5.4 Location Flashcards
What is meant by the location decision?
The location decision depends on many factors such as the nature of the business (e.g. retail outlet or oil extraction), the nature of the product (e.g. agricultural products or tourism) and the nature of human resources (e.g. unskilled or skilled). Location decisions will occur in different situations. New businesses need to consider the location of their first premises. Firms planning to expand, domestically and internationally, also have to choose between different locations.
Why might a location decision be said to be ‘irreversible’?
The location decision is one of the most important that senior managers have to make, especially as it is often an irreversible decision, i.e. they cannot simply afford to relocate if things do not workout as planned.
What are the quantitative factors that affect the location decision?
Availability, suitability and cost of land Availability, quality and cost of labour Proximity to the market (customers) Government incentives and limitations Feasibility of e-commerce
What are the qualitative factors that affect the location decision?
Management preferences Local knowledge Infrastructure Political stability Government restrictions and regulations Ethical issues Comparative shopping (clustering)
Distinguish between bulk-increasing and bulk-reducing industries.
Bulk-reducing businesses (or weight-losing industries) locate near the source of raw materials that are heavier and costlier to transport than the final product, i.e. the weight or size of the finished product is less than that of the raw materials used to produce it.
Bulk-increasing or weight-gaining industries, locate near to their markets as they are commonly found in businesses that assemble components.
What is meant by outsourcing? What are its benefits and limitations?
the practice of transferring internal business activities to an external organization to reduce costs and increase productivity.
+ allows business to concentrate on core activities
+ quality output
+ cut production costs
- mutual trust between business and subcontractor
- quality is passed onto an external party
- outsourcing requires effective two-way communication
- uncertainty among workforce
What is the difference between outsourcing and offshoring?
Offshoring is an extension of outsourcing which involves relocating business functions and processes overseas.
What is meant by insourcing?
Insourcing is the use of an organization’s own people and resources to accomplish a certain function or task which would otherwise have been outsourced.
