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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 has several reasons for choosing the UK as its production location. Firstly, the company employs over 200 staff in its UK manufacturing center, ensuring that local labor costs are manageable—particularly in the North East, where labor costs are lower than the national average. Additionally, the UK serves as a gateway to continental Europe, allowing Ebac to export its products without additional tariffs, benefiting from the European Single Market. Recent evidence suggests that although manufacturing costs in the UK can be higher than other European countries, they are not as high as in nations like Italy or France. Ebac's expansion strategy involves introducing new products in the UK market, which emphasizes the importance of understanding customer needs and adapting to market demands.
Step 2
Counterarguments against UK as a production location
Answer
Despite these benefits, there are significant challenges to consider. The UK has some of the highest production costs compared to other exporting nations. Ebac's competitors, such as Whirlpool, which operate in lower-cost regions, can produce similar products more affordably. Uncertainties regarding future trading relationships with the EU can lead to potential tariffs and disruptions in production. This instability may make investing in the UK less attractive, particularly for mass-market products which could be manufactured in lower-cost locations such as China or Indonesia.
Step 3
Potential judgment on Ebac's decision
Answer
Ebac Ltd demonstrates a commitment to its local community through the Ebac Ltd Foundation. This strong connection is vital for brand loyalty but may limit the company's flexibility to reduce production costs by relocating. The skilled labor available in North East England can enhance the quality of specialized products like water coolers. However, it might be more beneficial to shift production of lower-end items to regions where labor and production costs are significantly lower, thereby ensuring Ebac remains competitive in diverse product markets.