Military helicopters

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Possible answers

• Export restrictions (between US, UK and Canada):
  Are there are restrictions to export or import machines from/to the countries?
• Financial analysis of plant operation:
  (VC, FC) / Revenues / Profits
• Customers:
  Where?
• Suppliers:
  Spare parts / Raw materials
• Logistics:
  How to get the product to the customer?
• Labour:
  Availability of skilled labour

Information that can be shared if inquired by the interviewee:

• One of the plants in the US has space for an additional assembly line, for the costs of $500 m.
• The assembly line could produce up to 250 helicopters annually.
• The plants abroad can produce up to 350 helicopters per year.
• The helicopters are sold for $100 m a piece.
• If a new plant is built abroad, the local Departement of Defense (DoD) is willing to spend 50% of its annual budget on the helicopters.
• The UK and CA do NOT import from other countries
• If they are imported to the US they have to be certified for an additional cost of $10 m per helicopter.

Total costs for 5 years:

Costs are composed of:

• Initial setup costs
• Fixed costs
• Variable costs
• Certification costs for imports to US

Compared to the UK, in Canada costs are higher and revenues are lower. Consequently, the plant should either be situated in the US or UK.
To check the attractiveness of these two countries the profit for each has to be calculated.

Key Insights

Building the plant in the UK will give us profits that are $22.75 B higher than in the case of having it in the US.

Main conclusion

• Based on the financial outcome, the UK seems to be the more attractive location due to:
  • Profits over 5 years will be $22.75 B higher
  • Our client will not completely depend on a single customer
  • The plant in the UK would be fully utilized (350 of 350)
• There are other points that should be taken into consideration:
  • Potential of selling helicopters to other countries worldwide
  • Labour reaction in US plants if a new plant is built in the UK
  • Stability of political relations between US and UK

Possible answers:

• Labour protest due to the loss of jobs in the US.
• Governmental intervention in order to keep industry in the US (e.g. losing subsidies).
• Loss of customers in the US as a result of taste (want only American quality), etc.
• Loss of brand reputation (depending on the country moved to).