Chapter-18 Flashcards
Location decisions
What is infrastructure?
The basic facilities, services, and installations needed for a business to function, such as water, power, and transport links.
What are government incentives?
Financial support such as interest-free loans or grants provided to a business to assist with locating in a country or a specific area.
What are quantitative factors in business location decisions?
1) Cost of site: Expense of renting or buying land or buildings.
2) Labour costs: Average wages in the area, influenced by worker supply, skill levels, and competition.
3) Transport costs: Proximity to suppliers and customers, affecting transport expenses and accessibility.
4) Market potential: Sales revenue depends on location, especially for service businesses.
5) Government incentives: Financial support or benefits from governments to encourage business setup.
What are qualitative factors in business location decisions?
1) Size of the available site: Must be sufficient for current needs and potential future expansion.
2) Legal restrictions: Planning laws may limit where businesses can operate, especially near residential areas.
3) Quality of local infrastructure: Availability of good transport links, power, water, and telecommunications.
4) Ethical issues and concerns: Relocation may lead to job losses, harming the company’s reputation and sales.
Why do businesses relocate their operations to another country?
1) To achieve growth: Expanding into new markets when home market sales reach their peak.
2) To reduce production costs: Lower labor costs in countries like India, China, and Eastern Europe.
3) To locate closer to the market: Reducing transport costs and delivery times.
What are the benefits of international location decisions for businesses?
1) Lower labor costs: Moving to countries with cheaper wages
2) Access to global markets: Expanding into new economies where home market growth is limited
3) Avoiding legal barriers and tariffs: Establishing operations within a country eliminates import duties and trade restrictions.
4) Government incentives: Many governments offer financial and non-financial support to attract foreign businesses, leading to economic growth.
What are the limitations of international location decisions for businesses?
1) Cultural differences: Consumer preferences and workplace culture may vary, affecting product demand and employee management.
2) Communication problems: Language barriers and distance from Head Office can make communication difficult.
3) Ethical concerns: Relocating may lead to redundancies in the home country, and worker exploitation in low-cost economies can harm a company’s reputation.
4) Quality issues: Controlling the quality of supplies and finished products may be more difficult in international markets.
