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Sandora Company Case Study
For use by University of Phoenix only. Copyright 2021 © John Wiley & Sons, Inc.
Sandora Company
Sandora Company, a US-based firm, was struggling to remain profitable. Attempts were made to
downsize and cut costs, especially in manufacturing. Unfortunately, they were limited to cost reduction
attempts because of required compliance to United States laws related to health, safety, and the
environment.
Sandora designed and manufactured the components that went into their products. They were almost
100% vertically integrated. Management believed that they could increase profitability as other companies
have done by outsourcing some of the manufacturing work to companies in emerging-market countries
with highly qualified lower-salaried human capital that could do the job and Sandora would then focus
internally on assembly efforts rather than on manufacturing and assembly.
The company decided which of the components in their products they were willing to outsource and
looked for suppliers through worldwide competitive bidding efforts. Several companies in low-income
emerging market countries submitted bids. The low-income countries appeared to have less stringent
laws related to health, safety, and the environment. This is what Sandora had hoped for to lower
manufacturing costs and increase potential profitability.
The criteria that Sandora used for contractor proposal evaluation and acceptance was based heavily
upon cost, quality, and schedule. Several companies met Sandora’s evaluation criteria. But Sandora
knew that there could still exist enterprise environmental factors unique to certain countries that could
have a serious impact after contract award. A multinational consulting company was hired to evaluate the
enterprise environmental factors of government impact and influence, political climate, and industry
standards in the countries that Sandora might award a contract.
The consulting company identified the following issues with enterprise environmental factors that could
impact the ability of the suppliers to perform as Sandora expected:
• Host governments may have the final word in who local companies can select as
subcontractors. Contractors hired by Sandora may be forced to hire only subcontractors from
within their country. To make matters worse, the contractor chosen may be required to select
subcontractors in the cities with the greatest unemployment, regardless of the qualifications
of the subcontractors and even if more qualified subcontractors are available elsewhere in
the country.
• Local government agencies may act as silent stakeholders but have the final say as to
whether any overtime will be allowed. The government may not want overtime to be allowed
if it might create a new class of citizens.
• Sandora may have no say in the way that the contractor assigns resources. Also, workers
may have the right to “own” a job once hired into a company. Sandora may not be able to get
incompetent people removed from working on the contract once they are assigned to their
project.
• If the workers believe that they may be laid off once the contract is completed, they may slow
the work down significantly to elongate their employment. Sandora may have no input in
accelerating the contractor’s schedule.
• In companies in the United States, project problems and issues are most frequently resolved
with meetings between the team members and the project sponsor or governance committee.
But in other countries, the problems and issues may be elevated to high-ranking government
officials who instantaneously become active stakeholders to make sure that the problems and
issues are resolved in favor of the host country. When host countries are awarded contracts,
the government within the host country sees this as a source of national revenue entering the
country and a means of keeping people employed. As such, the government may closely
monitor many of these contracts without the company, in this case Sandora, recognizing that
this surveillance is taking place.
Sandora Company Case Study
Page 2 of 3
For use by University of Phoenix only. Copyright 2021 © John Wiley & Sons, Inc.
• The maturity level of project management in the contractor’s company may be less than
Sandora expects. The contractor may not possess the tools and software needed to report
progress as needed by Sandora.
• Senior managers in the host countries may be fearful of project decisions being made
between Sandora and the contractor’s project team, and mandate that all customer-
contractor communications go through senior management.
Senior management at Sandora now had a critical decision to make regarding the outsourcing of some of
their components.
Questions
1. Should the impact of enterprise environmental factors be treated as criteria for contract award?
2. Can Sandora control the enterprise environmental factors after the contract is awarded?
3. Could Sandora require in the contractual statement of work that changes must take place in the
enterprise environmental factors?
4. What should Sandora do now?
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