HAYCO: MOVING MANUFACTURING TO MEXICO, THE CARIBBEAN,
OR CENTRAL AMERICA? CASE STUDY SOLUTION
e
pl
m
Sa
SYNOPSIS
In 2018, Christopher Hay, president and chief executive officer (CEO) of Hayco—the top contract
manufacturer to the brush industry globally—had been looking for a new location for some of its operations
n
due to over a decade of rising labour costs in Hong Kong, China, where the company was based. The
company accelerated its search in response to the US government’s announcement of tariffs against Chinese
tio
products in April 2018. Hayco was seeking a location closer to the US and European markets where labour
costs were still low for an initial workforce of over one thousand employees and where there was no threat
of tariffs. Hay’s focus was on Mexico, the Caribbean, and Central America. He was considering questions
lu
such as, “What is the best market to which Hayco could move its operations?” and “Should it establish a
new subsidiary on its own or locate within a special economic zone (SEZ)?”
So
OBJECTIVES
• Identify the relative merits of countries that a manufacturing company is considering for relocation.
• Recommend which country best fits the company’s needs.
• Understand in detail the merits of locating in special economic zones.
The Case Solution Starts From page 4
, e
ASSIGNMENT QUESTIONS
pl
1. Where in Mexico, the Caribbean, or Central America should Hayco relocate some of its manufacturing
from China? Can we eliminate any of the four countries based on the variables considered?
m
2. What considerations are likely the most important to Christopher Hay?
3. Can a wholly owned subsidiary sometimes operate like an IJV?
4. What concerns would decline if Hayco were to decide to set up in a SEZ? Which functions can the SEZ
Sa
operator provide?
ANALYSIS
n
1. Where in Mexico, the Caribbean, or Central America should Hayco relocate some of its
tio
manufacturing from China? Can we eliminate any of the four countries based on the variables
considered?
When we look at the hassle factor indicator cobwebs from case Exhibit 3, Mexico is the most suitable
lu
country. However, none of the four countries being considered wins out on all considerations. Even the
country selected will still have issues.
So
There are many considerations that benefit the Dominican Republic, despite it having a less favourable
indicator cobweb than Mexico. An initial assessment is that Mexico or the Dominican Republic would be
the most suitable.
Based on case Exhibits 1–3, most students will agree that Panama and Guatemala can be dropped.
Panama has a small population and very little manufacturing. It has the highest per capita income of the
The Case Solution Starts From page 4
, EXHIBIT -1: PROS AND CONS OF EACH LOCATION BEING CONSIDERED FOR
RELOCATION BY HAYCO
Pros Cons
• Largest population • Low political stability and rule of law; poor
• Most manufacturing experience by far score on personal safety
• Greatest distance from Miami
• Most of the free point manufacturing
sites near the US border, not seaports,
Mexico
so slower and more expensive shipping
to Europe
• Higher per capita income than
Dominican Republic or Guatemala
• Closest to Miami • Limited technical talent available relative
e
• to China or Mexico
•
pl
•
• •
Dominican
m
Republic
Sa
• • Very poor political stability and rule of law
• •
n
•
• •
tio
•
Guatemala
•
lu
So
• • Small population, so potential problems
finding labour
•
•
Panama
•
•
The Case Solution Starts From page 4
OR CENTRAL AMERICA? CASE STUDY SOLUTION
e
pl
m
Sa
SYNOPSIS
In 2018, Christopher Hay, president and chief executive officer (CEO) of Hayco—the top contract
manufacturer to the brush industry globally—had been looking for a new location for some of its operations
n
due to over a decade of rising labour costs in Hong Kong, China, where the company was based. The
company accelerated its search in response to the US government’s announcement of tariffs against Chinese
tio
products in April 2018. Hayco was seeking a location closer to the US and European markets where labour
costs were still low for an initial workforce of over one thousand employees and where there was no threat
of tariffs. Hay’s focus was on Mexico, the Caribbean, and Central America. He was considering questions
lu
such as, “What is the best market to which Hayco could move its operations?” and “Should it establish a
new subsidiary on its own or locate within a special economic zone (SEZ)?”
So
OBJECTIVES
• Identify the relative merits of countries that a manufacturing company is considering for relocation.
• Recommend which country best fits the company’s needs.
• Understand in detail the merits of locating in special economic zones.
The Case Solution Starts From page 4
, e
ASSIGNMENT QUESTIONS
pl
1. Where in Mexico, the Caribbean, or Central America should Hayco relocate some of its manufacturing
from China? Can we eliminate any of the four countries based on the variables considered?
m
2. What considerations are likely the most important to Christopher Hay?
3. Can a wholly owned subsidiary sometimes operate like an IJV?
4. What concerns would decline if Hayco were to decide to set up in a SEZ? Which functions can the SEZ
Sa
operator provide?
ANALYSIS
n
1. Where in Mexico, the Caribbean, or Central America should Hayco relocate some of its
tio
manufacturing from China? Can we eliminate any of the four countries based on the variables
considered?
When we look at the hassle factor indicator cobwebs from case Exhibit 3, Mexico is the most suitable
lu
country. However, none of the four countries being considered wins out on all considerations. Even the
country selected will still have issues.
So
There are many considerations that benefit the Dominican Republic, despite it having a less favourable
indicator cobweb than Mexico. An initial assessment is that Mexico or the Dominican Republic would be
the most suitable.
Based on case Exhibits 1–3, most students will agree that Panama and Guatemala can be dropped.
Panama has a small population and very little manufacturing. It has the highest per capita income of the
The Case Solution Starts From page 4
, EXHIBIT -1: PROS AND CONS OF EACH LOCATION BEING CONSIDERED FOR
RELOCATION BY HAYCO
Pros Cons
• Largest population • Low political stability and rule of law; poor
• Most manufacturing experience by far score on personal safety
• Greatest distance from Miami
• Most of the free point manufacturing
sites near the US border, not seaports,
Mexico
so slower and more expensive shipping
to Europe
• Higher per capita income than
Dominican Republic or Guatemala
• Closest to Miami • Limited technical talent available relative
e
• to China or Mexico
•
pl
•
• •
Dominican
m
Republic
Sa
• • Very poor political stability and rule of law
• •
n
•
• •
tio
•
Guatemala
•
lu
So
• • Small population, so potential problems
finding labour
•
•
Panama
•
•
The Case Solution Starts From page 4
