4.2.3 - ASSESSMENT OF A COUNTRY AS A PRODUTION LOCATION

Question 1

What are the 9 FACTORS to Assess a Country as Production Location

Answer 1

• COST Of PRODUCTION
  -SKILLS and AVAILABILITY Of LABOUR FORCE
• INFRASTRUCTURE
• LOCATION in TRADE BLOC
• GOVERNMENT INCENTIVES
• EASE of DOING BUSINESS
• POLITICAL STABILITY
• NATURAL RESOURCES
• LIKELY RETURN ON INVESTMENT

Question 2

Explain the FACTOR Assessing a Country as a Production Location - COST OF PRODUCTION

Answer 2

MAIN COST of PRODUCTION is WAGES of Employees -> UK Production is EXPENSIVE -> HIGH STANDARD of LIVING, HIGH MINIMUM WAGE Compared to Other Countries
- LOW WAGES can give COMPETITVE ADVANATGE
- LOW WAGES are IMPORTANT for ATTRACTING BUSINESES, especially Those with Large Labour Force

Question 3

Explain the FACTOR Assessing a Country as a Production Location - SKILLS AND AVALIABILITY OF LABOUR

Answer 3

• LARGE UNEMPLOYED POPULATION = means a LARGE POOL of CANDIDATES for Every Position
• BUSINESS has to CONSIDER the QUALITY of HUMAN CAPITAL , whether the Force of a Country has the SKILLS REQUIRED to MAINTAIN QUALITY STANDARDS –> business CAN’T AFFORD CONSEQUENCES of POOR-QUALITY WORK –> UNSKILLED, POORLY EDUCATES –> COSTS for TRAINING

Question 4

Explain the FACTOR Assessing a Country as a Production Location - INFRASTRUCTURE

Answer 4

• Business need to ASSESS if the COUNTRY has ADEQUATE ROAD, RAIL, Sea and Air TRANSPORT SYSTEM so GOODS can be EXPORTED and IMPORTED EASILY
• Suitable BUILDINGS and PREMISES

Question 5

Explain the FACTOR Assessing a Country as a Production Location - LOCATION IN TRADE BLOC

Answer 5

• some BUSINESSES may START PRODUCTION in a COUNTRY as a WAY INTO a TRADE BLOC
• to AVOID TRADE BARRIES e.g. Tariffs

Question 6

Explain the FACTOR Assessing a Country as a Production Location - GOVERNMENT INCENTIVES

Answer 6

TAX INCENTIVES are GIVEN to COMPANIES in the Hope that it ATTRACTS FDI –> BRING IN CAPTAL to SUPPORT ECONOMIC DEVELOPMENT and CREATE LOCAL EMPLOYMENT

Question 7

Explain the FACTOR Assessing a Country as a Production Location - EASE OF DOING BUSINESS

Answer 7

a location that AVOIDS TRADING RESTRICTIONS and ADDITIONAL COSTS that can be FRUSTRATING and EXPENSIVE for Businesses
- the AMOUNT of BUREAUCRACY e,g, the Ease which Permits can be Obtained for Construction Projects ( decision making slow )

Question 8

Explain the FACTOR Assessing a Country as a Production Location - POLITICAL STABILITY

Answer 8

Politically UNSTABLE -> Too DANGEROUS to do Business -> EXPOSURE to possible FINANCIAL LOSS might be TOO HIGH due to Policial Tensions
- RISK of KIDNAPPING
- In SOME Countires POLTICAL SYSTEM are CORRPUT and BRIBERY is COMMON in Business - Western Business AVOID

Question 9

Explain the FACTOR Assessing a Country as a Production Location - NATURAL RESOURCES

Answer 9

may need particular RAW MATERIALS from that COUNTRY. this is CHEAPER THAN IMPORTING which could INCREASE COSTS –> REDUCE PROFITS

Question 10

Explain the FACTOR Assessing a Country as a Production Location - LIKELY RETURN on INVESTMENT

Answer 10

• Setting Up PRODUCTION in ANOTHER COUNTRY is EXPENSIVE e.g. Hiring Staff, Buying Machinery, etc
  INVESTORS need to know if these EXPENSES will be RETURNED with PROFITS - SWOT Analysis