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Emu Uniform Manufacturers Pty Ltd are a successful business based in NSW - HSC - SSCE Business Studies - Question 25 - 2014 - Paper 1
Question 25
Emu Uniform Manufacturers Pty Ltd are a successful business based in NSW. They currently supply a range of school, sport and work uniforms to a large number of custo... show full transcript
Worked Solution & Example Answer:Emu Uniform Manufacturers Pty Ltd are a successful business based in NSW - HSC - SSCE Business Studies - Question 25 - 2014 - Paper 1
Step 1
recommend a source of finance for the factory expansion
Answer
For financing the factory expansion, a suitable option is to consider internal sources of finance such as retained earnings. This method allows the company to utilize profits that have been reinvested into the business without incurring additional debt or interest expenses. Alternatively, external funding options like bank loans or venture capital can be explored. Bank loans provide a structured repayment plan, which can support cash flow management, while venture capital may offer more flexibility but usually requires giving up a stake in the company.
Step 2
discuss outsourcing overseas compared with the factory expansion
Answer
Outsourcing overseas can lead to cost reductions due to lower labor costs, but it may also come with challenges such as quality control and reliability of suppliers. Furthermore, the logistics involved can increase complexity and lead to longer lead times. In contrast, expanding the factory retains production control and maintains local jobs, which can enhance company reputation among customers. However, the $5 million investment might strain cash flow initially and could distract from the company's focus on customer service.
Step 3
explain the global factors that need to be considered if they decide to use outsourcing as an operations strategy
Answer
Several global factors must be considered when deciding to use outsourcing as an operations strategy. These include:
- Global Economic Conditions: Fluctuations in currency exchange rates can impact costs and profit margins.
- Quality Standards: Different countries have varying regulations and standards which may affect product quality.
- Supply Chain Risks: Natural disasters, political instability, or economic issues can disrupt supply chains.
- Cultural Differences: Understanding local workforce culture can help in managing relationships with international suppliers.
- Logistics and Transportation Costs: When outsourcing, the expenses and time associated with shipping goods internationally need to be factored into the budget.