5.4 Location

Question 1

What QUALITATIVE factors do we need to consider when deciding a location for a production business?

Answer 1

• Skills of labour
• Infrastructure
• Technology e.g. 5G
• Proximity of customers
• Political stability/Economic
• Laws and regulations
• Ethical considerations

Question 2

What QUANTITATIVE factors do we need to consider when deciding a location for a production business?

Answer 2

• Rent/cost of location
• Labour costs
• Cost/availability of supplies
• Capital costs
• Cost/availability of raw materials
• Energy costs
• Government grants/subsidies/incentives

Question 3

What are some advantages of “international locations”?

Answer 3

• Cost reduction
  Labour and materials may be considerably cheaper overseas. (these do have to be compared with the additional distribution costs!!)
• Avoiding excessive government regulation and interference
  UK industries face growing costs resulting from new industrial rules and regulations. This gives overseas companies a competitive advantage.
• Avoiding protectionism
  Import restrictions can be by-passed by manufacturing inside the country. This is a major reason for investment inside of the EU.
• Economies of scale

Question 4

What are some disadvantages of “international locations”?

Answer 4

• Language
• Culture
  Can be a major problem if not planned for. There could be key differences in dress, food and behavior depending on location
• Regulations
  Health and safety, transport, ingredients may have completely different rules and regulations, so requires thorough planning
• Lack of contacts
• Ethics, moral and social responsibility

Question 5

What are some advantages of “multi-site locations”?

Answer 5

• Greater convenience for consumers
• Lower transport costs
  (eg. company can supply from regional factories instead of from one national factory)
• Reduced risk of supply disruption
• Promotion opportunities
  (regional managers..)
• Cost advantages of locating in other countries

Question 6

What are some disadvantages of “multi-site locations”?

Answer 6

• Coordination problems between the locations
• Potential lack of control and direction from managers at head office
• Different cultural standards and legal systems in different countries (requires adaptation)
• If sites are too close to each other, there may be a danger of - cannibalism where one restaurant or store takes away from another owned by the same business

Question 7

What is the definition of “optimal location”?

Answer 7

A business location that gives the best combination of quantitative and qualitative factors

Question 8

What is the definition of “outsourcing”?

Answer 8

Using another business to undertake a part of the production process rather than doing it within the business using the firm’s own employees

Question 9

What is the definition of “subtracting”?

Answer 9

The practice of assigning to another business part of a contract - for example a specialist activity that makes up a part of that contract

Question 10

What is the definition of “business-process outsourcing”?

Answer 10

A form of outsourcing that uses a third party to take responsibility for complete business functions, such as HR and finance

Question 11

What is the definition of “offshoring”?

Answer 11

The relocation of a business process to another country

Question 12

What is the definition of “insourcing”?

Answer 12

The reverse of outsourcing as it is undertaking a business function or process within the business rather than contracting it to another

Question 13

What is the definition of “in-shoring”?

Answer 13

Ending off shoring contracts with oversea suppliers and returning functions and processes to the home country