Essay Mid Term Case

1400 Words Apr 21st, 2014 6 Pages
Eastern Waves Inc. Case

OM 527

Edward Elric

Background
Eastern Waves Inc. is a steel manufacturing company located in Kuantan, Malaysia. In 2009, Eastern Waves’ cash on hand was 188 ringgits (RM). In the previous year, they had an even lower cash balance of RM188. Without cash, Eastern Waves are unable to purchase raw materials from local raw material suppliers. Eastern currently has a joint venture relationship with Jinan & Iron Steel Corp., which enables Eastern to buy scrap steel on credit from the Jinan plate mill operation. This scrap steel is crucial to Eastern’s success given the market price of the purchased raw steel billets. However, the scrap steel is of a lower grade than the standard raw steel billet.
The new
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The protection of Malaysian upstream steel industry was affecting local downstream steel millers as they were forced to buy from the more expensive domestic suppliers. The government are attempting to promote cordial relationships between employers and employees and industrial harmony based on social justice and equity. The minimum wage for an employee is RM1500 per month. The labor regulations attempt to protect the domestic workers. As a result, the Malaysian industries still rely heavily on cheap foreign workers. In order to reverse the dependency on foreign workers and promote domestic workers, the government has recently imposed an annual level of RM125-1500 on each foreign worker and limited their work stay to only two years per permit. Eastern Wave is a small steel manufacturing company in Malaysia. It has several plants in Malaysia and China and produce various downstream steel products such as angle steel, I-beam, and round bar. The key material to angle steel production is billets. When operating at full efficiency, the annual capacity of the angle steel production is 10,000MT.

Current Issues
The Malaysian government’s trade barrier on billets in order to protect the domestic billet producers has greatly affected the bottom lines of the downstream steel manufacturing companies. The domestic billet price is 15-25% higher than the international billet price. On the other hand, the government

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