5.4 Location

Question 1

Location

Answer 1

refers to the geographical location of a business where it is sited. The location decision depends on many factors
-often irreversible decision
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Question 2

Quantitative reasons for a specific location of production

Answer 2

cost of purchasing or renting commercial premises. quantitative factors include
-availability, suitability and cost of land
-availability, quality, cost of labour
-proximity to the market
-proximity and access to raw materials
-government incentives and limitations
-feasibility of e-commerce

Question 3

availability suitability and cost of land

Answer 3

cost of land tends to be greater where there is greater earning potential, however cheaper locations are not ideal. cost of land is greater in city centres due to demand for land and supply of land.

Question 4

availability, quality and cost of labour

Answer 4

affect the level of wages and salaries paid to workers.
supply and quality of labour varies, depending on socio-economic demographics and regional employment rates.

Question 5

Proximity to the market

Answer 5

-bulk increasing industries must locate closer to the customer due to costs of transportation.
- industries that rely on just-in-time production need to locate near the supplier reducing transportation costs and time delays
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Question 6

bulk increasing industries

Answer 6

industries where the product gains weight during production e.g water bottles

Question 7

proximity and access to raw materials

Answer 7

bulk reducing industries locate nearer to the source of raw materials that are heavier and costlier to transport than the final product.

Question 8

government incentives and regulations

Answer 8

-govts try to attract businesses to locate in or relocate to a certain area by offering financial incentives, such as tax allowiances, grants and subsidies to help reduce their costs of production.
- govts can impose regulatory limits that affect business location. busiensses may struggle to obtain a license to trade overseas that within the domestic country
-corporation tax may also have implications.

Question 9

feasibility of e-commerce

Answer 9

-can hugely reduce the financial costs of location.
-however a virtual business is not feasable for all businesses e.g aircrafts,

Question 10

qualitative reasons for a specific location of production

Answer 10

-management preferences
-local knowledge
-infrastructure
-political stability
-government restrictions and regulations

Question 11

management preferences

Answer 11

may prefer location due to personal reasons, familiarity, gut instincts.

Question 12

local knowledge

Answer 12

knowledge of culture makes it less risky for a business to establish itself, giving it potential competitive advantage.
a lack of local knowledge and cultural sensitivity can prove disastrous.

Question 13

infrastructure

Answer 13

-transportation networks
-communication networks (access to telephone lines, internet services)
-support networks (maintenance and services that are essential for the running of a business such as utilities companies to provide fuel, water, power and waste management.

Question 14

Political stability

Answer 14

politically stable environment helps a business to trade effectively, thereby reducing the risks of operating overseas.

Question 15

Government restrictions and regulations

Answer 15

difficulty in obtaining licenses, permits, copyrights, and planning permission.

Question 16

ethical issues

Answer 16

• a business that produces a lot of waste may locate away from towns and in remote areas to avoid complaints.
• a business may not wish to relocate as it may cause job losses.

Question 17

comparitive shopping

Answer 17

clustering means that firms locate near other businesses that cater for similar or complementary markets.

Question 18

Ways of reorganision production

Answer 18

-Outsourcing
-subcontracting
-offchoring

Question 19

Outsourcing/ subcontracting

Answer 19

outsourcing is the practice of transferring internal business activities to an external organisation in order to reduce costs and increase productivity. Subcontractors are outsourced firms that undertake non-core activities for an organisation.

Question 20

pros and cons of outsourcing/subcontracting

Answer 20

pros
-specialists are hired to carry out the work to high-quality standards. This is particularly important if the business does not have the necessary skills and expertise available internally to carry out the outsourced functions.
-it helps to reduce labour costs as outsourced workers are not employees of the organisation (no sick pay, pension
-allows businesses to focus on its core activities
-improves workforce flexibility

Cons
-subcontractors may not be ethical (hiring underage, illegal, underqualified workers). standard may be low
-Quality management can become challenging, risky to have an external entity have such large influence on reputation of business
-subcontracters need to be monitored; increases costs
- can cause decrease in staff morale and motivation
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Question 21

Offshoring

Answer 21

offshoring is an extension of outsourcing, involves relocating business functions and processes overseas. There are two categories of offshoring; production and services.

pros
-can help a business get around protectionist measures used by foreign governments. Can produce and sell in that foreign country no import taxes or trade restrictions
-avoid tariffs and quotas

cons
-quality is harder to manage
-is associated with unethical business operations, exploitation of labour, low pay, child labour, poor health and services.
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Question 22

Insourcing

Answer 22

Insourcing is the use of an organisations own people and resources to accomplish a certain function or task, which would otherwise be outsourced.
- can be sometimes more cost effective to insource as work can be done effectively and to higher quality.

Question 23

limitations to relocation

Answer 23

-relocation costs
-lower morale and higher anxiety unto workforce
- damage to the corporate image if the firm is seen to value profits over people
- loss of skilled workers
-need to find new customers and suppliers
-redundancy payments

Question 24

Reshoring

Answer 24

the transfer of business operations back to their country of origin.
reasons
- mass media coverage of unethical practices
-transportation costs
-domestic governments wanting to reshore