18 Marks)

International relocation has suggested the proposal of moving premises overseas. Andrew suggests that moving all production overseas would help achieve the company’s objectives of improving efficiency of factories and returning the business to profitability

Many would suggest that Andrews proposal to move all production to overseas would be a good move. Andrew was appointed to improve profitability and efficiency as it is currently lower than competitors. In order to become more efficient Andrew had to find a method to increase production. Moving to a larger factory in China would allow Burkinshaw plc to produce 4 million more units. It also lowers unit costs from 100 in the UK factory to only 60 in China. Introducing new technology instead of making handmade products would result in Burkinshaw being able to produce more. Due to economies to this would result in the lowering of unit costs. As a result the business may become more profitable.
Originally making an operating profit of -50 million, in 2010 profit is predicted to significantly increase to 175 million following the move. Therefore this suggests Andrew would achieve his objectives so the move would be a success.

Although the potential move has upset the UK unions it could be argued that the new technology is a necessary compromise in order to cut costs and increase profitability. The handmade products were suffering from falling sales compared to competitors and were said to have an ‘old fashioned’ image. Their competitors were also producing the products cheaper. Therefore moving to a more technological based production in China allowed costs to be cut significantly. The machinery decreased unit costs significantly and the workers in China only required half the amount of pay per hour as the workers in the UK factory. This meant the product would be produced cheaper, solving the original problem

Although the move has upset the unions Andrew did consult them first before making his decision. He offered them extensive training plus a pay rise. He also offered reasonable redundancy terms. Andrew even kept the business headquarters in the UK so despite what others were saying he was supporting the UK workforce.
However many would highlight the fact that Andrew let down his original loyal workforce. Many had worked for Burkinshaw for years and had unique skills. Introducing new technology and abandoning these workers with these unique skills could lead to a rise in defective products from 5.0% in the UK to 7.5% in the new factory in China. This is potentially problematic as Burkinshaw has a reputation for producing high quality products. Andrew ignored the fact that the unions were unhappy with the move. Furthermore he also ignored local MP’s and would not even compromise. By cutting jobs he attracted bad media attention as Burkinshaw was a major employer in that area. However stats suggest that in the long term EU sales will not be effected and actually could continue to rise following the move

In conclusion it could be argued that during Andrew would be ignoring his workforce and treating them unfairly by moving all production to China. However I do believe that the introduction of technology and the move to china will have significant benefits to the business. The company was falling behind its competitors who were producing cheaper products. Therefore Andrew needed to find the necessary methods to cut unit costs. Introducing new technology would increase efficiency and moving to China would mean cheaper labour. All of these would lead to Andrews original objectives of increasing profitability. As Andrew has the potential to achieve the objectives the move should take place. However I believe Andrew should of left negotiations with unions to a HR specialist as Andrew comes from a marketing background so lacks the correct skills to deal with unions.