Scenario Based Question – Application 5
Mary runs a small company which specializes in designing, manufacturing and delivering custom cutting tools to the mining industry. Most of her business is
involed in fusing industrial diamonds to high-speed drill bits for use in creating blast shafts for the extraction of iron ore, and other minerals. Her techniques for fusing the diamonds results in a process that cannot bematched by competitors. Her products provide cutting surfaces that last up to three times longer than her nearest competitor, and while her equipment costs twice as much, her clients are willing to pay the price because of the costs they face when changing over drill bits, and the down time that it involves.
Mary’s company is based in Adelaide as she sees this as a good midway location between her two large mining regions: coal mining on the east coast and iron ore on the west coast. However, the recent boom has meant that work on the west coast is now contributing more than 80% to her total revenue.
Recently, she has been approached by the West Pilbara Mining Consortium (WPMC) to form a joint venture (JV). If she goes ahead with the JV she will personally receive $1.5 million from the deal, but she will have to take a lower position in the new company moving from Managing Director to Production Manager. She will also have to move the company to Karratha (WA). As a result of her wealth of related experience, her industrial knowledge, and her HR and organisational skills, she will retain her annual salary of $185,000 (including benefits). However, living and working in Karratha with average temperatures often exceeding 40oC will be a huge personal cost and inconvenience. Also, she is very close to her staff, which she considers as part of her extended family, and she knows that if she pushes them to move to Karratha only about 10% will stay with her. As a result she will lose them, their expertise, and their friendship. This would have an impact on her operations which rely on cross functional teams which work to enhance quality and innovation. Plus, she feels that building relationships with her new staff and work mates will require a big investment of time, which could be better spent elsewhere.
If she decides not to take the deal she will keep her staff and her office in Adelaide, but she may lose the business she was getting from all of the WPMC businesses. This could mean a loss of 40% of her current business. Mary is also considering offering incentives to her staff. She feels 60% certain that a majority of her staff will move for the right money. She heard of a similar situation with CROC Ltd – a company which was involved in the maintenance of logging and timber‐milling equipment. They offered their staff incentives such as free housing and 50% salary loadings, and this company, she heard, was able to take almost half of the staff with them.
Above all things, Mary feels responsible for the well‐being of her staff. As a result of this her staff hold a strong affinity for her, and a reciprocal desire to not to let her down.
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