A293 Case Study

Section 1 and 2 - Introduction and Background to Holden PLC
1. Holden adds value to their products through manufacturing
  1. The value added is the difference between the selling price of its products and the cost of bought-in materials used to make them
  2. This is important to Holden PLC because of the competitive cushion market in which they trade
2. They choose to move production to China because of lower labour costs
  1. Harder to communicate because of the time difference between the HQ in Bowton and the factory in China
  2. Labour costs are beginning to rise due to inflation
3. Holden PLC in a Public Limited Company
4. They use batch production as a method of producing cushions
  1. They make one type of product, then they change to make another type
Section 3 - Production Costs at Holden PLC
1. The difference in different forms of 'Cost'
  1. Variable costs are costs that change in proportion to output
  2. Fixed costs are costs that are not affected by output quantity
  3. Average cost is the cost of producing one item. Average costs = fixed costs + variable costs / units produced
    1. Average costs of the Hip-Hop Beanbag is £15
  4. Total cost is the total cost of producing all output over a period of time
    1. The total cost of manufacturing the Hip-Hop Bean Bag was £1,200,000
2. The difference in different forms of 'Profit'
  1. Profit = Revenue - Costs
  2. Net profit = Total revenue - Total costs
  3. Gross profit = Total revenue - Sales cost
3. Break even output = 45,715 units
Section 4 - Possible location change for Holden PLC
1. Pros of relocation
  1. Fabric costs per cushion are lower in Bowton due to less wastage
  2. British workers are more productive and more accurate
  3. The costs of buying fabrics wouldn't be affected by the move
2. Cons of relocation
  1. Wages are lower in China
  2. They'll have to buy/rent a new factory
  3. They'll have to go through the recruitment process again
  4. The health and safety measures will be stricter because the UK is in the EU
Section 5 - Relocation issues for Holden PLC
1. Renting
  1. Monthly payments would have to be made to the landlord
  2. Higher maintenance costs and uniform business rates
  3. Currently vacant
2. Building
  1. Very expensive initially
  2. Cheaper long-term solution
  3. Can be adapted
Section 6 - Kapok fibres and Holden PLC
1. World price of latex has risen
2. Kapok fibres
  1. Sustainable and renewable
    1. Better reputation
  2. More expensive but may be better economically
  3. Tariffs may be added
Section 7 - Prospects for the town of Bowton
1. Bowton is going through a recession
  1. "Two concessive quarters of negative economic growth"
  2. Multiplier effect
    1. Business leaves
    2. Jobs lost
    3. Less disposable income
    4. Local businesses fail
    5. Jobs lost
  3. If Holden PLC came back to Bowton a positive multiplier effect would occur
2. Beginning to recover in more recent times
3. Government may give a grant to Holden PLC
Section 8 - Bromley Furnushings
1. Lower than normal sales
  1. Because of recession
  2. Increased competition
  3. Inaccurate cash flow forecast
2. Cash flow forecast
  2. Shows money in/out of the business

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A293 Case Study

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