The advertising agency

Transcription

1 The advertising agency You are MadAdMen, and it is your job to help sell Flopshop s products. You develop the brand, think up the slogans, and design the billboards, TV and press advertising, and point of sale material. You use lots of different methods to get the shoppers in. You have the top camera and photographic technology and spend a lot on massive wall art printers so you can produce top quality promotional material for your customers. You are based in the UK and so are close to your clients and their customers. Although developing countries may charge less you have better technology and a better understanding of the market, which helps you keep the business. Retailers always want things done fast: if you cannot come up with designs, to tight deadlines and budgets, you might lose their business. You work long hours, sometimes all night, to get projects finished, and have a reputation for always delivering on time. You are among the best in the business and retailers compete for you even though you are very expensive. 3 Do you think you are so important to Flopshop that you can charge high prices without worrying that they will sack you?

2 The cotton farmer You are Señor Gabriel, a cotton farmer in Mozambique. As a cotton farmer, you have to work very hard all year, ploughing the land, sowing the seed, thinning the seedlings, weeding, adding fertilizer, spraying with insecticide 5-7 times and picking the cotton by hand. You need money for wages and for buying the seed, fertilizer and insecticide to grow your crop. You are in a risky business: your investment in seeds, etc. is at risk if the weather is bad, and you depend on getting the right price for your crop to make a profit. In 1992 Lonro, a UK company, decided to buy cotton from farmers in your area, to then sell on to companies like Primark and Next. For the first time in nearly two years, you had a guaranteed income and could buy things for your family. Lonro even repaired the roads on your farm. In 1996, the price you received for your cotton fell by a quarter. By 1997 the price of cotton on the world market was very low, because countries like the USA who had surplus cotton dumped their surplus onto the world market. Lonro decided to stop buying your cotton because they could get it cheaper elsewhere. Now, you don t have anyone to sell your cotton to, and your income has disappeared. 2. What will this development mean for you and your family? 3. Do you think this is fair? 4. What proportion of the 4 price of the T-shirt should you earn?

3 The T-shirt manufacturer You are Lonro, a T-shirt manufacturer in the UK. You handle the whole manufacturing process: you buy the raw cotton, spin it into thread, weave and dye the fabric and then make up the garments. Much of the manufacturing process requires expensive machines. These need to be controlled by skilled operators who have to work fast, so your labour costs are also high. You have invested a lot of money in your machines, and took out loans to pay for them. You need to make a good profit on your product so you can repay the loans. You want to expand your company, so need to sell to the big retailers. The lower your manufacturing costs, the more profit you make, so you try to buy your cotton as cheaply as possible. You used to buy your cotton from Señor Gabriel in Mozambique, but when the world price for cotton fell you decided to switch your business away from him it was cheaper to get your cotton elsewhere. In your business you have to make tough decisions you have a responsibility to your shareholders to maintain dividends. Your are under a lot of pressure from the retailers to make sure the quality and style of the product is right for the customer. You have to work very fast to keep up with current trends and compete with other garment manufacturers. T-shirts are selling well at the moment. You need to make money on them to invest in the design and production of future garments. 2. How do you feel about your decision to pull out of Mozambique? 3. Do you think you have a responsibility to continue trading with Señor Gabriel? 4 What proportion of the 4 price of the T-shirt should you earn?

4 The retailer You are Flopshop, a high street clothing retailer. You need shops in the city centre or shopping centre where rents and wages are high. You have to make your shops attractive, which means high decorating and maintenance costs. As the retailer you have no guarantee that people will buy your T-shirts. You have to compete with other brands, so you spend money on advertising. You are at the end of the commodity chain and you don t have any contact with the cotton farmer. Your focus is the consumers providing what they want and your profits to keep the company shareholders happy. You want to spend as little as possible on the product so you can invest more in advertising, shop fitting and wage bills. If Lonro, your T-shirt manufacturers, pitch their price too high, it is a global market: you can source your T-shirts from another country where they are cheaper. It would be to your benefit to outsource production to poorer countries, as wages are lower and raw materials cost less. This would help you keep prices down and customers happy, so they will keep coming back. If your company outsourced the production to poorer countries, it would generate jobs there. That would help the countries develop, educating workers and giving them skills. Anyway, it costs them less to live so they don t need to be paid as much as workers here. 3. Do you have a responsibility to always buy from Lonro even if you can get the T-shirts cheaper elsewhere?

5 The shipping and transport company You are ExPedEx. Your business is shipping and logistics, mainly between Africa and the UK. You bring in cargoes of cotton for Lonro, and you also handle the transport between Lonro and the retailers they sell on to. Your cargo ships are very expensive to buy and maintain, and your running costs are very high: a vessel en route between Africa and Europe may be at sea for up to four weeks. You have to pay port fees at both ends of the journey. Your large fleet of lorries is also expensive to buy and maintain. One of your heaviest costs is insurance. Not only must you insure your vessels, vehicles and staff, you must insure against the loss of, or damage to, the goods you are carrying. If the cotton you are carrying for Lonro is lost or damaged it is your responsibility to compensate Lonro for it. The retailers Lonro sells to expect on time deliveries. They change their clothing stock every six weeks, so you are always on the go. If you don t keep to schedule Lonro may sack you and find another logistics company.