Brendan Burr
BTEC National Certificate in ElectronicsThe Economical,
Environmental, Legislation and Social Constraints of a Company
Assignment 2 Business Systems for Technicians
External factors and legislation which affect the operation of
an engineering companyPlease Note
Tasks 1 and 2 must be completed in full and are compulsory.
On successful completion of these tasks you will achieve a Pass
(P4 & P5) Please note that other PASS criteria exist on other
assignments and only on completion of ALL PASS CRITERIA will a PASS
be awarded
Task 2 Optional
On successful completion of this task you will achieve a Merit
(M2) provided that ALL the Pass criteria have been completed
successfully.
Please note that other Merit criteria exist on the other
assignments and only on completion of ALL Merit criteria will a
Merit be awarded
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Brendan Burr
BTEC National Certificate in ElectronicsThe Economical,
Environmental, Legislation and Social Constraints of a Company
External factors and legislation which affect the operation of
an engineering companyWHAT YOU WILL LEARN IN THIS ASSIGNMENT
You will appreciate that engineering businesses in the UK have
to compete against the rest of the world and that sometimes their
operations are affected by things over which they have no control.
For example, sudden changes in energy and raw materials prices
caused by economic uncertainty in other countries will have a
knock-on effect if a product has been promised to a customer at an
agreed price and there will need to be a strategy to take account
of this eventuality. You will also appreciate that businesses have
to operate according to a set of rules designed to protect their
workforce, their customers and the environment.ASSIGNMENT
OBJECTIVES
In this assignment you will need to:
1 identify a UK-based engineering company and investigate
howprofitability is affected by external factors over which it may
not have control
2 carry out further research to determine what effect changes in
theeconomic environment may have on the operation of the
company
3 identify the statutory legislation and regulations which
govern theway that the company operates and explain how it complies
with them
4 describe the environmental and social issues which impact upon
the operation of the business.WHAT YOU WILL DO IN THIS
ASSIGNMENT
You will use the internet and other information sources to carry
out research into the external factors and pressures which can
affect the profitability of an engineering business. You will
investigate how the economic climate both in the UK and in the
wider global economy affects the profitability of engineering
businesses. You will find out about the statutory legislation and
regulations which apply to businesses operating in the UK. You will
investigate the environmental and social issues which must be
accounted for when setting up and operating a business.TASK
INTRODUCTION
The main focus of this assignment is to carry out research based
on an actual engineering company in order to find out how it
operates in an ever-changing economic and legislative climate. You
have a number of options when deciding which company to base your
research for task 4:
1 use the company where you work 2 use one where you have been
on work placement 3 make an arranged visit (possibly in conjunction
with gathering datafor other units)
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Brendan Burr
BTEC National Certificate in ElectronicsThe Economical,
Environmental, Legislation and Social Constraints of a Company
4 use the factory which featured in the activity on the use of
chemicalsin Case study 5 but widen the scope of your investigation
to include more than just electroplating chemicals.TASK 1
(a) A UK manufacturing company supplies most of its product to
the USA and has negotiated regular deliveries over a 10 year span.
The contract was signed five years ago. The product was priced in
sterling (UK ) with an agreed uplift each year equivalent to the
average of the USA and UK inflation rates. At time the exchange
rate was $1.46 (US) to 1 (UK). The American company has asked for a
price review. Explain why the US customer might want this review
and consider what effect it might have on the profitability of the
UK business. (b) Currently the Chinese economy is booming. Chinese
manufacturing industries are able to produce goods much more
cheaply than companies in the West. The Chinese economy is unique
in that it has a positive balance of payments and is able to build
up large reserves. To take advantage of the lower cost base, many
UK companies have relocated their manufacturing facilities to China
while maintaining design and support services in the UK and EU. (i)
Explain how the Chinese are able to produce manufactured parts more
cheaply than in the West while still maintaining quality. (ii) What
external and economic factors might derail the Chinese success in
manufacturing? (c) On the BBC News website on 29 May 2007 there was
a short report about Nanjing Automobile Corporation (NAC) reopening
the MG sports car factory at Longbridge, Birmingham. The article
presented the reasons for this initiative and included a number of
statements from the chief executive at NAC. You can find this
report at: http://news.bbc.co.uk/1/hi/business/6700219.stm To set
this report in context, it might be worthwhile to look at earlier
reports by the BBC and other organisations when the MG Rover
company ceased trading in 2005. (i) What caused MG Rover to go out
of business in 2005 and what effect did this have on the local
economy? (ii) How much design work, machining of components and
testing is planned for Longbridge? (iii) What are the reasons for
NAC deciding to build cars at Longbridge? (iv) In five years time
will they still be producing cars at Longbridge? These tasks
provide evidence for grading criterion P4.TASK 2
(a) When NAC reopens the Longbridge factory it will probably
hire UK staff who previously worked for MG Rover before it closed,
but with conditions of service possibly different to those they
were used to. What might those differences be? (b) Most Rover
workers who were made redundant after the firm's collapse found new
jobs, many retraining to work in other areas. Explain the steps in
a retraining process starting from the point when a worker is given
notice of redundancy.
