CASE THE OFFICE EQUIPMENT COMPANY
CASE THE OFFICE EQUIPMENT COMPANY
In 1992 the Office Equipment Company (OEC) had to replace its manager in San Salvador, El Salvador, because the present managing director (a U.S. national) announced suddenly that he would leave within one month. OEC manufactured a wide variety of small office equipment (such as copying machines, recording machines, mail scales, paper shredders) in eight different countries that was distributed and sold worldwide.
OEC had no manufacturing facilities in El Salvador (see Map 21.1) but had been selling and servicing there since the early 1970s. OEC had first tried selling in El Salvador through independent importers but quickly became convinced that it needed to have its own staff there to make sufficient sales. Despite political turmoil, which over the last few years had bordered on being a full-scale civil war, OEC's operation in El Salvador (with about 100 employees) had enjoyed good and improving sales and profitability.
OEC was in the process of constructing a factory in El Salvador that would begin operations in early 1993. This factory would import components for personal computer printers and assemsold for the Mexican market. He was a Mexican citizen who had worked for OEC in Mexico for all his twelve years with the company. He held an MBA from a Mexican university and was considered to be one of the likely candidates to head the Mexican operation when the present managing director retired in seven years. He was 35, married with four children (ages two to seven). He spoke English adequately; his wife did not work outside the home and spoke no English.
Juan Moreno At age 27 he was assistant to the present managing director in El Salvador, a position he had assumed when he joined OEC after completion of his undergraduate degree in the United States four years before. He was considered competent, especially in employee relations, but lacking in experience. He had been successful in increasing OEC's sales, an advantage being that he was well connected with the local families who could afford to buy new office equipment for their businesses. He was not married.
Questions
1. Whom should the committee choose for the assignment and why?
2. What problems might each individual encounter in the position?
3. How might OEC go about minimizing the problems that the chosen person would have in managing the El Salvador operations?
4. Calculate an estimated compensation package for each of the five candidates based on the following additional assumed information:
a) Present annual salaries: Zimmerman, US$70,000; Harrison, US$75,000; Moyer, US$65,000; Cabrera,
M$ 120,000,000; Moreno, CI50,000.
b) Exchange rates: $1 = M$3,000 (Mexican peso); $1 = C5 (El Salvador colon).
c) U.S. Department of State cost-of-living index: Washington, D.C. = 100; San Salvador = 93; Mexico City = 76, based on items covering 35% of income for a family of one, 40% for a family of two, 45% for a family of four, and 50% for a family of five or more.
d) U.S. Department of State foreign-service premiums for El Salvador: hardship = 15%; danger = 20%.
e) Housing allowance (nontaxable) single = US $11,300; family = US $12,400.
f) Schooling allowance: age 6-12 = US $5000; age 13-18 = US $9000.
g) Average tax rates: Mexico = 20%; U.S. = 25%; El Salvador = $30%.
In 1992 the Office Equipment Company (OEC) had to replace its manager in San Salvador, El Salvador, because the present managing director (a U.S. national) announced suddenly that he would leave within one month. OEC manufactured a wide variety of small office equipment (such as copying machines, recording machines, mail scales, paper shredders) in eight different countries that was distributed and sold worldwide.
OEC had no manufacturing facilities in El Salvador (see Map 21.1) but had been selling and servicing there since the early 1970s. OEC had first tried selling in El Salvador through independent importers but quickly became convinced that it needed to have its own staff there to make sufficient sales. Despite political turmoil, which over the last few years had bordered on being a full-scale civil war, OEC's operation in El Salvador (with about 100 employees) had enjoyed good and improving sales and profitability.
OEC was in the process of constructing a factory in El Salvador that would begin operations in early 1993. This factory would import components for personal computer printers and assemsold for the Mexican market. He was a Mexican citizen who had worked for OEC in Mexico for all his twelve years with the company. He held an MBA from a Mexican university and was considered to be one of the likely candidates to head the Mexican operation when the present managing director retired in seven years. He was 35, married with four children (ages two to seven). He spoke English adequately; his wife did not work outside the home and spoke no English.
Juan Moreno At age 27 he was assistant to the present managing director in El Salvador, a position he had assumed when he joined OEC after completion of his undergraduate degree in the United States four years before. He was considered competent, especially in employee relations, but lacking in experience. He had been successful in increasing OEC's sales, an advantage being that he was well connected with the local families who could afford to buy new office equipment for their businesses. He was not married.
Questions
1. Whom should the committee choose for the assignment and why?
2. What problems might each individual encounter in the position?
3. How might OEC go about minimizing the problems that the chosen person would have in managing the El Salvador operations?
4. Calculate an estimated compensation package for each of the five candidates based on the following additional assumed information:
a) Present annual salaries: Zimmerman, US$70,000; Harrison, US$75,000; Moyer, US$65,000; Cabrera,
M$ 120,000,000; Moreno, CI50,000.
b) Exchange rates: $1 = M$3,000 (Mexican peso); $1 = C5 (El Salvador colon).
c) U.S. Department of State cost-of-living index: Washington, D.C. = 100; San Salvador = 93; Mexico City = 76, based on items covering 35% of income for a family of one, 40% for a family of two, 45% for a family of four, and 50% for a family of five or more.
d) U.S. Department of State foreign-service premiums for El Salvador: hardship = 15%; danger = 20%.
e) Housing allowance (nontaxable) single = US $11,300; family = US $12,400.
f) Schooling allowance: age 6-12 = US $5000; age 13-18 = US $9000.
g) Average tax rates: Mexico = 20%; U.S. = 25%; El Salvador = $30%.
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