Opening Statement
As the regional manager of Sunderland’s base, my intention is to highlight the importance of finding a compromise that does not negatively impact the employees, the local communities, and our customers, who appreciate the work ethic, the working conditions, and the transparency that Panoshiba has maintained over the years. My position allows me to speak for the stakeholders who will be affected by the decision that we will agree upon today, and I would like to emphasize the potential damage that can be done if the UK branch is fully transferred.
I acknowledge that the current market is more competitive than ever, and we cannot be at the same profit level as other corporations due to the high costs we experience by not moving production abroad. Hence, I would like to point out that my view, which aligns with the position of another regional stakeholder, can be problematic from a financial and competitive perspective.
My goal is to persuade you to consider a phased transition alongside retraining initiatives and supply chain improvements. The rationale for the decision includes damage control regarding local communities relying on Panoshiba’s jobs and taxes, as well as the workers who have been operating here for the entirety of the organization’s existence. I believe it is important to minimize costs, yet I insist that it is critical to maintain the Sunderland base and decrease its production.
Despite the fact that my opinion is partial, I am motivated to keep employee morale high and community support strong; my rationale is also emphasized in the relevant literature. For example, the barriers linked to potential supply chain disruptions are an argument against a full relocation (Hill, 2023). An additional consideration is the potential difficulties in communication in a cross-cultural setting (Thomas and Peterson, 2022). Hence, I would like to reach a compromise that would satisfy both the need for cost reduction and the needs and advantages of employees, locals, customers, and the image of the brand itself. By combining a cross-border and stakeholder theory approach, the resolution is likely to satisfy all parties of this debate.
Compromise Resolution
It is understandable that offshoring production appears to be the most beneficial strategy due to the high competitiveness of the market. However, it is important to acknowledge the barriers that can generate major problems for the efficiency of Panoshiba. COVID-19 is an excellent example of the negative downsides of experiencing supply chain disruptions, according to Pourhejazy and Ashby (2021). Multinational enterprises have experienced more economic damage compared to local ones due to government regulations that were different from country to country. However, I believe it would be more helpful for me to start with the benefits of the current system implemented for the corporation.
Benefits of Maintaining UK Production
From a Direct Foreign Investment perspective, the economic context of local economies is critical to take into account. Needless to say, the experience is both direct, as exemplified through Panoshiba’s effect on the Sunderland community and supported by researchers such as Wang et al. (2021). Simultaneously, a financial connotation is the current sustainable growth achieved via the UK branch as a result of foreign investment. Other markets can be inefficient in regard to skilled labor, implying additional costs for training, as mentioned by Kajjumba et al. (2020).
An additional external influence besides the aforementioned barriers is the risks that multinational enterprises encounter when offshoring. Needless to say, the UK branch has been operating for a long time and has been shown to have a stable nature due to the economic, political, and social environment in the region. Developing countries put MNEs at an inherent risk due to the fluctuations in state authorities and financial system stability, as exemplified by Wang et al. (2023) in relation to Vietnam. Currently, such limitations are reduced due to the fact that production has never been majorly disrupted in the UK environment. Furthermore, there have not been any major cases in which organizations have encountered significant problems as long as they employ state regulatory premises in their business strategy.
International Culture and Cross-Cultural Management
Besides external influences and Foreign Direct Investment connotations, cross-cultural contexts are prevalent. Panoshiba’s experience in the international market has been positive. At the same time, the cultural alignment between the UK branch and the Japanese values and practices has been built since the beginning when the organization was first established.
On the one hand, inevitably, there are cultural differences between the two parties. Communication, negotiation, informalities, and truth-telling are contrasting due to the differences in the country-level culture, according to Tabata and Vrij (2022). On the other hand, Panoshiba is a Japanese organization that has had a UK plant for over 20 years. Furthermore, the production has not been diminished and has proven to be profitable despite the high costs of maintaining the UK factory active.