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Brendan Burr
BTEC National Certificate in ElectronicsThe Economical,
Environmental, Legislation and Social Constraints of a Company(c)
In assignment 1 you were given a profile about a business which
manufactures hydraulic equipment. It was called company A. (In task
3 of this assignment you will be looking in more detail at one of
its products.) Research the types of processes and manufacturing
equipment which this sort of business would be using and identify
which legislation and regulations are applicable to its operation.
These tasks provide evidence for grading criterion P5.
TASK 3
In Case study 5 in the activity on the use of chemicals you were
given this information: You work for a company which carries out a
range of electroplating processes on its products. These products
are made mainly from mild steel components which are stamped,
formed and welded together. The factory has two injection moulding
machines for producing small items such as covers, handles and trim
pieces. The plating department employs 50 operators and there are
baths for plating gold, silver and chromium. The factory is long
established on what was once a greenfield site. It is now ringed by
housing estates with a single access road to the factory. To remain
competitive the management would like to move from a two 8hour
shift system to a three 8-hour shift seven-day-a-week operation.
The total number of people on site at any one time would be about
160. Car parking is restricted and lorry movements number about
four per day with two of these being large articulated vehicles.
Fuel oil is delivered by tanker and there are specialist chemical
deliveries once a month by secure lorry. People living nearby have
specific concerns about two operations carried out at the factory:
1 stamping, which is a noisy process 2 plating, which uses cyanide
and is therefore perceived as a deadly process by some residents.
The company has decided to make a presentation to the local
residents association explaining how it complies with legislation
and demonstrating its good green credentials, particularly in
respect of discharging waste water from the onsite treatment plant
into a nearby culvert which runs down to a river. Your manager has
asked you to put together the presentation which will explain the
legislation appertaining to the two operations and the benefits to
the company of complying with the law. To counter the misinformed
criticisms of some residents, your manager has asked that the
presentation include comment about recent EU legislation which is
limiting the way that the company can operate. This task provides
evidence for grading criterion M2.TASK 4
Using the company in which you work, one you have visited or the
one in task 3, evaluate the importance and effects of external
factors on the businesss operation. The most straightforward
approach is to use a real
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Brendan Burr
BTEC National Certificate in ElectronicsThe Economical,
Environmental, Legislation and Social Constraints of a
Companycompany so that you have access to published financial data
(such as share prices and trading figures) and other economic data.
You are looking to evaluate what happens if for example: 1 the Bank
of England base rate changes 2 conflict between countries increases
or is resolved 3 climate change and carbon footprint issues
increase 4 raw material prices change 5 the supply chain for
strategic materials changes. This task provides evidence for
grading criterion D2.
