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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
To finance the factory expansion, Emu Uniform Manufacturers should consider using internal sources of finance, such as retained earnings, which allows the business to avoid incurring debt and interest expenses. This method is advantageous as it provides the necessary funds without affecting cash flow. Alternatively, they could explore options like bank loans or government grants specifically aimed at supporting local manufacturers. A bank loan could provide the $5 million required but would add interest, while grants could reduce the total financial burden.
Step 2
discuss outsourcing overseas compared with the factory expansion
Answer
Outsourcing overseas can lower production costs significantly due to cheaper labor and materials. It allows Emu to scale quickly and meet larger order demands without the long lead times associated with expanding their existing factory. However, this might lead to quality control issues and longer shipping times that could affect customer satisfaction. Conversely, expanding the factory ensures jobs are retained locally and aligns with their brand's commitment to high-quality products. This approach may take longer and require a larger upfront investment, but it allows for better control of production processes and quality.
Step 3
explain the global factors that need to be considered if they decide to use outsourcing as an expansion strategy
Answer
When considering outsourcing, Emu must evaluate several global factors, including:
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Global Competition: They should assess whether competitors are also outsourcing and how this affects pricing and market position.
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Economic Conditions: Fluctuations in foreign economies may impact costs and supply chain stability.
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Legal Regulations: Understanding labor laws, tariffs, and trade agreements in the countries of outsourcing is essential to avoid legal complications.
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Cultural Differences: Effective communication and management styles can vary significantly across cultures, impacting productivity and collaboration.
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Supply Chain Logistics: The efficiency of logistics, including shipping times and costs, must be analyzed to ensure timely delivery to customers.