A/S Business Homework for 13th March

A/S Business Homework for March 13^th 2017

The UK Motor Industry According to the Society of Motor Manufacturers and Traders (SMMT), in early 2009, UK sales of new cars and other vehicles were the lowest for 35 years. The fall in sales created cash flow problems for vehicle manufacturers; these were made worse by suppliers demanding quick payment.

To stay in business, vehicle manufacturers in the UK adopted strategies that cut costs. Companies were forced to make redundancies and, in some cases, halt production because of a lack of demand both domestically and abroad. The GMB trade union announced that it was afraid that at least 25% of all jobs in the motor industry were likely to be lost in the recession. 

To help the motor industry, the UK government put together a financial rescue package of loans, and guarantees for loans, worth £2.5 billion. The support focused on investment to promote a ‘step change’ into more environmentally friendly engines. The industry has been criticised for being slow to invest in this area in the past. Subsidies were also provided to customers buying new cars. Not everyone supports such intervention. Sir Richard Branson, founder of the Virgin Group said, “Companies need to stand on their own two feet, and the weak ones need to go to the wall.” The UK motor industry:

● includes 27 car and other vehicle manufacturers that operate in the UK, such as Aston Martin, BMW, Honda, Nissan and Toyota

● produces 1.75 million cars and other vehicles each year

● supplies over 100 markets worldwide

● has an annual turnover of about £50 billion

● directly employs some 190 000 people in the UK and indirectly supports 850 000 jobs in the components and retail sectors. 

With reference to the item above to what extent do you think that cutting costs is the best strategy for businesses to adopt in a recession? (20 marks)

https://www.tutor2u.net/business/blog/strategy-in-a-recession-cost-optimisation-not-cost-minimisation