Assessing a country as a production location (4.2.3) Flashcards
What are factors to be considered before setting up production locations in other countries?
-Government Incentive
-Ease of doing business
-Political Stability
-Natural Resources
-Return on Investment
-Location in trade blocs
-Infrastructure
-Skills and availability of labour force
-Costs of Production
How is this different from choosing a country as a potential market for consumers?
In this sense, production includes both manufacturing and any services associated with the business e.g. call centres
Why are Government Incentives important when assessing a production location?
Businesses may be offered incentives (e.g. grants, business loans and tax breaks) by the government
Why is ease of doing business important when assessing a production location?
Business will want to locate in an area where there is limited bureaucracy (state controlled decisions), so the process of establishing production facilities is not delayed or does not incur high costs
Why is political stability important when assessing a production location?
Businesses may be at risk of not gaining a return on their investment in a country with political instability. Country with political instability subject to corruption, lack of law enforcement and higher levels of crime. More likely to disrupt production. Economy with a stable economy and government is seen as a less risky investment
Why are Natural Resources important when assessing a production location?
Often important business has easy access to their raw materials. This can help to reduce transportation costs and reduce any potential delays to the production process
Why is Return on Investments important when assessing a production location?
Assessing the return on investment in different markets will reduce the risk of the initial investment not being paid for. Investment appraisal techniques (payback method, average rate of return and discounted cash flow) can be used to tell a business what their potential return on investment could be
Why is Location in a trading bloc important when assessing a production location?
Business located in a market within a trade bloc will be able to access many advantages such as
Why is Infrastructure important when assessing a production location?
Businesses need to consider the infrastructure needed such as roads as this will affect the production process.
Why is Skills and availability of labour force important when assessing a production location?
Quality of the workforce is important as this will directly impact the quality of the goods and services produced in an economy. Literacy rates and whether the workforce has the right skills needed for the business have to be considered. Businesses may choose to locate production in a market where the labour costs are lower
Why are Costs of production important when assessing a production location?
Businesses want to keep costs of production low as this can help them increase their profit margin or allow them to sell at a lower price to gain a competitive advantage
