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The
assignment must be done individually. You are expected to read the case and write
an individual assignment on the “Drivers and Challenges for globalization”.
The
successful completion of your work requires that you critically evaluate
the global business environment, including opportunities and challenges
faced by organizations like DBK Technitherm Ltd.
The ups and downs of manufacturing in Wales
Just under 20 percent of
employees jobs in Wales are in manufacturing. This percentage is higher than
that of the UK generally. However, manufacturing employment in Wales has
diminished along with manufacturing jobs in the UK. Wales has seen plants
close and existing plants have contracted workforce. At seven percent, Wales
has a higher rate of employment than other parts of the UK except the
northeast, and its GDP per head is about 80 percent of the national average.
Wales qualifies for the
economic support from the European Commission, to bring greater prosperity to
the region. Some manufacturing firms have managed to succeed, and even grow
in the difficult competitive environment. DBK Technitherm Ltd of Wales manufactures
advanced technology heating systems which are used in a wide range of
applications, including white goods such as tumble dryers and hot plates used
in coffee machines.
In 2XX4, it received two
large contracts, leading the management to increase the workforce by a fifth,
to 120 workers. But rising oil prices and steel prices and rising interest
rates added a 20 percent rise in costs in one year, which concerned the
Managing Director. The company has been warned by its major steel supplier,
the Anglo Dutch group Corous, that further rises are coming in the near
future. Steel is a key material in much manufacturing and economic growth
would be inconceivable without it. Surging demand for steel by the Chinese
economy has led to rising global prices. For manufacturing businesses such as
DBJ, rising costs are eroding margins. The company could even be making a
loss on some of its products. The managing director says: “We are being
pushed on all sides: by customers, falling retail prices and cost of
components from our suppliers. Rising steel and oil prices are affecting all
businesses. Although the price of steel has doubled in three years, this
level may fall as demand in China slows and its steel corporations, having
grown rapidly in response to home demand.
However apart from these
cyclical factors, businesses in the EU are affected by employment protection
legislation and high levels of taxation. In particular, the EU’s Working Time
Directive limits working hours to 40 hours a week. The effect of this may
raise the wage bill also, adding to operation costs. One of the concern of
the company and other manufacturing businesses is the fact that is its
products may become unproductive in the international markets. Welsh
governmental authorities are committed to keeping manufacturing as a
significant share of employment in Wales. The success of technologically
advanced manufactures like DBK Technitherm is indicative of levels of
innovation and skills in component manufacturing which will contribute to
economic development.
References
Case taken from The International Business Environment, second edition (Palgrave, 2006), by Janet Morrison
Moules, J., ‘Dearer oil, steel and money turn the screw on UK businesses’, Financial Times, 15 May 2004;
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