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Brendan Burr
BTEC National Certificate in ElectronicsThe Economical,
Environmental, Legislation and Social Constraints of a Company
Task 1a) The American company is obviously doing the correct
thing, for its own interest, when deciding to request a price
review. This is because the Pound Sterling (UK) may have become a
much stronger currency than that of the Dollar (US). If that is the
case then the US company may be spending a lot more money than is
actually required and effectively making a small loss on potential
profits. If the opposite has occurred, where the US Dollar has
become stronger than the UK Pound Sterling then the US company may
be shooting themselves in the foot as they would currently be
getting a bargain, so it could work both ways. The UK manufacturing
company has had a steady income for the past five years on a
pre-negotiated fixed inflation rate. It is however only half way
through the contract and therefore a massive amount of money could
be lost because of the price review. The trading may cease however,
if the UK manufacturing company does not agree with the price
review as with all companies they are looking for profit on their
operations to be able to survive and grow. The US Company may ask
for the price of the product to be lowered to make it more
affordable, as it would be tough to maintain a small profit, as
some months the company will make losses. Alternatively the US
company may decide to look for a new cheaper source of this product
if the price review doesnt go ahead, but there may be contract
clauses and potential lawsuits ahead if this were to happen. The UK
manufacturing company are quite likely to agree with the price
review as the US company are the majority buyer from the UK
company, so any loss in sales would be extremely significant for
the UK company to handle. In conclusion; the UK company could make
a large loss of earnings if the relationship between the two
companies broke down, causing the US company to switch supplier.
However if the UK company agreed then the contract may be extended
to exceed 10 years if the relationship was strengthened by the
cooperation between the two companies. The profits of the UK
company are likely to decrease if the price plan is agreed, due to
the inflation rate. However over the long term contract period it
will gain a larger profit than if it were to cease supplying its
products to America.
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Brendan Burr
BTEC National Certificate in ElectronicsThe Economical,
Environmental, Legislation and Social Constraints of a Company
b) i)
The Chinese are able to produce products cheaply at the same
quality due to many reasons. Firstly the labour is extremely cheap
which allows companies to produce products with less expenditure
which can then be consequentially deducted from the overall price
of the product. The lives of the individual workers are not valued
as much as in the West which results in the health and safety for
the Chinese workers being compromised. This in itself will deduct
cost from the overall manufacturing cost, as machinery will not
have to have guards and other safety features. Also there would be
no maximum amount of safe working hours, so people would be
exploited and forced to work many hours a day for the majority of
the week. As China is a Communist country, its Government is more
committed to the health of the county rather than the health of
individuals. It doesnt offer help to individuals who need it,
resulting in less expense for the country as a whole, but also
results in a different mindset of its population. Due to the lack
of income available from the Government, everybody is forced to get
a job to be able to survive. Everybody wants to work hard to get
more money, maintaining the quality of the products produced,
simple but incredibly effective. By maintaining the design and
support services in the UK and EU, the UK companies are able to
ensure that the quality of the products are of a similar standard
to that of before the relocation of production. Another reason is
because materials are cheaper in China as they are more local.
China are also able to keep large reserves, so production can begin
quickly, cheaply and effectively.
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Brendan Burr
BTEC National Certificate in ElectronicsThe Economical,
Environmental, Legislation and Social Constraints of a Company
ii)
The internal factors which may result in derailing the Chinese
success in the manufacturing industry may include things such as a
change in Government. This may allow Unions to form which will
increase the chance of individuals fighting to get higher wages and
better working conditions. The external factors could be new EU
regulations, that my require any imports to be manufactured with
regulations on Carbon Dioxide emissions. This would increase the
manufacturing costs of nearly all products produced cheaply by
China as they are one of the highest polluting countries in the
world. If cheaper labour was available elsewhere then it would be
likely that there would be a relocation of the manufacturing
operations to that country, as all businesses are looking to make
as much profit as possible.
c) i)
MG Rover went out of business for a number of reasons, which all
accumulated and caused a catastrophic breakdown of business
structure within the company and its assets. According to the BBC
website the company failed due to gross mismanagement, expressed
with the concern that the Phoenix Four (The four owners) were
incapable of securing the companys future and expanding it into a
company that makes money instead of losing it. There was a
continuation in the decrease in vehicle sales, losing thousands of
sales each year. This was due to cheaper and more stylish cars
being available to the public causing poor perception in all MG
Rovers even if they were the most modern new release vehicles. Job
losses were substantial in the local economy with losses of just
under 5,000 almost immediately and then the remaining 1,000 after
the cars still in production had been shipped to their customers.
