4.2.3 Assessment Of A Country As A Production Location

Question 1

Assessment of a country as a production location

Answer 1

1. Costs of production.
2. Skills and availability of labour force.
3. Infrastructure.
4. Location in trade bloc.
5. Government incentives.
6. Ease of doing business.
7. Political stability.
8. Natural resources.
9. Likely return on investment.

Question 2

Location in a trade bloc

Answer 2

Trade blocs allow easier access to markets with lower export taxes.

Question 3

Costs of production

Answer 3

Low wage costs.
Low land costs.

Question 4

Government incentives

Answer 4

Tax incentives.

Foreign investors will bring in capital to support economic development and create jobs.

Governments wish to transfer intellectual property e.g. the skills and knowledge base of the new business locating in the country.

Question 5

Natural resources

Answer 5

Production is often set up to be located with close proximity to these resources.

Question 6

Return on investment

Answer 6

Profitability is the main objective for firms.
Heavy investment is required to move into new countries.

Question 7

Infrastructure

Answer 7

Businesses cannot just consider costs of production but must consider infrastructure: roads, airports, ports, railways, energies, utilities, education, healthcare, social.

Question 8

Ease of doing business

Answer 8

Legal systems and other regulations that make business harder as well as starting there - receiving any permits needed.

Question 9

Political stability

Answer 9

A business will consider the different laws, tax levels and trade policies to assess the country for a stable system of government.

Businesses hesitate to enter countries with frequent changing governments or heavy political changes.