5.4 Location Flashcards
Factors determining the Locating a business
✓ Costs,
✓ Competition,
✓ Type of land,
✓ Labour pool/aailability
✓ Infrastructure,
✓ Government support,
✓ Proximity to suppliers.
Outsourcing ?
The practice of using another business to complete part of the work.
Offshoring?
An extension of outsourcing, which involves contracting with a business in another country.
In-housing?
The reverse of outsourcing. It is when organizations choose to bring outsourced activities back into the main business.
Reshoring?
The opposite of offshoring. Activities may still be outsources, but they are outsourced in the home country, rather than overseas.
Location choice in case of bulk increasing production?
(buying in many components and building something bigger, such as televisions or cars)
Proximity to customers is crucial, as this will decrease transportation costs
Location choice in case of bulk decreasing production?
(buying in large quantities of raw materials and turning them into smaller end products)
Proximity to suppliers may be crucial to reduce transportation costs
Competitor’s location as a factor for location choice?
If the area becomes known for a particular product/service, it may be better to be close to the rivals (e.g. retail streets)
Cannibalistic marketing?
Opening more branches in the same sector, even though each new branch eats up some of the profits of the existing outlets , not just of the competitors
Ads and disads of being located in the area with which the business is familiar?
Advantages:
Understanding the customers, less costs
Disadvantages:
Missed opportunities elsewhere
Trading block vs location choice?
Trade is facilitated within trading blocks, such as EU, so this will influence the decision. Many companies outside these blocks may open productions there to avoid e.g. higher taxes, customs duties etc.
WTO?
World Trade Organization has a commitment to reducing trade barriers, which makes it far easier for trade to take
place across borders. More than three-quarters of the world’s countries are signatories to the WTO
Pull factors for relocation/additional locations?
These are external factors:
● Improved communications worldwide
● Dismantling of trade barriers
● Deregulation of the world’s financial markets
● Increasing size of multinational companies
Push factors for relocation/additional locations?
These are internal factors:
● reduce costs
● increase market share
● use extension strategies
● use defensive strategies.
Defensive strategy as a factor when opening branches abroad?
Relocating or opening branches not so much because they need to, but because they do not want their competitors to do it first.