Within Britain car warranties were also in jeopardy as there were
no longer places to repair cars under the MG Rovers approval. The
new Longbridge factory, opened by NAC is vehicle assembly only.
This means that all of the parts can be made in countries where
labour is cheap (lowering the cost of the overall manufacturing of
the product) and imported. The main advantage of this method is
that the vehicle can be declared as Made in England, even though
the car was only assembled in England. Because the UK is part of
Europe, a large market then opens for the NAC to sell to other
countries in the EU without having to pay large export fees. The
cars will also be road tested in England, as it would be cheaper
than sending a finished product to a distant country, complete the
road test and then ship it back to England to be sold to a
customer. There are plans to have a new model of MG designed in the
UK and produced at Longbridge, within the next 18 months.
ii)
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Brendan Burr
BTEC National Certificate in ElectronicsThe Economical,
Environmental, Legislation and Social Constraints of a Company
iii)
As discussed in the previous answer, the Import tax is kept
lower as parts can be shipped in large quantities. There is also
the fact that less space will be used up on cargo flights and
shipping, which will in turn reduce costs of transportation. The
build quality will have a much higher reputation as the product
will be labelled as being produce in the UK, even though it was
only assembled here. And also due to the product being assembled in
the UK, it can be shipped to and sold in the EU at a much reduced
cost to that of a country outside the EU. All of these reductions
in costs can enable the NAC to save money on the finished product.
Which in turn will result in greater benefits to its employees,
such as wage increases and secured pension agreements. It is tough
to give an accurate answer as the country is now in recession and
the car industry has taken a huge knock, with thousands of
redundancies within the last 6 months. If things continue the way
they are at present, then it is unlikely for any car factory to
still be producing in five years time. However the plans from the
NAC look promising, with five new models planned for production in
the next few years, which would hopefully secure jobs at the site.
The price range is still high, as the cars are not as modern,
stylish or reliable as other cars on the market for less money. So
depending on how the Longbridge site handles the UK recession will
enable the NAC to potentially employ more workers and produce
larger quantities of vehicles each year.
iv)
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Brendan Burr
BTEC National Certificate in ElectronicsThe Economical,
Environmental, Legislation and Social Constraints of a Company
Task 2a) The NAC in Longbridge is likely to make a loss in its
first year due to the high expense of reopening the manufacturing
factory. Due to expenditure in areas such as new tooling, factory
assessments and other areas. For this reason I would say that
expenditure costs will try to be kept to a minimum so the salaries
of the new employees are likely to be lower than a similar job in a
company with stronger foundations. Employees may be placed on the
National Minimum Wage, whereas before they may have been on much
more than that. Another aspect which may be limited, due to the
reopening of the factory could be holiday. It could be kept to a
minimum as this would ensure production is kept up to a high
capacity, throughout the year. This would be sealed in a contract
which would include contracted hours, holidays and other
entitlements, which may differ from the contract held with the
previous company. Peoples job roles may also be different so it may
be necessary to retrain certain workers on new tooling and
machinery, which will cause extra expense to the company. People
may be asked to go on training courses without getting paid. When a
person is made redundant it is their job role which is no longer
required and not the actual person. This being the case, if the
person has skills in an area that is no longer required by the
company, that person may get offered a place in a different
department with new training and skills to learn. It should be made
clear to the person, whose job role has been made redundant,
whether or not they will be offered a new place in the company or
whether they need to find an alternative company to work for. There
is a legal obligation for the worker to be given a period of
notification of redundancy, allowing him/her time to find
alternative employment/training before finding themselves without a
job. (This keeps the unemployment rate lower, making the Government
look better!). Employees may also be given the opportunity to go to
college or university to study and get new skills, adapting their
existing knowledge about the company into a different department.
