A Short Formal Report Looking Into Setting Up A Chemical Plant.

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FAO Ian Spencer                                                                                                     Ben Ashdown

A Short Formal Report Looking Into Setting Up A Chemical Plant

Terms of Reference

        I have been told to write a short formal report explaining to the managing director of a chemical manufacturing company, the social costs, social benefits, private costs and private benefits of setting up a chemical plant on the outskirts of a small market town, and whether or not the company should set up there. The report is to be handed in to Ian Spencer on the 28th of January 2003.

Procedure

        I am going to write the report comparing the social and private costs and benefits, using business theory, and I’m going to apply these ideas to the stakeholders.

Findings

  1. A well-known chemical manufacturing company is considering applying for planning permission to construct a new chemical plant on the outskirts of a small market town. New housing estates have recently been built in the suburbs and the area is popular for its picturesque countryside. There are many social and private costs and benefits to be surveyed before construction commences.

  1. Private costs are the costs that the firms owners, an internal stake holder (explained further down in the report), along with the employees, has to pay for setting up the factory, and there are many of these to be undertaken by the company if this project is to go ahead. Firstly the company will have to pay for the land that the plant will be built on, as well as all of the construction costs, including the building materials and the labour, the human effort, to build the plant. Then the company will have to pay for all of the capital, which is the equipment used in manufacturing the chemicals, as well as the buildings, and the labour used to run the plant, such as scientists. They will also have to pay for the land, which is the raw materials used to make the chemicals, and the transport of the finished chemicals to the customer will also have to be paid for. This is the petrol used and the company would also have to buy extra vehicles to transport the goods. There will also be costs that the company must face that cannot be measured in terms of money. The company’s reputation may be harmed if local residents object to the new plant. This may result in a drop in sales because people do not agree with the plant causing pollution or spoiling the countryside, so they don’t buy the products. But this might not affect the company if it sells most of its products elsewhere.
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  1. On the other hand there will be many private benefits, which are the benefits that the firm will gain from setting up the factory. The private benefits are that the chemical firm would make more money, and its profits would increase, because it would sell more of its goods. They would also benefit because would get good, cheap land. Employees would be easier to find because there may be people moving into the new housing estates looking for work. Transport to the customers of their products may be cheaper, as well if they have moved closer to them ...

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