As the world’s economies continue to reel from the damage caused by the spread of Covid-19, Supercar manufacturer McLaren is the latest company to announce a huge wave of layoffs.
The British based firm is most famous for their Formula One Team and supercars costing upwards of £150,000 ($185,000).
The company, which employs over 4,000 people around the world, has announced that they plan to make 1,200 people redundant in the coming months. Although the company has been working hard to cut costs and avoid the layoffs, the financial impact from the Covid-19 crisis has been too severe.
With consumers holding off on expensive and lavish purchases, the carmaker has seen a huge reduction in sales as demand for their supercars has plummeted.
In addition to the declining sales revenue, the firm is also losing out on the millions of pounds which they earn from advertising during the Formula One racing season. If you’ve ever seen a Formula One car, you will know that once it is on the track you can see more logos and brand names than actual car!
With the 2020 Formula One season yet to start, and seven races already cancelled, McLaren has lost out on millions of advertising revenue. The combination of this and weak demand for their supercars means the company has no secure revenue stream to fall back on. The unfortunate result then, as costs continue to mount, is the laying off of over a quarter of the workforce, and probably more as we head into 2021.
Q1. What is meant by the term sales revenue?
Q2. What type of good do you think a McLaren Supercar is?
Q3. Explain why demand for McLaren Supercars has decreased so significantly. Draw a diagram to show the likely effect on equilibrium price and quantity.
Q4. Analyse the reasons why McLaren is having to lay off over a quarter of their workforce.
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