Change in labour costs (per year): + 0
Wilsons will have no need to find employees and will retain a high number if not all its workers because all the workers have no large change in work location.
Change in other costs (per year): £0
This is probably the most important figure because it reflects a potential shortcoming for the business of a move to such a close location, because the other proposed locations would actually bring down other costs. This is not wise as the aim of the move is to generate more income by increasing production, here the production will increase but when the company has out grown this premises further expansion will impossible and they would probably have to find a new site. They should also take into account the central London congestion charge; your employees might demand you to pay the charge for them or pay for them and thus add to your costs.
Option 2
Location: Washington New Town
Cost of site premises and machinery: £3,500,000
Washington New town is the cheapest in terms of plant (machinery and premises) and is located centrally, which would be good for transport of goods throughout the country. This location has enough land to increase production by 50%. This would be good for long-term production aims but in the short term you would have to consider the building costs of extending the factory.
Financial costs of moving: £700,000
This is the same as you would have to pay for the other three locations and it would be a cost that would not influence any major decision because it would be a single payment and not an on going cost.
Change in transport costs (per year): + £ 200,000
This option will bring about an increase in transport costs per year. Despite it being the second most expensive option in terms of transport, however I feel that it would not be a cause for major concern as the move will save about £400, 000 per year which would cover this deficit and thus offset the transport costs.
Change in labour costs (per year): -£ 300, 000
A move to this location would reduce labour costs per year by £300,000, which is good and will enable your firm to pay for the marked increase in transport costs. This is about the same decrease, as the other locations would bring.
Change in other costs per year: -£200, ooo
Option 3:
Location: Cardiff
Cost of site premises and
New machinery : £4, 600,000
This site and machinery is the second most expensive compared to the other sites. The site has the capability to expand operations by 20% by increasing production. As the purpose of the move is to increase production and output a site with room to expand is a necessity. Its location is beneficial in the sense that you will not move away from your main customers who are located not too far away in Wimbledon and surrounding areas.
Financial cost of moving: £700,000
A move to this site will cost the same as moving to any of the other site on offer and it is again not a cause for basing a major decision on.
Change in transport costs (per year): + £100, 000
As stated before a move to this area would not only mean the lowest transport costs but it would maintain good contact with your existing
Change in labour costs (per year): - £250,000
This is slightly less of a decrease compared to the some of the other sites. The main fact is that there will be a decrease and not an increase. There will also be the matter of staff recruitment in terms of staff availability and qualification, recruitment costs and new wages and weather or not you will be able to retain members of your current staff. Labour in general will be cheaper so this is may be a feasible option to take.
Recommendation
I have decided that Washington New Town would be the best site to relocate to.
- It is centrally located and provides a good location in which to keep your old customer base and to explore new markets as well. There will be an increase in the cost of transport (raw materials and finished products) but this will be offset by the drop in labour costs.
- The site provides a enough land to facilitate an increase in production by 50%. This is a good rise in production because it is neither too little or too big a rise in production.
- The actual premises and machinery is the cheapest amongst the four options. It is £3,500,000 which is inexpensive when compared to some of the other sites.
- The move will bring about a major change in labour costs per year. You will be paying £300,000 less per year for labour.
- The site would decrease your costs by £200,000 per year which is a good saving and can be used in further expansion or advertising to the new markets now within your sphere of influence.
- The change in other costs per year is the same as the other sites so we can safely say that it would not cause you any unnecessary costs that could be avoided.
- Overall this site would offer a good base in which to start a new factory because it is very central. The purpose of business is to increase your market share and thus increase your profits. This can and will be achieved if you have greater contact with the national market, you will no longer face exorbitant transport fees for customers that are not in the south of the country and will mean that you will be within reach of markets previously too expensive to cater for.
- The site is located on in an industrial park which is very good as it will mean that you will not have to adjust means of production because of any residential restrictions for example noise, pollution and heavy truck movement .
Why I do not recommend Wimbledon:
- Wimbledon would be a completely pointless move as the purpose of the move is to increase production and Wimbledon does not offer any additional space for production increase.
- The cost of the site is far too expensive and would not be at all beneficial to you or your firm at the end of the day.
- It would be the cheapest in terms of moving but since the other sites do change this would not at all be the basis on which to make any decision.
- It would not open any new markets for your company, as all your regular customers would remain the same and you would not be able to access any new clients.
- There is no change in costs, however moving to the other sites will reduce your yearly out goings and this site will not .
Why I do not recommend Cardiff:
- The site and machinery is too expensive , as it is the second most expensive amongst the four options.
- Its location would provide only 20% production increase, and it would be sooner rather than later that your firm would outgrow this increase room.
- Transport costs per year would remain largely the same but this is not to be interpreted positively, as this would mean that without having made a major increase of your market share and your sphere of influence you will have increased your spending on transport with largely the same customer base.
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This site is not located wisely and it would in the long term benefit your company less. Because the equation is (increase in number of clients => Increase in production => increased profits) but this can not be achieved if you do not broaden your company outreach and customer base. And you will only do this by locating centrally.
- You will save less in terms of labour costs per year, and you yearly spending will be only down by £200,000 but your profits are less likely to increase.
Why I did not recommend Glasgow:
- The site is relatively low cost but would impose large new costs on transport of raw materials and finished goods.
- It would be too far away from your existing customer base that is mostly located in the south. You would be faced with heavy advertising bills because you would need to establish new customer links.
- Your total revenue per year would only be £150,000 because of the heavy transport costs.
