Impact of Labour Unrest for Business (Production) - Essay Example

Labor unrests are generally organized and strike actions carried out by labor unions in the case of the failure of solving such labor disputes. The employees and the overall workforce alter the normal production routine process, thus impacting the shareholders of the production business; the key reason for these unrests is the workers articulating for the increase in wages and labor rights (Silver, 2003). The impacts of labor unrests on a production firm or a business can be discussed as follows.

Lower Production levels Labor unrests have a significant impact on the businesses dealing with production, as they lead to lower production levels. Strikes by workers affect greatly the production levels, because most of the production businesses do not have production schedules where one day stock is taken as surplus. Thus labor unrests can lead to the drastic decrease in the production volumes, which can impact the key wholesalers and retailers negatively, as the business production is a countrywide supplier (Silver, 2003).

Shift in consumer demand Labor in the production business causes shifts in the demand of consumers, notably in the case of strikes. Typically, most of the manufacturing companies keep a significant volume of inventory in their warehouses purposely, as a precaution against labor unrests, which can only represent not more than a month inventory. This production schedule approach ensures that companies continue with their normal production and supply operations for some time after the unrests, thus providing a period for solving the labor dispute without much effect on their business operations (Silver, 2003).

In the case of the dispute taking long to be resolved, consumers may wait for the return of the normal operations or shift to the available competitors. Overlap impacts Labor unrests of higher degree of magnitude such as nationwide strike have a direct as well as an indirect impact on the related markets. Such labor unrests are characterized by work stoppage in the production manufacturing company, and this has a great impact on its major outlets and other stakeholders that have frequent transactions with the company.

Labor unrests can lead to a standstill of operations in its markets. Companies operating as providers of complimentary services to the production company are the highly affected, because its services or commodities will loose it major market share due to the slowdown of operations at the production company’s plants. This situation may lead to these stakeholders’ decision to go to other markets and the suppliers’ decision to go to the market outlets (Silver, 2003). Loss of revenue and profits Labor unrests cause slowdown and, at times, standstill in the operations at the manufacturing plants.

These standstills and slowdowns have an impact of reducing the volume of sales. Lower volume of sales translates into lower revenue realized from them, leading to lower profitability as compared with the period of labor stability (Silver, 2003). This impact is commonly expected to extend to the major outlets, as the level of supply will go down and the company is a nationwide distributor. In this case the company will go at a loss, since the overhead fixed cost will remain the same, straining the less realized revenue and the profits.

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