Calculator Allowed: Yes
Transcription of this question: 5.FrioAire Appliances (FA)FrioAire Appliances (FA) manufactures medium-priced and medium-quality refrigerators. It isa multinational public limited company. Its factory is located in a less economically developedcountry that has high unemployment, a tradition of autocratic leadership and labour costslower than FA’s home country. The factory is profitable, and FA pays consistently gooddividends. Market growth for medium-priced and medium-quality refrigerators is limited.As part of a strategic objective to increase productivity and to enter a fast-growing marketfor high-priced and high-quality refrigerators, FA is considering building a new factory inand relocating production to Germany. This would require closing the factory in the lesseconomically developed country. The new factory will:• use innovative technologies, including advanced robotics and 3D processesrequire fewer employees, but those it does require will need to have better skills andqualifications.Germany has a highly skilled, qualified and productive workforce. The new factory wouldallow FA to reposition its products. However, FA would need to raise significant finance tobuild and equip the new factory.FA’s leadership style at the factory in the less economically developed country is autocratic.Members of FA’s board wonder whether this style would be suitable for the new factory inGermany, where workers have more bargaining power because of their high skill level andthe labour-friendly cultural traditions. In Germany, FA would have to follow more regulationsregarding the environment, health and safety, and employee rights.FA workers in the less economically developed country are very loyal to FA, which hascontinued operation through a civil war at significant cost to itself (for security). If FA were toclose in the less economically developed country, the workers would not find such good jobs.(a)(b)(c)(d)Describe one disadvantage of operating as a public limited company.Explain one benefit and one cost to FA of using an autocratic leadership style.Explain one positive and one negative impact of FA on the developing country.Evaluate the option of building a factory in, and relocating to, Germany.