Problem
Case: A company manufactures clothes in a number of towns and cities in the United Kingdom. These are then distributed to a network of retail outlets throughout the country. The company is owned by two other companies that take an active interest in the profitability of the clothing manufacturing and retailing sides of the business. Other UK clothing businesses now source their products from overseas as manufacturing costs in the UK are extremely high and reduce margins on the sale of the final product.
The board of the business is currently considering closing the manufacturing side of the business and sourcing their garments from countries like China and India where manufacturing costs are half of those in the UK. However, there is some concern over the conditions for workers in these countries and the age of labor used.
1. Based on the case, evaluate what could the creditors, as a stakeholder, expect from manufacturing companies when manufacturing costs are increasing and reducing margins for the sale of products?
2. Closing the manufacturing business is the worst scenario that the Board could face, evaluate how could the investors, as a stakeholder, be affected to the imminent closure?