Describe the complexity of running a company under uncertain political circumstances. (Comprehension)
Build a complicated strategy for the future of a complex enterprise that depends on numerous variables (Tax incentives, Water shortage, substitution of workforce, a successful CSR program that would be abandoned, and other issues). (Application)
Discuss the influence of government strategies, mainly tax incentives, to encourage the development of specific geographic areas. (Comprehension)
Investigate whether temporary incentives are adequate to develop an area that has strong permanent disadvantages, and the dangers of the government not fulfilling its promises. (Analysis)
To appraise a plan the relocation of a major production facility considering the different effects on stakeholders, mainly the social effects of exiting a major employer in town. (Evaluation)
Industrias San Miguel (ISM) was established in Perú in 1988. In 2005, it expanded internationally, building a modern bottling plant in the Dominican Republic, attracted by a law that encouraged investments in the poorer provinces of the country. In 2012, it set up a plant in Brazil. By 2020, ISM had four plants and produced 700 million liters of beverages per year. The plant in the Dominican Republic was built in the province Santiago Rodríguez, which is close to the Haitian border, exploiting the tax advantages offered by law 28–01 for a period of 20 years. The law encouraged the establishment of industries in the provinces closest to the Haitian border which are among the poorest in the country at the time. The plant employed, at the time of the case, 1,600 people directly and another 12,000 indirectly in the Dominican Republic, of which 500 direct jobs and 800 indirect ones were in Santiago Rodríguez. As it was envisaged that the financial incentives given by the law would lapse in two years’ time, Arturo Marroquín, the general manager, called a management meeting to consider the different alternatives regarding the future of the company. The company lawyer indicated that there was a remote chance that the incentives provided by the law could be extended for some time, but that the discontented bottlers located in Santo Domingo have lobbied for their termination as they considered the incentives equaled to unfair competition supported by the government. Arturo Marroquín closed the meeting and decided to work on a proposal to the board of directors about the future of the company. The dilemmatic nature of the case invites participants to consider socio-geographical, tax, incentives, key regulatory issues marketing consequences, reputation and CSR repercussions to make managerial decisions, all of which may have dramatic impacts on the firm. The decision to move the plant or not must rest on all variables, regardless of whether they are quantifiable or not.
MBA, executive and postgraduate.
Teaching notes are available for educators only.
CSS 11: Strategy.
