ANNEX A
BUSINESS INTERNATIONALISATION
1. A DESIGN AND
PRODUCTION COMPANY
FROM THE
MANCHESTER AREA
In a reaction to increased low cost competition,
this company decided to move the labour-intensive element of it's
manufacturing overseas. Malaysia was selected as the best location
and, with effective support from the Malaysian Industrial Development
Authority; the project was completed with first production in
January 2004.
Converting the negative aspects of globalisation
into a major opportunity, this company is in a position to retain
its existing business, improve the operational efficiency and
profitability of its UK operation and respond quickly to opportunities
in new markets. This company is now seeking to expand production
facilities in Malaysia to build on the successes already achieved.
2. A MACHINE
MANUFACTURER FROM
BIRMINGHAM
It realised in the mid-nineties that it would
be well served to look to China in terms of both reducing production
costs and also establishing a foothold in what could be a lucrative
market.The company ran a series of seminars at a Chinese machine
tool show in 1997 and identified a number of potential partners
and customers. Business with China has developed further since
and resulted in supply partner arrangements for the supply of
machined castings, an extension of this work to include sub-assembly
work, sale of the company's products into China and the sale of
the company's labelled, low cost products into Western Europe.
3. A LEADING
CONTROLS SOLUTIONS
SUPPLIER FROM
NORWICH
The company found that profitability was being
affected by price erosion and rising costs. Unable to justify
a significant level of investment in automation, the only viable
option to establish production in a low labour cost country.
Over two years the company moved production
to a new Chinese plant with the help of a UK educated Chinese
engineer, now their Operations Director. UK activities are now
focused on R&D, logistics and customer support, whereas the
Chinese plant is operational, production costs are competitive
and the company is in profit for the first time in three years.
4. A WEST MIDLANDS
COMPANY, PRODUCING
HOME SAFETY
EQUIPMENT
This company already had a business model that
aimed to outsource the majority of its business functions to reduce
costs and increase its chances of survival.
Working with one of its prototype component
suppliers, a Chinese company, it quickly became apparent that
this company was looking to supply whole products rather than
just components. This fitted the UK company's business model well,
so they set about working with the Chinese to set up a production
line that could produce the required products to high UK specification.
There are now three Chinese suppliers with excellent quality performance
and lower labour costs allowing a greater emphasis upon and investment
in quality management and control activities.
Whilst the core business activities of research
and product development remain in the UK, the company has been
able to outsource the more routine lower technology design activity
to their main supplier in China. This allows the company to concentrate
on higher value-added activity related to new product concepts—the
source of their competitive advantage.
5. BUCKINGHAMSHIRE
MANUFACTURER OF
BESPOKE AUTOMATION
SOLUTIONS
This company found that one of its main sales
lines had become unprofitable. To rectify this, the company planned
to sub-contract machining to a lower cost supplier in a country
with lower raw material and labour costs. India was identified
as that country and a visit to an industry exhibition in 2001
identified potential partners.
In 2002 the company visited its preferred partner
to undertake a full commercial and quality review. After a positive
impression, an order for tooling followed. This relationship has
developed to a point where the UK company is sourcing the quality
of component they demand at only 35% of the original supplier
price.
6. FORGINGS COMPANY,
WEST MIDLANDS
Faced with closure in 2001, a management buy-out
saved the business from liquidation. The company then undertook
an analysis of its full product range. It concluded that it could
not continue to compete on high volume, lower value-add business
without a fundamental change to the cost base of the business.
To reduce the cost base the company set out to find a strategic
supply partner that could take on the higher volume business and
produce it more competitively. As a result of a visit to India,
it found an appropriate supply partner. This enabled the company
to offer more competitive pricing to its existing customers, directly
resulting in the winning of a £1 million contract from a
major tier-1 automotive customer. After a period of stable trading
the two businesses took their relationship further. The result
of this was an agreement that the Indian partner would purchase
a controlling stake in the UK company, strengthening both companies'
positions and securing 100 UK based jobs.
7. FASTENER AND
JOINING SYSTEMS
MANUFACTURER, WEST
MIDLANDS
As a result of a review of its business operation
this specialist manufacturer has now undertaken to restructure
its distribution, sales and engineering services in the UK while
expanding its manufacturing capabilities in China. This will enable
the company to enhance the UK distribution systems, put capital
investments in the engineering and quality technical centres in
the UK, and improve their overall customer services.
