Maruti to set up 2nd plant in Gujarat, acquires 600 acres

1. Tata NanoSingur Controversy refers to the controversy generated by land acquisition of the Nano factory of Tata Motors at Singur in Hooghly district, West Bengal, India. • Singur gained international media attention since Tata Motors started constructing a factory to manufacture their $2,500 car, the Tata Nano at Singur. The small car was scheduled to roll out of the factory by 2008.[1] • The state government of West Bengal facilitated the controversy by using 1894 land acquisition act rule to conduct  takeover of 997 acres (4.03 km2) of farmland to have Tata build its factory.[2] • The rule is meant for public improvement projects, and the West Bengal government wanted Tata to build in its state. The project was opposed by activists and opposition parties in Bengal. • The choice of Singur was made by the company among six sites offered by the state government. The project faced massive opposition from displaced farmers. The unwilling farmers were given political support by West Bengal's opposition leader MamataBanerjee. Banerjee's "Save Farmland" movement was supported by environmental activists like MedhaPatkar, AnuradhaTalwarandArundhati Roy. Banerjee's movement against displacement of farmers was also supported by several Kolkata based intellectuals Leftist activists also shared the platform with Banerjee'sTrinamool Party. • The Tatas finally decided to move out of Singur on 3 October 2008. Ratan Tata blamed agitation by Banerjee and her supporters for the pullout decision. On 7 October 2008, the Tatas announced that they would be setting up the Tata Nano plant in Sanand, Gujarat.

2. Maruti to set up 2nd plant in Gujarat, acquires 600 acres • PTI | Dec 23, 2012, 07.34AM ISTNEW DELHI: Maruti Suzuki India on Saturday said it has started spadework to set up its second facility in Gujarat with acquisition of another 600 acres, in addition to its existing plan to invest Rs 4,000 crore for setting up a plant in the state. The company also said it expects about 6-7% sales growth in 2013-14 after closing the current fiscal with about 6% rise in vehicle sales. The country's largest carmaker also said it will not enter the premium segment of passenger cars in India and will "protect" its image of a small car manufacturer. "We have land at two locations in Gujarat. The first one is offered by the government and the second one is a private land that is directly acquired by us with some negotiations by the government," Maruti Suzuki India (MSI) Chairman R C Bhargava told reporters here. The company has acquired about 600 acres, located about 40 km from the first site near Mehsana, he added. "The second location is for our future expansion. Once we exhaust the capacity at the first site, we will move to the second one," Bhargava said.  • When asked if MSI is shifting its focus from Haryana, Bhargava said: "We are not moving away from Haryana. We have two plants in the state and going to Gujarat after utilising the capacity at Gurgaon and Manesar. We will do the same once we exhaust the capacity in Gujarat also." He said the company will do the groundbreaking ceremony for the Gujarat facility early next year. MSI had this year announced to invest Rs 4,000 crore, its biggest-ever outside Haryana, to set up a 700-acre new production facility in Gujarat by 2015-16.

3. Location issues have become more prominent in recent years on account of GLOBALISATIONof markets • Multi-national Corporations have more opportunities to identify candidate locations for their manufacturing facilities. • ABB decided to locate its factories that could produce world class products at competitive prices . Moreover factories needed to have high level of technical and domain expertise. • Resulted in factory for circuit breakers at Baroda • Variable drive motors at Faridabad • Factor cost advantages and expanding market in developing countries have made these nations attractive for locating new facilities. • Regulatory Issues removal of cap on FDI, simplifying tax structure to have VAT , reduction of customs and excise tariffs Expanding markets in developing countries such as india china

4. Factors that drive globalisationThree tier model Country Competitiveness Govt. budget & regulation Quality of judicial & political institutions Openness to Intl. trade & finance Development of financial Mkt. Extent to which a national environment is Conducive or detrimental to business LabourSector Competitiveness Qlty of Mkt. Flexibility Infrastructure Quality of Tech. Extent to which a business sector offers potential for growth and attractive return on investment Company Competitiveness Ability to design, produce, & mkt products superior to competitors, Qlty. of business mgmt.

