment climate. The domestic workers are protected by worker-friendly laws. They are hard to manage, difficult to fire, free to resign or quit, and demand full pay each month, even when there is no work. They strike if they are not paid
George Stipe
Arkansas State University
Author Note This assignment is being submitted on February 1st, 2013, for Dr. Mello’s 4123 MKTG: Organizational Purchasing course.
Case 10: Eastern Waves Inc.
Introduction
(Benton 2010) Mr. Patton, the situation in Malaysia is not looking good. “In 1997 Malaysia was hit by the Asian financial crisis.” One of the most effected areas was the manufacturing sector. “In order to rescue some of the largest state-owned companies, the government has imposed several strict trade barriers on certain goods. Included under law in these protected goods are the steel billets, the raw material for use in the downstream steel industry.” The government has also put into effect new labor policies for both domestic and foreign labor in order to protect the domestic workers. The Malaysian steel industry is forced by the government to buy more expensive local steel billets because of the restrictions put on imports to protect the local economy. With falling steel prices, domestic steel prices are getting higher and the foreign prices are getting cheaper. The local billets are priced at RM760 metric ton (MT), while foreign prices are between RM600 and RM680 per MT F.O.B. This 15 to 20% price difference is continually dropping the profits of Eastern Waves Inc. located in Malaysia. Eastern has done research and found that scrap steel can be used as a substitute, but not without its problems. (Benton 2010) There is also a problem with the price of labor for Eastern Waves Inc. in Malaysia: The domestic workers are protected by the government by a new labor policy for workers who make less than or equal to RM1,500 per month to assure economic progress and a good investment climate. The domestic workers are protected by worker-friendly laws. They are hard to manage, difficult to fire, free to resign or quit, and demand full pay each month, even when there is no work. They strike if they are not paid
Cited: Benton, W. J. (2010). Purchasing and Supply Chain Management. New York: McGraw-Hill/Irwin. Handfield, R. (2007, N/A N/A). SASCOM. Retrieved January 28, 2013, from SASCOM: www.sas.com/resources/asset/sascom.pdf