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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 employs over 200 staff in its UK manufacturing centre, allowing for a stable workforce. Additionally, it exports to continental Europe, thus benefiting from proximity to key markets such as France and Italy. While UK manufacturing costs may be higher compared to some countries, evidence suggests these costs are not as high as other European nations like Germany or France. Furthermore, the labour costs in the North East are below the national average, aiding Ebac's production profitability. The company is also focusing on expanding its market share in the UK, which includes developing new products to cater to customer needs.
Step 2
Potential counterbalance
Answer
Despite the advantages, the UK faces some of the highest production costs among the top exporting countries. This could impact Ebac's competitiveness against manufacturers like Indesit and Whirlpool, who benefit from economies of scale. The uncertainty surrounding the UK’s future trading relationship with the EU also poses risks, which might deter investment and complicate export logistics.
Step 3
Potential judgement
Answer
Ebac has a strong foundation in North East England, showing deep ties with the community. The commitment to the Ebac Ltd Foundation indicates a long-term investment in the area. However, reliance on the local market may necessitate a reconsideration of manufacturing locations if costs remain high. Furthermore, despite being able to leverage skilled labour locally, mass-market products might be more cost-effective if produced in lower-cost regions such as China or Indonesia.