Question: You are a consultant manufacturing economist: you will need to explain to a senior manager:

Why it is worth moving the production of the company’s holographic televisions from the current location in Europe to new faculty in China. The management team will expect you analysis with reasons and recommendations to cover items such as cash flow, transport, setup, direct and indirect costs, political situation and future outlook. 2.What would be the implications be if this production was not moved from Europe. The management team will expect you to consider improvements and modifications in the manufacturing processes and other processes and methods used by the facility and to assess how this can be used to impact future investment.

The management team will also expect you to devise a solution to improve the financial position of the company, utilizing all your skills and experience.

There are certainly sound arguments as to why it would be worth while for the company to consider moving the production of its holographic television sets from their present European production sites to a new purpose built location in China. Since the middle part of the 1970s, China has enjoyed strong and sustained economic growth rates, during which time that country has become an increasingly attractive location. China has attracted both foreign investors, as well as foreign companies that have moved their production sites over to Chinese locations to reduce production and labour costs compared to having factories in Western Europe and North America (Roberts, 2003 p. 466). Western European, and North American companies do have a long tradition of opening subsidiary factories abroad, or of just moving most if not all of their production abroad if that becomes the best way of improving cost effectiveness, and therefore increasing levels of profits. The much talked about process of globalisation is supposed to make such decisions of switching production to China or other similar countries more economically rewarding than previously used to be the case (Ferguson, 2007 p. 643). Globalisation has allowed capital, goods, and to a lesser extent workforces more free flowing than before. The freeing up of capital and goods, when combined with better transport and information technology has arguably benefited those companies that have been able to take advantage of improved economic opportunities on a global scale (Bannock, Baxter, & Davis, 2003 p. 161. Multinational corporations have opened outlets or subsidiaries in other countries since the 1920s. It has only been in the last two or three decades that companies have in some cases moved all their production to countries such as China that offer lower production and labour costs (Turner, 2001 p. 49).

Over all the benefits of switching production of the company’s holographic television sets to China from its present locations in Europe would arguably be greater than the costs of making such a switch, or indeed not making the switch at all. Wage costs are markedly lower in China than they are in Europe in general, and in Western Europe in particular. Lower wages costs in China are partly due to the sheer size of the Chinese workforce in comparison to the number of workers available in Europe. China, after all has the largest population in the world (Whitaker’s, 2007 p. 800). Chinese workers have been paid lower wages because the cost of living is lower than in most of Europe, so they do not have to earn high wages to maintain a good standard of living. Chinese workers have not been able to raise their wage levels as the Chinese trade unions are heavily connected to the ruling Communist party. Although, the Chinese government has increasingly allowed foreign investors into the country to promote higher economic growth without allowing Chinese workers to gain higher wages. The Chinese government regards keeping wage costs low as a means of attracting foreign investment, and to tempt foreign companies into building factories to create jobs (Woodruff, 2005 p. 365).