Analysisof Threads Apparel Case Study
Analysisof Threads Apparel Case Study
Laborrelated factors to consider when comparing Canada and Mexico
Mexico and Canada have relatively developed apparel industries, whichwould provide opportunities and competitive edge for Threads Apparel.However, for the company to identify and utilize the differentbusiness success factors in each country, it will need to considerthe diverse labor related factors. Furthermore, considering thefactors will allow the firm to determine the most appropriatelocation for the new facility. Currently, the company has acompetitive compensation and benefits policy for its employees thus,it will need to consider the labor costs and benefits packagesoffered in both nations. The decent compensation policy and effectivemanagement practices have aided Threads in diminishing turnover rateand increasing employment engagement. In this regards, it issignificant to understand the labor costs and trends in bothcountries to determine the best package to introduce in the chosennation. Considering the labor costs will help the organization chosethe nation with relatively low labor costs to cut costs and ensurethat the company manages to continue with its competitive package inthe new nation. Besides, the organization should consider the minimumsalary and wage rates and the associated laws governing labor of eachcountry. Average wages for Mexico stand at US$14,867 while those ofCanada stand at US$47,843 (Organization for Economic Co-operation andDevelopment, 2015). Both Canada and Mexico have minimum payguidelines, but the regulations differ greatly. Mexico has two salaryrates: an occupational minimum wage and a general minimum wage thatapplies to all employees but the amount depends on the region(Organization for Economic Co-operation and Development, 2015). Onthe other hand, Canada has a minimum wage rate that is set at thestate level. Considering the minimum wage rate will enable themanagement understands the best approach to cultivating or the nationwith the most competitive rate.
The company should consider the availability of skilled labor in eachcountry. The firm has managed to experience growth and enhance itsreputation for quality standards because of the presence of atalented staff. This means that for the company to continue realizinggrowth and producing high-quality apparel, it must set the newfacility in a country with a high availability of skilled employees.Furthermore, the firm should consider the actual size labor force andGDP of both countries. While Canada has a GDP of US$44,284 percapita, Mexico has a GDP of US$18,078 per capita (Organization forEconomic Co-operation and Development, 2015). Canada has anemployment rate of 72.6% and an unemployment rate of 6.9% of thelabor force while Mexico has an employment rate of 60.9% and anunemployment rate of 4.3% of the labor force (Organization forEconomic Co-operation and Development, 2015). GDP per capita and theemployment rate are significant factors when considering to enterinto new markets as they illustrate the level of productivity andperformance in the new locations.
Factorsthat favor Mexico or Canada as ideal location for the new location
Both countriesdiffer greatly in their labor aspects thus, it is essential for thefirm to understand the labor regulations, work force, employmentcosts, and the performance of the existing force for each nation.Canada has a higher employment rate and GDP per capita than Mexico,which shows that it performs relatively higher than Mexico. In thisregards, the higher GDP favors Canada as the location of the newfacility. A firm should determine the level of productivity andperformance in the country it wishes to open a new facility as thiswill help it determine whether the facility will be profitable. Reitz(2013) suggests that Canada has an available skilled labor force,which means that the presence of a skilled labor force indicates thatthe organization may choose Canada as the new location for thefacility. The higher employment rate of Canada (72.6%) compared tothat of Mexico (60.9%) means that Canada has managed to utilize itslabor force better than Mexico. This shows that Canada’s laborforce has a higher experience in work related aspects than Mexicothus, it is ideal for the new facility.
On the otherhand, a higher labor force and lower labor wages favor Mexico as thedestined new location. Data from the Organization for EconomicCo-operation and Development (2015) shows that Mexico has a laborforce of 51,787,000 while Canada has a labor force of 19,038,000,which means that Mexico has a high labor force. Vogl (2014) contendsthat the high labor force in Mexico has ensured that globalmanufacturing companies set production facilities in Mexico. The samedata shows that the US has a labor force of 155,389,000 thus, Mexicocompares relatively well with the US when it comes to the laborforce. This means that the organization will profit from a large poolof labor if it decides to set the new facility in Mexico.Furthermore, Mexico (US$14,867) has a lower average wage compared toCanada (US$47,843). The lower average wage means that theorganization will cut labor costs and perhaps utilize the saved moneyin enhancing working conditions. Labor costs contribute greatly to afirm’s total costs therefore, it is always prudent for anorganization to set its production facilities in areas with low wagerates and extensive labor force to realize higher profits. The firm’snew facility should be located in a country where profits,productivity, and performance will be realized. Although Canadaboasts of a skilled work force with enhanced performance andproductivity, the firm will benefit from a low wage bill and anextensive pool of labor if it decides to open the new facility inMexico. In this regards, the management should extensively assess thelabor-related factors in both countries to determine the most suitednation for setting the facility. Furthermore, the administrationshould deliberate on skills, costs, and productivity greatly as theseaspects will determine its profitability and growth.
Organization for Economic Co-operation and Development. (2015).Canada – OECD data. Retrieved August 20, 2016, fromhttps://data.oecd.org/canada.htm
Organization for Economic Co-operation and Development. (2015).Mexico – OECD data. Retrieved August 20, 2016, fromhttps://data.oecd.org/mexico.htm
Reitz, J. G. (2013). Closing the gaps between skilled immigration andCanadian labor markets: Emerging policy issues and priorities.In Wanted and Welcome? (pp. 147-163). Springer NewYork.
Vogl, T. S. (2014). Height, skills, and labor market outcomes inMexico. Journal of Development Economics, 107,84-96.