Such a successful collaboration between two cultures is the result of several components. First and foremost, it is evident that Panoshiba has had transparent and open communication with UK stakeholders, which facilitated a successful relationship based on collaboration. Communication is often mentioned in relation to cross-cultural management, for example, in the research published by Akpa, Asikhia, and Nneji (2021). It is unknown whether similar implementations will be effectively applied under the conditions of offshoring as problems can arise related to the specific national characteristics and cultural alignments between Japan and the market selected for the endeavor.
In case employees from the UK plant will be relocated to the new production location, additional barriers can be encountered. Forte and Ribeiro (2019) emphasize the burden on the workforce from the standpoint of having to adapt to a new environment. Existing employees of the Sunderland base, most of whom have been working for the corporation for a long time, align with their workplace regarding goals and vision.
The Panoshiba values and mission have been engrained in their day-to-day professional life, which is one of the examples of cross-cultural management that has been effectively employed. The concept of a shared perspective, as reflected upon by Mangla and Singh (2022), allows MNEs to have branches globally while maintaining a singular goal orientation. Building the phenomenon from scratch in a new location with newly employed individuals who do not share a history with the organization can be challenging.
An additional argument can be added concerning team cohesion. I do not debate that having a diverse team is essential for improving innovation, creativity, and inclusivity. However, when merging a workforce that has been operating for decades in the UK with a newly established one, communication barriers and dispersions can be expected. The term itself is often applied in relation to one of the challenges of managing an international corporation with multiple offices, factories, and campaigns in various areas of the world. For example, Baptista (2022) reflects on the fact that the workforce can become distanced from each other and from organizational goals when such sudden changes are being employed.
The circumstances that have been described prior correlate with evidence-based theoretical models, such as Porter’s Diamond Model. Based on the framework, a country’s competitive advantage is measured according to its factor conditions, demand conditions, supporting industries, and firm strategy (Tsai, Chen, and Yang., 2021). The UK employment pool has a significant number of skilled workers, and needless to say, the current workforce is efficient at fulfilling demands and generating profit via productivity.
Additionally, transportation-wise, the location allows for easy access to Western European markets and the USA. There is also knowledge of local markets, which, according to Petrovici et al. (2019), is critical when it comes to managing international companies. A similar outcome is likely to take a lengthy time period if relocation takes place. The relationship with customers is also maximized based on location. Beraud, Xicang, and Jiying (2022) mention that a “Made in China” label generates a sense of understanding of a product’s lower quality control measures in consumers. Concerning strategy, the employer is the largest company locally and is popular not only among buyers but also potential employees.
Environmental Issues
Outsourcing manufacturing is not the best decision for maintaining the image of being a sustainable brand. Lopes de Sousa Jabbour, Ndubisi, and Roman Pais Seles (2020) mention that Asian manufacturing is often considered below the ecological standards employed in other areas of the world. Panoshiba will have reduced control over the measures that are being applied to reduce environmental damage due to the fact that communication disruptions are likely to be the case when a new base is being established. This is detrimental in the current environment, in which Caferra et al. (2023) state that buyers are more likely to invest in more eco-conscious goods. The risks linked to the external environment, as mentioned previously, also pose a threat, especially in regions with low democracy, political instability, and frequent financial crises.
Recommendations and Closing Remarks
As the representative of the regional division of Panoshiba, I have to find a balance between protecting Sunderland’s base and ensuring that the corporation itself maintains a competitive advantage. I have previously mentioned all the reasons why I believe that a full relocation cannot be the best option for any of the parties. At the same time, I realize that maintaining all production in the UK will compromise the future of the organization.
Hence, I propose employing less abrupt strategies. Namely, I believe that we have to approach a phased transition of a portion of manufacturing in Asia to reduce costs. I would also like you to consider initiatives aimed at retaining workers to ensure that the local economy will not be damaged as a result of our corporate decisions.
Last but not least, I believe that we can increase the profitability of the remaining UK branch by employing improvements in the local supply chain. It is critical to ensure that the transition is smooth and as risk-free as possible. I believe that the proposed solutions can satisfy most stakeholders that will be affected by the partial offshoring, and I hope my colleagues will review it accordingly.
Reference List
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Caferra, R. et al. (2023) ‘Consumer Analysis and the role of information in sustainable choices: A natural experiment’, Frontiers in Environmental Economics, 1. Web.
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