5. Case- Li and Fung • Li Fung is a Hong Kong based trading firm in the textile sector • Initial concept is made in HK • Cotton yarn is bought from Korea • Dyed and woven in Taiwan • Zippers are sourced from a factory in china • Components are shipped to Thailand • Packing and inspection in HK Q) What are the factors affecting the global supply chain operations ? • Volume of orders • Change in demand pattern, example winter garments, summer collection etc • Technical capabilities • Infrastructure • Coordination

6. Case- Li and Fung Q) What are the barriers in achieving the service-cost-time equilibrium in the above case. • Foreign exchange rates • Geo political issues, EXIM policies • Cultural, language • Increase/decrease in taxes • Break in the value link due to competition forces • Transportation delays (during peak season) , damages during transportation • Coordination Q) How is Value created--> Scope- expertise in garment manufacture , Time , Cost , Quality, Service adv/customer support

7. Methods of Evaluation Location rating • Identify Selection Criteria and list down all the relevant factors for the location decision • Develop weightage scale- Establish the relative importance of each factor in the final decision • Assign rating to each factor for each location-Rate the performance of each candidate location • Compute a total score for each location based on its performance against each factor and rank them in the decreasing order of the score

8. Location DecisionRelevant Factors

9. Location Planning Methods • Location factor rating • Centre of Gravity Method

10. Example 7.1 • A manufacturer of garments is actively considering five alternative locations for setting up its factory. The locations vary in terms of the advantages that it provides to the firm. Hence the firm requires a method of identifying the most appropriate location. Based on a survey of its senior executives the firm has arrived at six factors to be considered for final site selection. The ratings of each factor on a scale of 1 to 100 provide this information. Further, based some detailed analysis of both the qualitative and quantitative data available for each of the location, the rating for the locations against each factor has also been arrived at (on a scale of 0 to 100). Using this information obtain a ranking of the alternative locations. Rating of each locations against the factors Factor Ratings

11. Solution to Example 7.1. Overall rating for location 3 = 60*0.28 + 40*0.18 + 50*0.15 + 10*0.09 + 45*0.09 + 90*0.20 = 54.77

12. Centre of Gravity Method • All the demand points (or the supply points, if raw material is supplied from several locations) are represented in a Cartesian coordinate system • Each demand (or the supply point) will also have weight indicating the quantum of shipment • Therefore it is possible to identify the centre of gravity of the various demand (or supply) points • Notations: • The number of demand (or supply) points in the grip map: n • Co-ordinates of location i in the grid map: (xi,yi) • Quantum of shipment between existing demand (or supply) point i and proposed facility: Wi • Co-ordinates of the center of gravity in the grip map: (XC,YC)

13. Example 7.2. • A manufacturer of certain industrial component is interested in locating a new facility in a target market and would like to know the most appropriate place in the target market to locate the proposed facility. The manufacturer feels that there are no location constraints in the target market (i.e. any point in the target market is good enough). • There are four supply points A, B, C and D in the locality that will provide key inputs to the new facility. A two-dimensional grid map of the target market in which we would like to locate a new facility with distance coordinates of the four supply points is available. • The annual supply from these four points to the proposed facility is 200, 450, 175 and 150 tonnes respectively. • The situation is graphically shown in the two-dimensional plot in the figure. While the coordinates in the parentheses show the distance from the origin of the target map of each of the supply point, the number that follows is the annual shipment (in tonnes) from these points to the proposed facility. • Identify the most appropriate point in the grid map to locate the new facility.

14. Solution to Example 7.2. Grid Map 600 A (125,550), 200 500 B (350,400), 450 400 Distance in Kilometres 300 D (700,300), 150 Centre of Gravity (366,376) 200 C (450,125), 175 100 300 400 500 600 700 100 200 Distance in Kilometres

15. Summary Finance management and Location • Cost of land • Taxes • Operating costs rent, insurance etc