The company who makes the redundancy must allow the affected person
to apply and attend interviews for new jobs, allowing them to more
easily find a new job.
b)
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Brendan Burr
BTEC National Certificate in ElectronicsThe Economical,
Environmental, Legislation and Social Constraints of a Company
c)
Company A manufactures Hydraulic Equipment for the Newline
Aeroplane Manufacturing Company (NAMC). The company has a strong
structure of approximately 100 Employees and 30 years of
experience. The Employees are so vast that many areas of the
company which cover many aspects of business, such as design and
manufacturing of the parts. The manufacturing equipment which this
business would be using would be CNC (Computer Numerically
Controlled) Machines, which are able to manufacture parts extremely
quickly and precisely. The design office would produce the parts on
a CAD (Computer Aided Design) Software, which would enable multiple
calculations and redesigns before money is wasted on the actual
production of the part, saving in material expense. Then the data
would be sent to the CAM (Computer Aided Manufacture) Machines to
begin production of the components. The manufacturing equipment
would be things like, Computers for CAD as well as the software.
Also CNC machines which are linked and compatible with the CAD
software. Once the parts are manufactured they must then be treated
to ensure life longevity of the parts. This could include
electroplating or anodizing to give the material surfaces the
properties of other materials, such as rust prevention and added
hardness (scratch resistance). The Company will have to abide many
laws and legislations set out by the UK and the EU to protect the
employees of the company. This includes such legislation as the
Health and Safety at Work Act 1974 (HASAWA), which helps to ensure
the workplace becomes a much safer place. This is done by making it
a legal requirement for employees to have adequate training and be
given awareness on the facts of Health and Safety in the workplace
and potential detrimental problems caused by working. Such as
Industrial Dermatitis, hearing loss from repeated noise and
repetitive strain injuries from the design work on computers.
Turning and Milling machines will have to have impact proof guards
to ensure that high velocity objects are prevented from hitting the
operator or other people in the workshop. They would also have
Emergency Stop buttons as there may be a need to isolate the power
in the event of an emergency. Grinding machines should be used with
extreme caution, as the grinding wheel is a very hard but brittle
material and will shatter if stopped abruptly, so E-Stops would not
be used. Manual Handling techniques are also important and should
be taught to people who may be moving some of the components, as
they are bound to be heavy from the materials they are to be made
from. From the component treatment stage, the components are
normally dipped into acids, to clean the surface and then treated
with the
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Brendan Burr
BTEC National Certificate in ElectronicsThe Economical,
Environmental, Legislation and Social Constraints of a Company
appropriate materials. These substances are extremely hazardous
to not only our health, but to the health of plants and wildlife,
so must be disposed of with extreme care. This category falls under
the Control of Substances Hazardous to Health Regulation (COSHH). I
would also say that certain Aviation Laws have to be met, due to
the components being produced for an Aircraft Manufacturing
Company. This may include such things as impact tests, to ensure
the new component can actually withstand the impact it was designed
for (such as Landing Gear).
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Brendan Burr
BTEC National Certificate in ElectronicsThe Economical,
Environmental, Legislation and Social Constraints of a Company
Task 3
13
Brendan Burr
BTEC National Certificate in ElectronicsThe Economical,
Environmental, Legislation and Social Constraints of a Company
14
Brendan Burr
BTEC National Certificate in ElectronicsThe Economical,
Environmental, Legislation and Social Constraints of a Company
15
Brendan Burr
BTEC National Certificate in ElectronicsThe Economical,
Environmental, Legislation and Social Constraints of a Company
16
Brendan Burr
BTEC National Certificate in ElectronicsThe Economical,
Environmental, Legislation and Social Constraints of a Company
Task 4AgustaWestland is my chosen company to study. They are a
large sized company as they employ 200+ people (9,000 people in
total). They design and manufacture varieties of Helicopter for the
civilian and military markets. They also provide a large customer
support network to train aeronautical engineers, employed by the
Royal Navy or Royal Air Force, to maintain specific types of
aircraft, such as Lynx or AW101 Aircraft. AgustaWestland are
supported in Italy as well, due to their parent company being
Finmeccanica. This means that a potential failure in the UK market
can be supported by the Italian market, as long as the problem
hasnt already spread to that area of Europe. AgustaWestland have
sold multiple shares of the company to its workers, this made the
company approximately 1 Billion which could be used in further
investment. The company is split into three different sectors of
Corporate, Business and Operations. If the Bank of England Base
Rate changed affecting the UK market, there could be (and has
recently) been difficulties in securing new and future contracts
with major customers. There is currently a period of financial
insecurity where the Government was looking at the Defence Industry
and major talks in cutting costs. While doing this the Ministry of
Defence were set to withdraw the purchase of 70 Future Lynx
Helicopters. Luckily the MoD pulled funding from the manufacture of
Aircraft Carriers instead of the Aircraft themselves, saving
hundreds of jobs at the Yeovil site, but causing major lob losses
in the Shipping Industry across Britain. There would also have been
a major affect to the Shareholders, this is because the profit of
the company would have been dramatically slashed causing a knock on
effect to the price of Shares. If the BoE Base Rate decreased, the
Shareholders themselves may get scared and begin selling their
shares in the company, trying to avoid a loss. They may also sell
up as they would begin spending money instead of saving and
investing it. The local MP was in discussions with the MoD to
secure the contract at the Yeovil Site, this was on the 4th of
November 2008. From the Finmeccanica Share Graph (below) you can
see that the share price had decreased significantly from the late
summer in 2008. This was the period where the BoE Base Rate was
dropping also. Once the Contract began to look secure again, around
the 5th of November the share price began to increase steadily.
