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4.2.3 Assessment of a Country as a Production Location - Coggle Diagram
4.2.3 Assessment of a Country as a Production Location
Key Terms
Reshoring - Bringing production back home after using foreign production facilities for a period of time
Trade bloc - A group of countries situated in the same region that join together and enjoy trade free for tariffs, quotas and other forms of trade barrier
Factors
Costs of Production
Many businesses locate factories in countries that have low producion costs, abusiness may gain a competitive edge in the market
Some of the main production costs, such as labour, energy, raw materials and land, are a lot lower in Asia than in many other parts in the world
Low wage costs are often an important factor in attracting businesses, particularly for businesses that employ a large labour force
Labour costs in some countries that were traditionally low, such as China, have started to rise and look set to continue their upward trend
The rising cost of energy and land is having an increasing impact on the location plans of some businesses
Skills and Availability of Labour
When a business is considering locations for its production facilities, it is not just the cost of labour that is important, it is also the quality of human capital
A business is not likely to locate a factory in another country only for cheaper labour
A business has to consider whether a labour force in a country has the skills required to maintain quality standards
Businesses cannot afford the consequences of poor-quality work
In some countries where labour is cheaper, workers might be unskilled and poorly educated
Consequently, a business locating production in that country may have to invest substantial sums of money in training, unless all the work on offer is unskilled
Any business that locates production in a particular country will have to ensure that there are enough workers near to the chosen site
The business will also have to consider whether there would be enough workers in the future if the facilities needed to expand
A new business organisation, or an existing business that is expand its operations, will need to consider in which country it wishes to locate production