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Assess the likely impact on Ebac Ltd of choosing the UK as a production location. - Edexcel - A-Level Business - Question 2 - 2018 - Paper 1
Question 2
Assess the likely impact on Ebac Ltd of choosing the UK as a production location.
Worked Solution & Example Answer:Assess the likely impact on Ebac Ltd of choosing the UK as a production location. - Edexcel - A-Level Business - Question 2 - 2018 - Paper 1
Step 1
Reasons for UK as a production location
Answer
Ebac Ltd, a manufacturer of water coolers and dehumidifiers, employs over 200 staff in the UK. Choosing the UK as a production site allows Ebac to export to nearby continental European markets. Although manufacturing costs in the UK are relatively high compared to countries like China, Ebac's strategic location can offer easier access to EU markets, particularly with evidence suggesting that UK manufacturing costs are not considerably higher than other European countries like Italy and Germany. Additionally, Ebac's labour costs in the North East of England are lower than the national average, providing potential savings while maintaining a skilled workforce that understands customer needs.
Step 2
Counterbalance factors
Answer
However, the UK does have some of the highest production costs among the top exporting countries. Competitors such as Haier and Whirlpool, who operate in lower-cost regions, can produce similar goods at a much cheaper rate. This could pressure Ebac to lower prices, reducing profit margins. Furthermore, uncertainties around trade relationships with the EU could impact Ebac's costs and ability to compete, as tariffs and regulations may apply to UK exports.
Step 3
Potential judgement
Answer
Ebac has a strong local community orientation and is committed to investing in local skills through its foundation. Transitioning production abroad could undermine these community ties. Additionally, Ebac’s product range typically requires specialized knowledge, which is more readily available in its existing UK workforce, suggesting that keeping manufacturing in the UK could maintain product quality and customer loyalty. Overall, while there are challenges, the decision to remain in the UK can leverage local workforce strengths and community engagement.