Edexcel- Factors to consider before setting up production locations in other countries 4.2 Flashcards
What does production include?
Manufacturing and any services associated in the business.
Cost of production
Businesses want a low cost of production as this can increase profit margin to sell at a lower price and gain a competitive advantage.
Skills and availability of labour force
Businesses may choose to locate production in a market where labour costs are low.
Infrastructure
Need to consider as affect production processes.
Location in a trading bloc
Business will be able to access advantages such as reduced protectionist measures.
Return on investment
Reduces the risk of initial investment not being paid for.
What can identify return on investment?
Investment appraisals.
Natural resources
Important business has access to raw materials which can reduce transportation costs and potential delays to production.
Politcal instability
Businesses may not be at risk of not gaining a return on their investment
What is seen as a less risky investment in regard to politics?
An economy with stable economy and government is seen as less risky investment.
Ease of doing business
A business will want to locate in an area with low bureaucracy so production process is not delayed or does not incur high costs.
Government incentives
Businesses may be offered incentives by the government.
