1. Production Holden PLC and Bromley Furnishings

2. Types of Production ●Use Batch Production to manufacture the cushions as they have different types of cushions. The advantage of this is that they will be able to cater to many customers needs. This will lead to an increase in customer satisfaction, which will lead to an increase in reputation, which could lead to an increase in sales if the satisfied customers advertises them via word of mouth. The disadvantage about batch production is that it may require any machines to be re-set to produce a different type of cushion, therefore, costs increase and it’s more time consuming. ●They employ specialist workers such as cutters and seamstresses, so they use job production. The advantage of this is that the quality of the cushion increases, and according to the directors, quality is important to the customers who buy the higher priced cushions. therefore, this will lead to an increase in customer satisfaction. However it is time consuming and very expensive therefore it will be difficult to compete with the increasing competitive nature of the market

3. Resources ●Uses latex-filled cushion pads. Unfortunately, the price of latex has risen, meaning their costs will increase. ●Researching the use of kapok fibre, to use as cushion pads instead of latex. This is more expensive, therefore their costs will increase. However, they are keen to buy it from fairtrade producers, which quite a lot of consumers prefer, therefore, an increase in sales may occur, which means profit may increase. ●They can take advantage of the fact that their products are fairtrade, and use that as a USP. They could charge premium price due to their USP, therefore, the higher costs may be covered be the increased prices.

4. Production costs ●To produce a bean-bag, the costs are the following: filling, fabric costs, make-up cost, and expenses ●To produce a cushion, the costs are the following: cushion pad, fabric costs, make-up cost, and expenses ●The costs to produce one Hip-Hop Bean Bag are, filling (£4), Fabric cost (£4), Expenses (£4) and Make-up cost (£3). ●Wage rates in china are increasing, meaning their total costs will increase, therefore their profits may decrease providing their revenue remains the same or decreases. However, the wage rate is still lower than it is if they were to produce in the UK, thus it would still be cheaper to produce in China. If they were to produce in the UK, they would have a higher quality product due to better machinery and motivation among workers. Due to the high amount of competition, they need to have a USP, which could be fairtrade products if they decide to use kapok fibre. However this is costly, so producing in China is ideal due to lower costs. ●Fixed costs: rent/mortgage on the factory in China, marketing costs and administration costs ●Variable costs: wages to workers, filling cost, fabric cost, make-up cost and transport cost

5. Efficiency ●Martin Holden states that fabric costs are less in Bowton than in China due to less wastage, showing that production in china is less efficient. ●Also, chinese employees productivity is lower compared to employees in Bowton, showing that Chinese employees are less motivated. It also shows that machines in China are less developed, which reduces output. To improve productivity in china, they will need to motivate their workers. To do this, they could pay them using a piece rate. Therefore, they will have an incentive to produce as many cushions as they can. ●Overall, in terms of production, Bowton would be more efficient, as Chinese sewing machine workers are slower and less accurate compared to UK workers, and UK workers seem to be more motivated compared to Chinese workers, so their productivity is higher than those of the the Chinese workers.

6. Quality Assurance ● Quality is very important to the customers who buy the higher tier of cushions. In order to help maintain quality, they should conduct quality checks throughout production, rather than just at the end, which is quality assurance. If a fault is found in the product, it will be much easier to correct it during the process.If it is found at the end, then Holden plc will have to waste unnecessary time and resources on correcting the fault, therefore costs increase, which can hinder the business. Also, conducting multiple searches throughout the process yields a higher chance of finding faults compared to one quality check at the end. This means there is a reduced chance a faulty product will be sold to a customer, who will likely be upset by the product.

7. External Influences

8. Governmental Influences ●The council in Bowton want more business to locate to Bowton, possibilly to reduce the high unemployment that was caused by the recent economic recession. If Holden plc were to move back to Bowton it will provide jobs for the community, therefore unemployment is reduced, so the council will be able to tax more people via income tax. In addition, there will be an increase in the corporation tax collected as more firms move to Bowton. ●The UK government has rejected the idea of increasing tax on imports. This means that competitors products from abroad will remain at the same price, therefore, Holden plc will continue to lose a lot of market share from competitors abroad, therefore their profits will decrease. To counter this, they need to have a USP in order to separate themselves from their competitors. If they decide to buy kapok fibre from fairtrade producers, they can use that as their USP. Customers will be more attracted to their products because of this, therefore sales increases.

9. Location ●Holden plc wishes to build on the green built, due to being an ideal location. This could be due to trucks being able to easily enter the factory premises if it were to be built on the green built, therefore, they will use less petrol, therefore their costs will decrease. Also, if they build on the green belt, they are likely to be away from any residential areas. This means that there is a low chance of any resistance against the factory, therefore their reputation won’t decrease. This will only happen if Bowton council decide to reduce the ‘green belt’ areas., and therefore get planning permission. ●Holden plc are also investigating whether or not to move production back to Bowton. The advantage about producing in Bowton is that the sewing machines workers are more accurate and faster compared to the workers in China. This means the quality is likely to be higher, therefore, customers are more likely to be satisfied, so their reputation will increase. Also, if they move production back to Bowton, 30 jobs will be created, which will reduce unemployment. Therefore, the government can tax more people.

10. Economic environment ●Low interest rate means that it would be easier to get financal help from financial institutions, such as banks. These could cover the mortgage for building the factory (if they decide to build a factory), hire purchase or leasing for machiner. ●Their costs will increase in the short term due to loans, but their productivity could increase, which will lead to increased revenues that will easily cover their new costs ●Also, since the interest rate is to remain low, and the fact that the economic prospects for the future is good, customers will have more disposable income, which they can use to buy Holden plc’s products as there is little incentive for consumers to save as interest low, so they are spending. This could be on luxury items such as cushions if Holden’s plc choose to go for fair trade with a premium pricing. Therefore, sales increases, therefore gross profit increases.

11. Competition The cushion market has become increasingly competitive due to new business around the world entering the markets, meaning that Holden are now operating in a perfect competition market. This means that they could be losing a lot of market share to these competitors, therefore, sales decrease, and so will their overall profits. This has meant that business in the UK have had to keep production costs to a minimum, so that their profits wont be affected as much. To counter the competition, Holden should have a USP for their products. For example, if they invest in Kapok fibre and use fairtrade products, they can emphasise this in order to make them stand out among competitors, therefore sales may increase, so their profits may increase.

12. Globalisation As they produce in China, production costs are lower due to cheap machinery and labour, so they can afford to reduce the price of their products, as to attract more customers. Therefore, sales and profit will increase. Due to globalisation, the market for cushions has become increasingly competitive. This means Holden plc has been losing market share due to the competition, so their profits will decrease.