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4.2 - Coggle Diagram

- - - - Examples
        
        Subsidies- an amount of money provided to firms to help reduce production costs which can then be passed on as lower prices, and which can encourage consumption.
        
        Low tax rates- the percentage at which an individual or corporation is taxed
        
        Grants- a sum of money given to an individual or business for a specific project or purpose.
      - National and local governments can sometmes give incentives to encourage businesses to invest in the UK
    - - Is how responsive governments are to demands of the business
      - Government stances- sometimes a gov. may not want a business to create competition for domestic businesses so may make it difficult for them to set up
    - - Trade bloc- groups of countries in specific regions that manage and promote trade activities.
      - Trading blocs lead to trade liberalisation (the freeing of trade from protectionist measures) and trade creation between members, since they are treated favourably in comparison to non-members.
      - Examples of trade blocs
        
        North American Free Trade Agreement. (NAFTA)
        
        Association of South. east Asian Nations (ASEAN)
        
        European Union (EU)
      - Often FDI will be invested into a country due to its membership to a trade bloc and the subsequent advantages. (easier access to markets and lower export taxes)
    - - Unstable- war torn or corrupted countries
      - MNCs sometimes have to bribe local civil servants to cut through bureaucracy and get set up in the country.
      - In war torn countries there often will be issues with obtaining managers to oversee operations of production facilities
    - - Look at the transportation links in the other country, how easy will it be to move raw materials and finished product
      - Communication is also important to look at, as it's vital to communicate with customers suppliers and other businesses
    - - Examples
        
        Fossil fuels- gas and oil
        
        Minerals- diamonds and metals
      - Production is set up in countries with an abundance of natural resouce for economic gain
      - This can lead to MNCs moving production across the globe
    - - Need to take into account literacy rates in other countries due to differing education systems
      - Can utilise the skills of foreign workers which may be more available
      - Uk has a highly skilled labour force but a lack of availability, because there are many jobs here, high employment rates for skilled workers
    - - The most important factor when moving countries is considering the overall profit or return made on the investment
      - A business needs to consider all of the above factors before moving, it is an investment heavy decision which once made is not easy to undo
      - Is the return worthwhile for the risk?
    - - Wage costs
        
        Countries with lower wages will see increased FDI (foreign direct investment) because other countries are taking advantage of the cheap labour.
        
        Low wage cost allows businesses to drive thier costs down and follow a low cost strategy
      - Land costs
        
        Land costs in other areas such as eastern europe may be significantly lower in comparison to the UK
        
        This is a pull factor which attracts businesses to relocate (production) abroad
  - - - Cost minimisation as production can be done at a reduced cost in comparison to the domestic economy
      - Proximity to market will reduce transport costs and allow easier access to customers if targeting a non domestic market