The Chinese department store’s order would require significant communication with the UK based research and development centre which would take time to develop new ideas for products and cost money as well. The factory is also running at high levels of capacity with capacity utilisation of 95% which is 30% more than the UK factory. Since the factory is running at a higher capacity utilisation level it means that the number of defective products has raised as well as the care for quality has decreased and volume has increased. Andrew is worried this might not give the good impression that is needed from the company as they are trying to sell high quality British products. The amounts of defective products in the Chinese…show more content… Andrew pays the Chinese workers 50% less than he did with the British workers and only 5% of the employees are in a trade union meaning that there is a less likely chance of a strike occurring. There is also a 40% number of staff that is temporary in the business which means that Andrew can choose to hire and lay off staff during peak periods and when they are not needed. They also have close links to recently graduated university students. The ROCE in China is 3.44% which is a lot better than that of the -9.24% in the UK. The asset turnover in the UK was 1.17 and in China it was 2 which mean that they are selling more of their products in China than they were in the UK. The gearing ratio in China is 50.17% which is average for the business and means that they are not in risk of when the interest rate rise they will lose a lot of revenue. The employees that had been working at Burkinshaw had worked there a long time before hand and had possessed unique skills that would allow them to be in a niche market of handmade pottery products that had been hand made to a high quality standard. In the UK the defective products was only 5.0% which was lower than China by 2.5%. The EU and USA markets had showed more percentage of sales growth in Burkinshaw’s Plc markets than China did in 2005-2010 which would have been a safe bet to go with rather than going to China.
In the UK factories the capacity utilisation was only at 60% which meant they were not using the