8. TURNKEY SOLUTIONS
BUSINESS, WOLVERHAMPTON
This small business moved some of its operations
to Russia to enable it to compete more effectively for a contract
to refurbish a former car manufacturing assembly plant. Their
competitors were German. By setting up in Russia the company was
able to access local services and resources but manage the whole
project using skilled engineering labour force from the UK. The
result will be around 10 new jobs created in UK in the future
9. MEDICAL DESIGN
AND MANUFACTURING
BUSINESS, OXFORDSHIRE
As a result of exhibiting at an exhibition in
Brazil this SME won a large tender to supply 90 million lancets
for blood sampling to Sao Paulo state. This is 5 times the volume
that they supply annually to the NHS in the UK. As a result they
have moved some of their production overseas while maintaining
their core business operations in the UK.
10. COMMERCIAL
PRINTERS, WAKEFIELD
Originally a commercial printers, founded in
1928, the company set up its China operation in 1999 to deal with
pre-printing activities. It now employs 120 in China and 125 in
the UK. Its presence in China has now provided additional opportunities
for the company to provide services to Chinese publishers.
11. SPECIALIST
LAW FIRM,
LONDON
Having problems with the retention of secretarial
workers due to low morale and the repetitive nature and high volume
of work, this company decided to outsource copy and audio typing
functions by using a credible supplier able to provide the right
quality of service.
Benefits from a financial perspective are significant
with savings in excess of £90,000 per annum on an annualised
basis. Intangible benefits are huge, from being able to up-skill
the secretaries to being able to utilise the office space no longer
needed for temporary secretaries.
12. NEWS AGENCY,
LONDON
This company needed to outsource the handling
of its English language financial databases to provide lower cost
management. It was decided to base this work in Bangalore, India,
where they expect to have 1,700 staff in place by the end of 2006.
This project has proved so successful that many
other parts of their organisation has decided to follow suit and
has resulted in new types of content being made available to their
customers; some of which were too uneconomical to provide previously.
13. BOILER FAN
MANUFACTURER, GLASGOW
This company originally made large boiler fans
in the UK. Over time this became too expensive, resulting in an
uncompetitive product. After some research it was decided to establish
a manufacturing capability in China. This has proven to be very
successful and they now supply China and the rest of the world
from this plant. The high-level R&D plus design functions
are still performed in the UK whilst the detailed design and construction
is performed overseas.
Howden have since set up additional manufacturing
capabilities for their range of compressors in China for the same
reason.
14. PRECISION
ENGINEERING, HEMEL
HEMPSTEAD
A precision engineering company has set up a
manufacturing facility in Thailand as a Joint Venture (JV). The
company was originally formed as a sub-contract sheet metal shop
in 1985 and with the addition of Turning, Milling, Detail Presswork,
Assembly and then CNC, the company now undertakes complete project
management, being in the forefront of modern manufacturing technology.
It has responded to pricing pressures experienced in the industry
by retaining its R & D facility in the UK and setting up a
manufacturing JV in Thailand, now supplying major customers worldwide.
15. GIFT MANUFACTURER,
WARWICKSHIRE
This company grew very rapidly from a home business
to one with manufacturing units in Stoke-on-Trent and South Wales.
During the late 90s, due to the difficulty of attracting skilled
labour and cost pressures, production was moved off-shore to produce
in the new volumes required by the market. All design functions,
and the origination and preparation of product for production
is still managed from the UK as well as all the, marketing, sales
and administration. The cost savings and improved production processes
have allowed the company to increase export sales to the point
where they represent 20% of total business.
16. THERMAL ENGINEERING,
MANCHESTER
This manufacturer of incinerators had reached
saturation point in the UK due to the effects of foot and mouth
disease and they needed to expand their activities in order to
survive.
They have now established a partnering relationship
with a boiler manufacturing company based in Poland. Their export
activity has risen from zero to 13% of turnover within the first
12 months and they are now selling to seven markets in total.
The company are now actively considering manufacturing the incinerators
in Poland over the longer term to reduce costs and are currently
training their Polish partner in their processes and practices.
17. SAIL MANUFACTURER,
SOUTH EAST
Until 2004 their whole operation, including
manufacturing, was based in the UK when ad hoc exports
represented around 11% of turnover. Seeing the potential that
overseas business represented, the company set up a wholly owned
factory in the Philippines where all of their manufacturing now
takes place. The factory is equipped with the latest cutting equipment
allowing them to deliver more quickly and cost effectively to
worldwide markets. Design, sales and marketing remain in the UK.
The company is currently working with UKTI on the Passport to
Export programme which is helping them to set up strategic partnerships
to develop further retail. OEM account management will be handled
direct from the UK, and distributors for retail sales overseas
will be appointed. They are currently concentrating on Sweden
and the Netherlands.
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