Chapter 73- Assessment of a Country as a Production Location

Question 1

Locating production

Answer 1

Businesses may need to choose the best place to locate. Key factors should be considered:
• Cost (40%) such as labour, land and energy.
• Risks (20%) such as natural disasters, energy and
economic.
• Conditions (40%) such as labour quality, sustainability
and access to markets.

Question 2

According to research in 2014 the best places for production are:

Answer 2

Malaysia, Taiwan, South Korea, Thailand and China.

Question 3

A business will need to consider:

Answer 3

• Costs of production
• Skills and availability of labour
• Infrastructure
• Location in a trade bloc
• Government incentives
• Political stability
• Natural resources
• Ease of doing business

Question 4

Costs of production

Answer 4

locate factories where there is a low cost of production and low wage cost therefore a business can gain a competitive edge. E.g. Dyson moved production from the UK to Malaysia where costs of production where 30% lower, as a result profits doubled from £18 million to £40million in 2003.

Question 5

Skills and availability of labour

Answer 5

Business needs to find somewhere where people are skilled and will maintain quality of product not just cheap labour. In more recent times the poor-quality of work in far eastern countries has forced some company’s to reshore back to western nations for production facilities.

Question 6

Infrastructure

Answer 6

The business needs to have somewhere with good quality infrastructure that will be suitable for a larger factory.

• Roads might be poorly constructed and inadequately maintained. In some countries, they may be unsealed. This slows down the transportation of finished goods to customers, and raw materials and components to the site from suppliers.
• Increasingly, access to good broadband is of vital importance to businesses when considering locations for production. Some countries may still be developing their broadband networks, while others might be slow and unreliable.
• Some countries may not have modern airports and ports. This might make it difficult for business personnel to travel to and from production facilities to ship goods out of the country
• There may be a lack of investment in education, which can affect the quality of human capital and may discourage managers and other senior staff from locating near to the site. Families moving to the location would desire good-quality schools for their children.

Question 7

Location in a trade bloc

Answer 7

Some business production locates so then tariffs can be avoided; this is done through trade blocs.

Question 8

Government incentives

Answer 8

Governments offer financial incentives such as tax breaks, lower rates of company tax, interest free loans, cheap land etc. in order to encourage foreign direct investment.

Question 9

Political Stability

Answer 9

Financial loss might be too high due to political tensions. Western business are common targets for businesses and demand high ransoms.

Question 10

Natural resources

Answer 10

Some businesses require large quantities of natural resources therefore location is important.

Question 11

Ease of doing business

Answer 11

It is important to choose a location where it is relatively easy to do business because trading restrictions and additional costs can be frustrating and expensive for businesses. This depends on a number of factors:
1. the ease as which businesses can be started and closed
down
2. the efficiency with which contracts are enforced/tax collection
3. availability of trade credit