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Brendan Burr
BTEC National Certificate in ElectronicsThe Economical,
Environmental, Legislation and Social Constraints of a Company
The BoE Base Rate then fell significantly in late February to
March, falling to around 1%, and then again to 0% on the 25th of
March, hence the lowest Stock Price for years.
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Brendan Burr
BTEC National Certificate in ElectronicsThe Economical,
Environmental, Legislation and Social Constraints of a Company
If there were conflicts between countries then there may be a
higher requirement for AgustaWestlands products and services. This
would be because more aircraft would be deployed to the various
warzones. All these aircraft would require servicing at regular
intervals, with the increased demand in usage there would also be
an increased demand in repairs and replacement parts. Other
industries would probably decrement in share prices due to
conflicts. This would be because the companies would find in
difficult to trade to outside countries, which would significantly
reduce the amount of potential sales. This decrease in sales would
result in an increase in price of the individual products. Which as
you can see is a knock on effect, as people are less likely to
purchase things at higher prices so eventually all sales would dry
up. The AgustaWestland company is based primarily in Europe (with
bases in the UK and Italy) as well as the US. This would make the
company quite vulnerable to any changes in laws regarding the
climate or trading and manufacturing laws. The cost of the
businesses products would have to increase to cover the cost of the
time and money spent ensuring the company factories meet any new EU
laws or Global Trading Laws. Pollution laws, for example, may
result in newer expensive filters being installed to prevent
emissions exceeding that stated in the law. This money would have
to be covered somehow and it is likely the product that the new law
affects, would increase in price to cover that expense. The company
could also be greatly affected from the potential of changes in the
costs and availability of Raw Materials. If raw materials from an
aluminium source run out, for example, then almost the entire
structure of the aircraft would be compromised. This would increase
the price as a new
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Brendan Burr
BTEC National Certificate in ElectronicsThe Economical,
Environmental, Legislation and Social Constraints of a Company
source would have to be discovered and aluminium would have to
be created to the correct specifications to meet those of the
aircraft design. The same could be said for copper ore, as this
would compromise the electrics of the aircraft. An increase in
price in this material would force an increase in the overall
aircraft price. At AgustaWestland in the Business sector of the
company there is a division set up for Marketing. This allows
AgustaWestland to sell directly to customers without going through
an intermediary. This saves a large cost to the customer and
enables a much better customer to business relationship which will
help with the future servicing of the blades and airframe.
AgustaWestland do not make the whole aircraft, which isnt
surprising as it is a complex piece of equipment. They work with
many companies, such as: AVIC II/JIANGXI CHANGHE, Kawasaki,
NHIndustries, Bell Helicopter, CAE, Lockheed Martin, Boeing and
Denel. These are the companies who are effectively the supply chain
to the multiple various aircraft that AgustaWestland produce. If
Boeing, for example, withdrew the Right to service Apache
Helicopters (as it is their design) then the company would also
lose that area to its existing customers, such as the MoD. This
shows that there is a major effect from outside companies as well
as AgustaWestland themselves.
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