December 01, 2010 Case Study Analysis # 70 Castlebridge, a maker of high-quality outerwear, located in London is at a cross roads. Although its headquarters operates from London, most of its manufacturing has moved offshore. With the last domestic factory slated to close, the firm’s executives struggle to preserve the “Britishness” of the brand.
On the other hand, the company has to reduce costs to remain profitable. It seems that moving production offshore is inevitable. The executives believe that Castlebridge should come clean about it.In a world where stakeholders matter more than ever, the firm can’t just outperform competitors. It has to go above and beyond to satisfy their constituents. Therefore, the CEO Mary Crane asserts that the plant closure is a logical step. Reputational risk is a concern as well as brand image.
The majority of the customers who purchase Castlebridge items are wealthy. They pride themselves in wearing high class British fashions. The company fears that Asian manufacturing tags will diminish consumer confidence in quality and authenticity. The CEO wants to take the logical approach where the objective of any firm is to maximize profits.By not doing so, the firm will lose out to the competitors and will continue to face rising production costs in keeping up with consumer preferences. She holds Fergus Harold accountable for being overly nationalistic and even rather ignorant to the status of British clothing made in Malaysia and its effect on a Japanese consumer. Her unabashed perception indicates that backlash would be from local purchasers whose confidence may be undermined by the outsourcing of a classy British brand to a third world country.
Furthermore, it is well pointed out that the CEO does not feel threatened by British media.Supposedly she sees that production line workers are of the lower working class whereas buyers of Castlebridge’s products of are of the wealthier class. Castlebridge simply cannot survive in their high cost market by maintaining its production lines within the UK. Labor cost is just too expensive. Trade unions have become cleverer with their protests and could potentially be a thorn in their side. The company needs to make a decision soon. The British public has been down this road before, as have foreign consumers of British products.
I agree with the CEO that cost cutting measures need to be implemented.There is no need to maintain high production costs and place burden upon the shareholders of the company. If the British public has been down this path before then there should be no problem. If the firm shines light on its native roots and its international production, it could establish a winning reputation as a truly modern, global brand. However, the customers’ sentiment is very important. The brand image is highly regarded and maintaining the class, quality and authenticity is just as important as running the risk of a complete closure and a shutdown of business.Could Castlebridge hire foreign employees to work in the U.
K? Could wages be scaled down to keep in line with profit margins? Maybe these alternatives should be considered. Otherwise, the real risk to the brand could be the potential loss of its high-class distinction and not its national identity. Before making a firm decision, all alternatives should be considered. As a member of the Board of Directors, Ferguson should have the conscientiousness to advise the company to rediscover and recommit to the core values that have made them so successful.Should the CEO go through with moving its production facilities offshore, he could recommend a trust-building people strategy, modeled by the CEO, which emphasizes forthright communication from management to the employees as well as the opinions of its customers. In doing so, the company will be compliant with its corporate culture and stakeholders. The last thing Castlebridge needs is to have its employees and customers reject the principles of this outerwear line.
With that being said, the company can continue to enjoy the success it has had.