Unit R014 - Engineering Manufacture - Topic Area 4 - Retrieval C

Globalisation

Globalisation is?

• The manufacture and sale of products in multiple global locations

• Being a recognicable brand all over the world.

• Employing people from different nationalities.

Globalisation

Being global can mean a huge ​ (a)   network is needed in order to reach customers and the manufacturing premises. Different countries and parts of the world follow differing ​ (b)   , legislation and working practices and this needs to be considered ​ (c)   . Some countries will have increased ​ (d)   opportunities due to the larger populations and this can be used to the businesses advantage. Global businesses have to be careful to not​ (e)   the workforce and take advantage of differing or poorer working conditions and pay expectations.

• transportation
• standards
• carefully
• labour
• exploit
• machine
• site
• lathe
• drill

Globalisation

JCB's full range of 18 skid steer models are now made at the Savannah factory in North America. America is also the biggest market for these products. What benefits might this bring?

• Reduced transportation costs to deliver to American customers.

• Reduced delivery times to American customers.

• Marketing opportunities for "made in America" to American customers.

• Lower wage costs from manufacturing in America.

Answer explanation

The JCB skid steer products are in competition with Bobcat, an established American brand.

The market for this type of product in America is good so therefore JCB decided to move all production over to the USA from the UK.

This bought a range of benefits for JCB. Being close to customers, more streamlined sales and after sales service, and the ability to competitively rival Bobcat.

As well America has a good manufacturing heritage with similar standards and expectations to the UK making it a relatively straight forward transition.

The obvious draw backs being that America has high wage's on average (similar if not slightly more than the UK) and transportation costs and times for any customers wanting these products from outside the USA will rise.

Globalisation

Some businesses will put large scale production facilities in areas or countries less economically developed than the UK. When this happens the local infrastructure needs to be considered carefully. What infrastructure should be looked at?

• Local Rail and road networks.

• Utilities such as Gas, electric and water

• Medical care and hospitals.

• Internet and communication services

• Local Average Wage

Answer explanation

All the options in the question are important however the local average wage is not an infrastructure concern.

Infrastructure is the external requirements and needs in order for a business to be able to operate.

Globalisation

JCB have a factory in Pune, India. Average wages here are significantly less than the UK. What impact can this have on the product cost?

• Cost of the product can be lowered or remain competitive due to the reduced wage bill.

• Savings on wages can be spent on product development and advancement meaning a higher premium (price) can be asked for the product.

Globalisation

How can becoming a global manufacturer impact sustainability?

• Running the business will be difficult to maintain once it is large.

• A global business will require more resources and raw materials. Some of which are finite.

• The staff may have to travel more and decide to move to a more local business.

Answer explanation

Finite resources are ones which are depleting.

We are using finite resources at a pace that is greater than their ability to renew.

A business becoming global can mean more resources are needed and some of these resources may be finite resources, such as oil for example.

As businesses expand and spread their production across the world they have a responsibility to try and source sustainable resources and to develop more sustainable ways of doing business. For example the plastics sector has a responsibility to develop new products that use bioplastics rather than crude oil based plastics.

"Just because we can, doesn't mean we should"

Globalisation

JCB have a large factory in Sao Paulo, Brazil. Why?

• An upcoming area with forecasted strong economic growth.

• One of the largest producers of steel in the world.

• Low minimum wage in comparison to UK.

• Good climate for staff

Answer explanation

JCB have been manufacturing in Brazil since the early 2010's.

There was a forecasted huge economic growth from the world cup of 2014 being hosted there, and growth of this nature requires machinery manufactured by JCB.

Making machinery such as JCB's needs a significant amount of steel, something that Brazil produce in abundance. The transportation and delivery of the raw material being relatively straight forward due to the proximity.

Brazil's minimum wage is a lot lower than that found in more developed countries such as the UK allowing for large scale production with a manageable wage bill. Leaving funds available for further investment and development.

Globalisation

Working environments today are very different to those at the start of the industrial revolution, especially in developed countries such as the UK, USA and Germany etc.

However some parts of the world still need to catch up. What do businesses need to be mindful of when setting up production in other countries.

• To give the staff acceptable, safe conditions.

• To give the staff a fair wage or salary.

• To ensure the workforce are not exploited.

• To make sure they do not get caught when mistreating staff.

Answer explanation

It is perfectly acceptable for a business to set up globally, in a different country, where they can take advantage of lower costs and other cash saving benefits.

However what they should not do is exploit the workforce.

The business should ensure that human rights are adhered too and the staff and local area treated with respect.

For example just because it is acceptable to dispose of waste in a certain way in a particular country that does not mean the company should do it. If it would be seen as ethically or morally wrong the business should do the right thing and dispose of the waste safely.

Taking advantage of loose laws and lower expectations can seriously harm a businesses reputation.