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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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