A Level Business Studies - Influences leading to Clarks moving its production abroad

Discuss the main influences that are likely to have led Clarks to move all of its production abroad

Clarks is likely to have been influenced by the growth of international competition which led to moving its production abroad. As the world has become more globalised and connected, Clarks has been forced to compete on an international scale with online retailers who can offer the same product at a cheaper price. Moving their production abroad to countries like China and Vietnam allows for Clarks to achieve lower costs as labour costs as lower there than in developed countries which means they can make a greater profit with each unit sold. This was important for Clarks to do as they previously had a slow response to change which put them at a disadvantage; they had to diversify their product by offering more designs that were modern and fashionable (whilst still conforming to the traditional idea of a ‘Clarks’ product). This means that they could achieve greater added value as a result of this so that they could better compete internationally. The growth of international competition will likely have influenced the decision to move production abroad because it would be a potential threat to their revenue as a section of the market could be swayed by cheaper prices from substitute products.

Another reason for Clarks to move its production overseas may be to drive growth. Clarks is a private limited company that used to prioritise durability over style, and because it is a family company, it had a slow response to consumer trends changing as they were more traditional. The need for change perhaps motivated the need for growth in the business as it had reached a point of saturation within the UK market so is looking for ways to grow. An example is how they have purpose-built distributors abroad which ensure products get to customers across the world within 48 hours. Offering more modern products that come conveniently to the customer is achieved through having production abroad as it means these styles can be achieved for cheaper, and also means that Clarks can be perceived internationally as a reliable brand which may acts as a competitive edge over close competitors.

To conclude, perhaps the main reason for moving production abroad is to get lower costs. It ca be argued that falling behind trends influenced this decision also but the change in consumer demands means this would have likely been inevitable anyway. Lower costs is important to Clarks because it has to compete with a large range of retailers who can offer the same or similar products at a cheaper price. Through moving abroad, they have the potential to undercut competitors and attract a more mass market for their products. Moving abroad is often triggered by a need to better compete on price and this is the case for Clarks. The most important factor to consider is that moving abroad would have been inevitable for Clarks if it wanted to continue to operate as customers would have moved to alternative products that were both cheaper and more fashionable if it still offered “durable”, expensive shoes.