4.2.3 Assessment of a country as a production location

Question 1

factors affecting whether good 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

costs of production

Answer 2

• competitive mass markets = low
• low wage = attract FDI - adv of labour force
• cost minimisation
• land lower in areas like East Europe vs UK
• producing in UK = expensive (imports, living costs, min wage
• compete - move another country = design in head office in UK

Question 3

skills and availability of labour force

Answer 3

-Uk low unemployment compared to others 4.5%
Tunisia = 15.2, Swaziland 40, Spain 22
-unemployed populatio = pool candidates for positions
-skills needed
-differentiation strategy = skilled staff vs low cost

Question 4

location in trade bloc

Answer 4

EU/NAFTA (USMCA)/ASEAN
=access to markets in countries - low export taxes
-FDI -> reside in a trade bloc
-countries = favourable access to trade bloc = despair not being members e.g Norway and EU
-start production in country = way into the trade bloc
-Nissan/Honda/Toyota = manufacturing plants in UK=access to lucrative rich and developed EU market for cars

Question 5

government incentives

Answer 5

• tax incentives: hope foreign investors= capital = support economic development & local employment
• gov transfer intellectual property e.g. skills, knowledge base of new business locating in country

Question 6

natural resources

Answer 6

• abundance of natural resources, = economic gain e.g. fossil fuel (gas/oil/ and minerals diamonds/metals)
• located close proximity to these resources
• MNCs often move to these countries

Question 7

likely return on investment

Answer 7

• profitability = main obj for firms
• account all factors -> worthwhile?
• heavy investment = move into new countries, location in foreign country is dynamic

Question 8

why would a government offer incentives

Answer 8

1. boost local suppliers
2. jobs
3. tax revenue
4. increase skill level
5. improve balance of payments

Question 9

balance of payments

Answer 9

difference between all money flowing into a country in particular period and outflow of money to rest of world