Andrew Mitchell believed that the best solution to resolving the dispute over the introduction of new technology was to close the UK factories and move production to a purpose-built factory in China. Do you agree with this view?

When Andrew was first appointed as the new Chief Executive his first decision was to somehow improve efficiency for the business. He decided to do this the best option would be to introduce new technology into the production process as even though it would cause job loses it would improve overall efficiency greatly by making processes be completed quicker. Burkinshaw needed to improve its efficiency as the productivity of the workforce was lower than that of competitors therefore competitors had an advantage, if competitors continued to have an advantage they would start taking Burkinshaw’s customers and Burkinshaw would lose its’ 3% market share. He held a meeting with the union to explain the reasons for the need to improve efficiency but they were not happy with the job losses that would come with it so held multiple one day strikes that disrupted the business greatly for multiple days and meant that efficiency dipped even further. Therefore Andrew decided to move all the production processes into purpose-built factories in China as these will help bring efficiency back up.
The UK unions were never going to be happy with Andrew’s choice of the new technology and many workers would continue striking, he had to somehow increase efficiency otherwise Burkinshaw would ‘fall’ to their competitors and if the unions and the workers would not get ‘onboard’ for that plan Andrew had to think of a new feasible one. As the new factories in China are purpose-built it means Burkinshaw does not have to spend as much on new technology or getting old(er) factories mended to meet their requirements. Also as all the technology would be pre-installed Andrew could hire enough workers, train them to work with the machines and efficiency would rise again as the number of product lines would increase from 50 to 130 allowing Burkinshaw to compete with its competitors for productivity and efficiency with total output increasing to 10 million units from 6 million units – competitive advantage over its’ UK competitors as they have half capacity of the new Chinese factories as they can make and therefore sell more faster then people shall come to Burkinshaw first. A benefit that closely links to this is the fact that moving the factories to China shall mean Burkinshaw’s costs are lower as labour costs in countries such as China are a lot lower and they can work their employees for longer periods as working laws are more flexible this means more is produced in one day than in UK factories. Having lowers costs means Burkinshaw can put more money back into the business to help further improve it and give it that advantage over its’ competitors and attracting more customers to them.
On the other hand, Andrew did not seem to recognise that Burkinshaw’s UK factories were a significant source of employment for the region which other than Burkinshaw has little employment opportunities. Therefore many people were made redundant and as many of the workers had worked for Burkinshaw for many years and therefore required a unique set of skills it’d be hard for them to get another job even if they could find one as it would be hard for them to adapt as their skills are unique and can’t be applied to many other places. Despite pressure from local MPs and unions, Andrew would not make any concessions. This therefore left the region, local MPs and unions with a negative bitter feeling(s) towards Burkinshaw they would then produce negative word of mouth which would spread very quickly. As more and more people heard of the bad word of mouth they may consider or move away from using Burkinshaw to one of their competitors as they treat their employees and local region better and fairly. This would mean that Burkinshaw would lose a lot of business and their market share would decrease from 3% whereas their competitors would gain more market share then take back customers from Burkinshaw meaning Burkinshaw’s business would start to go downhill and not make as much revenue.
Secondly, moving to China means that the time it takes to transport goods to the European retailers (their target market) increases from 10 days to 21 days which means if competitors can offer quicker delivery times to the retailers the retailers are likely to swap to competitors as they want the goods as quickly as possible as they need to compete with their retail competitors. This would mean yet again Burkinshaw would lose more customers and inflowing cash into the business. Transport costs would also increases as obviously China is a lot further away from Europe whereas the UK is actually within Europe. Having higher transport costs means Burkinshaw would either need to charge their buyers/retailers more or pay more for transport themselves. Buy charging retailers more they may get unhappy and then want to find a supplier that does not charge as much and by paying for the more expensive transport themselves means Burkinshaw have even higher costs which they do not want when having to spend a lot on the move already – cash flow problems may occur especially during the first few years as there will be large costs from the move.
Overall I believe the move could go ahead, as long as it was completed in the proper way and in the same sense the move wouldn’t have had to take place. The move is certain to bring large costs which means Burkinshaw would have to think of ways to try and bring in more revenue either by charging more for the products which comes at the risk of losing customers to competitors as they may charge less or by expanding their target market so more people buy the products. They are planning on spending 18% more of their market budget in China which means they’ll get a better understanding of the Chinese market and potentially get more Chinese customers which would not cost as much to sell to. Andrew should have also had more discussions with local MPs and unions before moving so not as many/bad feelings were created and less bad word of mouth created – they could have offered even better redundancy packages to help ‘soften the blow’.
If Burkinshaw were to stay I agree they would need to implement more technology into their processes otherwise competitors would get the advantage over them in productivity and efficiency and Burkinshaw would lose their 3% market share. But instead of not discussing with the unions properly and just sacking loads of employees they could inform them that if something did not change they would have to move to China this would influence the unions and make them more liable to change within the UK factories. Technology could be brought in and employees that were going to be fired could be hired into different sectors of the business possibly to help with the regions low employment rates but also to keep good word of mouth about the business. This would improve efficiency and mean Burkinshaw would not have to leave the UK.