Activity#1

Sparks and Cables is a company in the construction industry which manufactures

different tools and equipment’s which enables labor to do their job efficiently. It operates its
factory in the capital as well as four warehouses in different regions. The tools and equipment’s
that are being manufactured in the capital are distributed to the regional warehouses.
Sparks and Cables expand their production product and has designed a new
multifunctional cable cutter known as Eazicut. It helps electricians to install electrical
connections and complete the work in the half time as they done without this tool.

OPTION 1: -
In option 1, we can convert the building next to the business current factory to
manufacture the Eazicut. Following are the pros and cons of this decision.
Quality Control: Good quality control can be maintained over a product Eazicut, if we convert
the building for the manufacturing of Eazicut, next to the business current factory. It enables us
to have more control the management, workers and keep a check and balance on our staff,
suppliers, managers and line workers.
Labor and Input: A production facility should be started at a place where all the essential
elements are available like availability of raw-material, and the required skilled labour to do the
job. In this case; we already have a stable and quality supply of raw-material for a business
current factory. So, we will have a controlled and good quality supply of raw-material for our
new product Eazicut. Similarly, we have skilled and experienced managers and labour at our
current factory which can utilized along with the new labor. Substantially cutting our training of
new labor cost for the manufacturing of Eazicut. All along with these advantages there will be
some disadvantages. One of con of have a production facility next to the business current factory
for the new product Eazicut as it will in more depreciation on the company assets i-e trucks,
machinery etc. because company assets will be utilized in the production of new product Eazicut
as well. Similarly, the work load on the labors and managers will be increase resulting a low
efficiency from the labor and management in the meantime.
Transportation Cost: Transportation Cost also reduces if we start the production of the Eazicut
in the building next to the current business factory. It is the major part of the expenses that a
manufacturing facility faces. It is very hard to minimize transportation expense of raw material
and finished products, coming to the production facility and out of the production facility
respectively. In this case, we will be able to save a lot of cost incurred on the transportation for
the new production building next to our current business factory.
Logistics Issues: The cost of production rises dramatically. It depends on the storage and the
needs related to the shipping of the business. As in this case we can’t directly ship from suppliers
to customers. So, the disadvantages of the production house next to business factory is that they
have warehouses at regional not at capital. Therefore, it takes more cost to ship the old product
along with the new product Eazicut from capital factory to regional warehouses.

OPTION 2: -
In option 2, We have to acquire the additional factory space close to one of their regional
warehouses in the north east of the country.
Storage and Distribution: If we acquired the additional factory space close to the regional
warehouse, it will have certain advantages that will include, a huge cut of cost of renting a
warehouse will be reduced because we will have our own warehouse close to the production
facility to storage our product. Having a warehouse close to the production facility will also
minimize the distribution cost incurred on the finished product. Warehousing near the production
facility will also minimize the chances of finished good getting damage because there is a lot of
moving around and finished goods or storied in the warehouses for some days before they are
shipped to the customer.
Transportation and shipping cost from the additional factory space to the warehouse is
become reduce as compared to the cost from the factory at capital. In this case we save the cost
incurred in the transportation and shipping of the finished goods being manufactured in the
additional factory space.
Having a warehouse near to the production facility will also increase flexibility because it
when there is a down fall or increase in the demand of the product we can store the product in the
warehouse as long as we want because we are not subjected to pay any rent and in the case of
increase of demand we can utilized the “space of warehouse” as a temporally production unit.
The regional warehouse is in the north east of the country is located in that region where
has been high rates of long-term employment. So, we will have no problem facing while hiring
new labor and the management staff for the additional factory space for our new product Eazicut
in the north east region.
One of the drawbacks of acquiring new space in the north east is that we have to face a
problem of less skilled workers and managers as we have to trained them which will in result
cost us both time and money. It will directly affect the production process of the new product and
being in a complicated market we cannot bear any kind of delay in the production of the new
product and utilized any more resources that will leave an impact on overall company. Another
related drawback is that it will also affect the quality of the product being manufactured in the
additional factory space by the new and unexperienced labor. It also created difficulties for the
management to control different, newly and unexperienced labor to manufacture Eazicut with
effectively and efficiently.
Raw material is an essential element for the production and the manufacturing process to
start and it effect the overall production process because it directly determines the cost of the
good manufactured and ultimately the sales and the profit. So, acquiring a production facility, we
have to keep in mind the availability of raw material, its quality and its cost per unit. As in this
case, we are starting a new production facility so we have to face the problem of availability of
raw material and its quality. Because we to take risk for hiring a new supplier and transportation
chain for the raw material.

