1. Section 5 - Relocation issues for Holden plc

2. Lesson objectives To be able to compare the renting a factory and building a new factory ideas discussed in the case To be able to make recommendations to Holden plc based on analysis of the two options To be able to discuss the social costs and benefits of business activity To be able to discuss green belt land and business use of this land To be able to answer quiz questions based on the case study

3. Starter If you were going to have a new car – what car would you have and would you rent or buy it? Can you explain your choice?

4. David Holden David Holden the Financial Director has been looking at the financial costs of moving production back to the UK. Last PowerPoint you looked at production costs, this now features financial costs.

5. David Holden’s two choices If he does decide to move production back to the UK he can either: Rent an existing suitable factory in bowton which is currently vacant (empty). Finance the building of a new factory

6. Business Vocab Annual rental – this is paid on a yearly basis to a landlord or owner of the factory. Holden plc would never own the factory so their business would be worth less on paper which may put off investors Estimated maintenance cost – this is the costs that Holden plc think they may have to pay out on the factory. This may include electrical work, roofing, upkeep of the building etc. Uniform business rates – paid to Bowton council on all non domestic properties such as shops, office and factories. More info herehere Annual mortgage payments – if Holden plc bought the factory they would have to pay these costs on a yearly basis back to the bank or building society. A mortgage is money specifically lent on a property.

7. The case for renting The costs are given over a 5 year period so need to be multiplied by 5 Renting an existing factory CostMultiplied by 5 Annual rental£68,000 Estimated maintenance cost £5,000 Uniform business rates Total

8. The case for renting - answers Renting an existing factory CostMultiplied by 5 Annual rental£68,000£340,000 Estimated maintenance cost £5,000£25,000 Uniform business rates £6,000£30,000 Total£79,000£395,000 Total cost over 5 years = £395,000 + machinery £1,000,000 Overall total to rent = £1,395,000

9. The case for building The costs are given over a 5 year period so need to be multiplied by 5 Building a new factory CostMultiplied by 5 Annual mortgage payments £80,000 Estimated maintenance cost £3,000 Uniform business rates Total

10. The case for building- answers Renting an existing factory CostMultiplied by 5 Annual mortgage payments £80,000£400,000 Estimated maintenance cost £3,000£15,000 Uniform business rates £4,000£20,000 Total£87,000£435,000 Total cost over 5 years = £435,000 + machinery £1,000,000 + £1,600,000 to build Overall total to build a new factory= £3,035,000

11. Conclusions In teams come up with a conclusion about Holden plc and if they should rent or build their factory Give your 3 strongest reasons What would you recommend that they do?

12. Martin Holden is considering locating the new factory on “green Belt” land Watch this video from the BBC with Ray Mears about Green Belt landvideo

13. Location decisions for Holden Today’s objective: To be able to discuss green belt land and business use of this land Starter Complete the missing words worksheet relating to section 5 of the case study

14. Debate Get into 4 groups. You will each be given a side of an argument. You should develop your strongest reasons for your argument ready to debate against an opposing group. Use the case study along with the supporting material provided. The question of focus will be given shortly.

15. Should Holden build on greenbelt?

16. Green belt debate YES! Bring new business to the area and build on green belt land Local councils encourage firms to locate in Bowton This will bring employment to the area (30 jobs at Bowton factory) Page 5 fig 5 That will bring wealth to the area Other businesses will follow the example and move in Regeneration of a run down area that badly needs jobs Employment will improve the value of houses in the area Local councils encourage firms to locate in Bowton This will bring employment to the area (30 jobs at Bowton factory) Page 5 fig 5 That will bring wealth to the area Other businesses will follow the example and move in Regeneration of a run down area that badly needs jobs Employment will improve the value of houses in the area NO! Reduce the amount of green belt land that can be built on. Local resident groups are opposing plans for the green belt and want the council to reconsider May be worried about potential social costs such as air pollution, noise pollution and visual blight (looking at an ugly factory). May also be worried about their loss of green spaces and habitat destruction of wild animals Local resident groups are opposing plans for the green belt and want the council to reconsider May be worried about potential social costs such as air pollution, noise pollution and visual blight (looking at an ugly factory). May also be worried about their loss of green spaces and habitat destruction of wild animals

17. Cushion factory part 2 10 mins

18. Quiz on section 5 1.What’s the difference in cost over 5 years of annual rental vs annual mortgage? 2.What is the cost of machinery estimated to be? 3.Who opposes the plans for the green belt land? 4.Overall which is the cheapest option – renting or building a factory? Ext – True or false section 5 worksheet

19. Answers to section 5 quiz 1.Rental = £68,000 x 5 = £340,000 Mortgage = £80,000 x 5 = £400,000 The mortgage will cost Holden plc £60,000 more over 5 years than if they rented 2. Machinery will be £1,000,000 to buy 3. Local resident groups 4. Renting