International Marketing Incident C: Japanese Tsunami On March 11, 2011, Japan was hit by a 9.0 magnitude earthquake, which subsequently produced a devastating tsunami. The effects of these events were numerous, including entire towns being washed away, nearly 500,000 people displaced, a nuclear power plant left in critical condition, and thousands of lives tragically lost. The earthquake was one of the largest in modern history, and though hard to estimate, could cost nearly $300 billion to clean up. Your group currently has a plant in Japan. While the AllStar plant is not located in an area hardest hit by this disaster, imagine the destruction to the infrastructure alone. Roads, trains, airports, electrical grids, buildings, all of these things are left in need of serious repair, affecting companies supply chains. In addition, there are major concerns about water safety due to a possible nuclear reactor meltdown that could leak into groundwater sources. Your Japanese plant serves the Japan and Korean markets. Currently production at your Japan plant is 200 million units per year. Demand for next year will be 100 million units in Japan, and 100 million units in Korea. Manufacturing costs in Japan will increase 10% due to damaged infrastructure. Production is expected to decrease 25% in the next year due to this disaster (that is, your capacity next year will drop 25%). As a result, you will still be able to meet all of the Japan demand from the local plant. Korea, however, will have to source products from both the Japan and home plants. How will this scenario affect your total landed cost (cost + freight + tariff in USD) for next year? Plant Location Home Average Unit COGS ($) 0.53 To: S. Korea Shipping COGS+Shipping Tariff % Tariff $ Total Unit Landed Cost (COGS + Shipping + Tariff) To: Japan Japan 0.46 0.06 0.02 0.59 0.48 0.08 0.08 0.0472 0.0384 0.6372 0.5184 Shipping 0.060 0.01 COGS +Shipping Tariff % Tariff $ 0.590 0.47 0.00% 0.000 0 Total Unit Landed Cost (COGS + Shipping + Tariff) 0.590 0.47