assessment of a country as a production location 2

Question 1

explain government incentives

Answer 1

• The government of a country may offer incentives for businesses to set up there
  E.g.
• Lower corporation tax rates – less profit lost
• Subsidies/grants – lowers production costs
• Lower employment tax rates, e.g. national insurance contributions
• Less restrictive planning laws

Question 2

explain the ease of doing business

Answer 2

how easy is it to:
- start a business
- getting electricity
- trading across borders

Question 3

explain political stability

Answer 3

• how often government changes e.g. tax rules, laws, trade policy
• risk of terrorism

Question 4

explain the likely return on investment

Answer 4

• consider NPV, ARR
• setting up production overseas is expensive
• qualitative factors - language, culture, time zones
• consider opportunity cost and risk vs rewards