5.4 Location

Question 1

Reasons for a specific Location of Production (AO2)

Answer 1

• Costs of Production
• Tax rates paid in the location of production
• Overcoming trade barriers
• Availability of Labour and skills available
• Demand for the products locally
• Ease of accessing markets and supplies

Question 2

Drawbacks of Outsourcing & Offshoring

Answer 2

Ethical issues and CSR issues are broken or bent
Job loss in home country
Communication issues
External effects such as environmental issues or political instability

Question 2

Qualitative Location Decisions

Answer 2

• Infrastructure of a region and the benefits gained
• Political factors
• Marketing factors
• Demographic characteristics
• Legal factors
• Quality of life for employees
• Ethical considerations and issues of a specific location

Question 2

Outsourcing-

Answer 2

occurs when a business uses other producers to undertake some of its operations. This is most commonly done with operations that the business does not consider essential to its primary business function.

Question 2

Quantitative Location Decisions

Answer 2

• Direct tariff costs avoided
• Tax breaks by value or %
• Clear costs of building and maintaining a new location
• Exchange rates of currencies
• Direct money saved on labour and/or resources
• Government grants & subsidies
• Population numbers

Question 2

offshoring

Answer 2

occurs when a company moves there production (or another function) out of its own country and into another.

Question 3

Benefits of Outsourcing & Offshoring

Answer 3

A business can better focus on its primary function(s)
These businesses specialize in the specific function
Increase in capacity of production
Cost savings (cheaper labour, closer to resources, etc.)

Question 4

Insourcing

Answer 4

when a business brings back a specific task that was previously outsourced or subcontracted.

Question 4

Reshoring

Answer 4

when a business brings back production into the home country from an overseas location.

Question 5

Subcontracted

Answer 5

the same as outsourcing but usually for a short period of time with a specific contract deadline.

Question 6

Benefits of Reshoring and Inshoring

Answer 6

Closer control of specific functions that are deemed essential
Returning jobs to the home nation = PR up!
The benefits of the offshoring/outsourcing are no longer apparent

Question 7

Drawbacks of Reshoring and Inshorting

Answer 7

High setup costs to recreating production or other functions
Loss of specialization
Might negatively affect relations with the former Host Country
It might be beneficial to offshoring again in the future if the situation changes.