OPTION 3: -
Many elements and factors have to be analyzed before relocating the business, especially
in this case there are many drawbacks and potential plus points. Keeping in mind the challenges
the construction companies are facing in UK. The potential risks and benefits that the business
can face in doing so are as follow:
While relocating in this case there are many advantages.
Relocating the business to a place were raw material for the product is easily available
can be a good decision because raw material cost plays a vital role in overall production. So,
relocating the business can be a beneficial decision while keeping the current situation of the
industry in mind.
Better reach to the consumer:
By relocating the business, we are probably moving to the better place then previous one and so
that these changes also improve the overall scenario. It helps the business in a way that, it will
provide better access to the customers by allowing us to plant ourselves in a region in which the
market is growing and there is a substantial chance to cross the benchmark of the overall industry
related to the business.
Reduction in operating costs:
Relocation to a new site can help our business to reduce operating costs substantially, as in this
we have a new product on our hands and the product is at make or break point, we can relocate
to a place were we can bear sky-high rents and utilities expenses which will provide more
chances for the success of the business by enabling us to cut expenditures and ultimately
increasing sales and profits.
There are also some threats that strand in the way and relocation can be risky:
Relocating Cost:
Relocating cost is one of the major costs that stand in the way: If we relocate it can incur
a large cost on moving alone like packing, storing and transporting. So, relocating can be a risky
thing because it can affect the whole business. It also includes many unavoidable expenses like
preparing the office space which include renovating and setting up for proper work.
Loss of Skilled Labor and Managers:
 Relocation can cause disruptions in overall business. Workforce is an essential part of our
overall business. In this case losing skilled professionals can cause a huge loss to the new
product launch if skilled labour and managers are not willing to relocate. So, finding a whole
new set of experienced labor and managers can be a difficult task, as it will be both time
consuming and risky. It will also affect the business financially as we have to meet up the
expenses like insurance of the employees, assets and others.
Factors influencing the development and formulation of the business objective: -
The factors that influencing the development and formulation of the business objective are
Growth: - According to the company, the future objective of the company is to increase their
growth regarding volume as well as in the sales of their products. There many factors that effects
the growth and sales of the company. To increase the growth and sale we have to focus on how
we can launch our product to bring in new customers. We have to create awareness to expend
our customer base and customer loyalty related to the business. We also increase the growth and
sales of the business by the adoption of technology. It serves as a fertilizer for the business
growth. It helps the business in working efficiently and tackle tasks. If we give the knowledge
related to the new technology and techniques to do work efficiently will also cultivate our
growth and sales. Just like different other factors leadership will also affect the growth on the
business. Leadership helps and motivated the employees to achieve the business goals and
objective.
All these factors help us in which option we will have more benefits and the decision will
be correct to invest the money.
Profitability: - As like growth of volume and sales value, Profitability also be the important
objective of the company. It also be related to the sales of the company. As there will be more
sales there will be more profit earn by the company.
Similarly, there are many factors that effects the profit margin of the business.
Competition in the market will reduces the profit. Therefore, if a firm has monopoly then it has
no or little competition with other companies and the demand will be inelastic. So that we will
easily gain profit by increasing the prices of our product due to having less or no competition.
Demand of the product also increase the profitability of the business. It will be more strengthen
when the products are related to the technology. The economy of the country is the main factor
in the increase or decrease of the profitability of the business. If the economy of country growing
then there will be more demand of the product and increased the profitability. Last but not the
least, a successful advertisement of the product will also increase the value and sales that will
ultimately fulfil the company’s objective and gives better profit margin.
Product Innovation: - If we can introduce some new handy tools or invent some new tools, it
will help workers to work more effectively and efficiently. It also helps us to enlarge our product
line and expend our business. As like we can introduce the new product Eazicut, we will have to
add more tools helps in the construction industry and expand the product line of our company. It
helps company to survive in the industry market and achieve the competitive advantages. So, that
the product innovation is the main factor in the success of the company.
Influences on Business Performances: -
According to all the above information, we will concluded that in the first option performance of
the business will be more better that the easily take the experienced persons from their capital
business factory to the new building to lead the works in the production of the new product
Eazicut and also train the newly hire worker to do work effectively and efficiently according to
the standards being set by the company to maintain our customers trust. So that according to the
production work it will be beneficial but according to the cash it will cost know more than that
before the addition of the new product Eazicut. The cost incurred on the renting of the building,
adaptation of the new things for the production and cost incurred in the transportation of the
finished products from manufacturing place to regional warehouse increase the expenses of the
company all along with profit on the new product. Second option will effect inversely to the first
option. In the option the cost of the transportation of the new product from the factory to the
warehouses will be very low due to having closer to the warehouse. Whereas the quality
employees will not be there and we have to hire all the new and unexperienced workers. And to
train these employees we obtain a cost on it. Also creating a newly separated factory required
many assets and increase the expense of the company but saves the transportation cost. In the last
option, if we have to relocate the whole business it will directly affect the business in the
negative way that to getting stable in the new environment required time and while relocating the
business we have to need all the assets including machinery, land and labor newly which is very
difficult and performance will be badly effective.

Rationale for selected business decision: -

Sparks and Cables is a company that produces construction equipment’s in UK. After reviewing
all the option, business future objective and their pros and cons that acquiring a building next to
the current business factory, acquiring an additional factory space near to one of the regional
warehouse or relocating the business in the UK, we will decided and that the best option for the
company sparks and cable to start the production of the new product Eazicut is the decision of
second option that acquiring an additional factory space near to one of the regional warehouse.
This decision will help the business to have a firm start backed by the advantages of having their
warehouse near to the production facility which will directly help the business to transport and
shipped it from the production facility to the warehouse easily and also directly enhance the
business performance. It will be beneficial for the new product Eazicut as the cost incurred for
the transportation will be very low and transportation will be without any risk of damaged
products.